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<TITLE>FORM 20-F</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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<B><FONT size="4">UNITED STATES SECURITIES AND EXCHANGE
COMMISSION</FONT></B>

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<B>Washington, D.C. 20549</B>
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<B><FONT size="5">Form&nbsp;20-F</FONT></B>

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    <TD width="15%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
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<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="wingdings">&#111;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">REGISTRATION STATEMENT PURSUANT TO
    SECTION&nbsp;12(b) OR (g)&nbsp;OF THE SECURITIES EXCHANGE ACT OF
    1934</FONT></B></TD>
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<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B><FONT size="2">Or</FONT></B></TD>
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    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2"><FONT face="wingdings">&#254;</FONT></FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">ANNUAL REPORT PURSUANT TO SECTION&nbsp;13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">For the fiscal year ended December&nbsp;31,
    2002</FONT></B></TD>
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<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B><FONT size="2">Or</FONT></B></TD>
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<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="wingdings">&#111;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">For the transition period
    from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</FONT></B></TD>
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<B><FONT size="2">Commission File number: 0-16174</FONT></B>

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<B><FONT size="6">Teva Pharmaceutical Industries
Limited</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact name of Registrant as specified in its
charter)</FONT></I>
</DIV>

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    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">N/A</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">ISRAEL</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(Translation of Registrant&#146;s<BR>
    name into English)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Jurisdiction of incorporation or<BR>
    organization)</FONT></I></TD>
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<B><FONT size="2">5&nbsp;Basel Street</FONT></B>
</DIV>

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<B><FONT size="2">P.O.&nbsp;Box 3190</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Petach Tikva 49131, Israel</FONT></B>
</DIV>

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<I><FONT size="2">(Address of principal executive
offices)</FONT></I>
</DIV>

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<B><FONT size="2">Securities registered or to be registered
pursuant to Section&nbsp;12(b) of the Act:</FONT></B>

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    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="center" nowrap><B><FONT size="1">Title of each class</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Name of each exchange on which registered</FONT></B></TD>
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    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
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    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">None
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">None
    </FONT></TD>
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<B><FONT size="2">Securities registered or to be registered
pursuant to Section&nbsp;12(g) of the Act:</FONT></B>

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<B><FONT size="2">American Depositary Shares (as evidenced by
American Depositary Receipts),</FONT></B>

<DIV align="center">
<B><FONT size="2">each representing one Ordinary Share</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(Title of Class)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Securities for which there is a reporting
obligation pursuant to Section&nbsp;15(d) of the
Act:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Indicate the number of outstanding shares of each
of the issuer&#146;s classes of capital or common stock as of
the close of the period covered by the annual report.
</FONT>

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    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">258,648,290 Ordinary Shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">186,884,975 American Depositary Shares
    </FONT></TD>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Indicate by check mark whether the registrant
(1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12&nbsp;months (or for such shorter period
that the registrant was required to file such reports), and
(2)&nbsp;has been subject to such filing requirements for the
past 90&nbsp;days.
</FONT>

<DIV align="center">
<FONT size="2">Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Indicate by check mark which financial statement
item the registrant has elected to follow.
</FONT>

<DIV align="center">
<FONT size="2">Item&nbsp;17&nbsp;<FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Item&nbsp;18&nbsp;<FONT face="wingdings">&#254;</FONT>
</FONT>
</DIV>

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<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
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</TR>
<TR><TD colspan="9"><A HREF="#000">FORWARD-LOOKING STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">ITEM 3: KEY INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">SELECTED FINANCIAL DATA</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">RISK FACTORS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">ITEM 4: INFORMATION ON THE COMPANY</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">ITEM 8: FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">ITEM 9: THE OFFER AND LISTING</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">ITEM 10: ADDITIONAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">MEMORANDUM AND ARTICLES OF ASSOCIATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">FOREIGN EXCHANGE REGULATIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">U.S. FEDERAL INCOME TAX CONSIDERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">ISRAELI TAXATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">DOCUMENTS ON DISPLAY</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">ITEM 15: CONTROLS AND PROCEDURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">PART III</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">ITEM 18: FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">ITEM 19: EXHIBITS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#024">CERTIFICATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#025"><B>REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE</B></A></TD></TR>
<TR><TD colspan="9"><A HREF="#026"><B>TEVA PHARMACEUTICAL INDUSTRIES LIMITED SCHEDULEII&nbsp;&#151;&nbsp;VALUATION AND QUALIFYING ACCOUNTS</B></A></TD></TR>
<TR><TD colspan="9"><A HREF="y84058exv99w8.htm">SUBSIDIARIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="y84058exv99w10w1.htm">CONSENT OF KESSELMAN & KESSELMAN</A></TD></TR>
<TR><TD colspan="9"><A HREF="y84058exv99w10w2.htm">CONSENT OF KPMG HUNGARIA KFT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y84058exv99w10w3.htm">CONSENT OF EHRENKRANTZ STERLING & CO. LLC</A></TD></TR>
<TR><TD colspan="9"><A HREF="y84058exv99w10w4wi.htm">CERTIFICATION OF CHIEF EXECUTIVE OFFICER</A></TD></TR>
<TR><TD colspan="9"><A HREF="y84058exv99w10w4wii.htm">CERTIFICATION OF CHIEF FINANCIAL OFFICER</A></TD></TR>
</TABLE>
</CENTER>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

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<TR>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Forward-Looking Statements
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="center" valign="top">
    <B><FONT size="2">PART I</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Identity of Directors, Senior Management and
    Advisers
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">Not applicable
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Offer Statistics and Expected Timetable
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">Not applicable
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;3
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Key Information
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">&nbsp;3
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">&nbsp;&nbsp;Selected Financial Data
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">&nbsp;3
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">&nbsp;&nbsp;Risk Factors
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">&nbsp;6
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;4
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Information on the Company
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">11
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;5
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Operating and Financial Review and Prospects
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">28
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;6
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Directors, Senior Management and Employees
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">41
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;7
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Major Shareholders and Related Party Transactions
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">49
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;8
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Financial Information
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">50
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;9
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">The Offer and Listing
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">54
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;10
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Additional Information
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">56
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">&nbsp;&nbsp;Memorandum and Articles of Association
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">56
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">&nbsp;&nbsp;Foreign Exchange Regulations
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">58
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">&nbsp;&nbsp;U.S. Federal Income Tax Considerations
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">58
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">&nbsp;&nbsp;Israeli Taxation
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">60
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">&nbsp;&nbsp;Documents on Display
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">62
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;11
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Quantitative and Qualitative Disclosures About
    Market Risk
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">63
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;12
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Description of Securities Other Than Equity
    Securities
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">Not applicable
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="center" valign="top">
    <B><FONT size="2">PART II</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;13
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Defaults, Dividends Arrearages and Delinquencies
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">Not applicable
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;14
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Material Modifications to the Rights of Security
    Holders and Use of Proceeds
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">Not applicable
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;15
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Controls and Procedures
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">66
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;16
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">[Reserved]
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="center" valign="top">
    <B><FONT size="2">PART III</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;17
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Financial Statements
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">Not applicable
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;18
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Financial Statements
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">67
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;19
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Exhibits
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">68
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise indicated, all references to the
&#147;Company&#148;, &#147;we&#148;, &#147;our&#148; or
&#147;Teva&#148; refer to Teva Pharmaceutical Industries Limited
and its subsidiaries.
</FONT>

<P align="center"><FONT size="2">1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "FORWARD-LOOKING STATEMENTS" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center">
<B><FONT size="2">FORWARD-LOOKING STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our disclosure and analysis in this report
contain or incorporate by reference some forward-looking
statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to
historical or current facts. Such statements may include words
such as &#147;anticipate&#148;, &#147;estimate&#148;,
&#147;expect&#148;, &#147;project&#148;, &#147;intend&#148;,
&#147;plan&#148;, &#147;believe&#148; and other words and terms
of similar meaning in connection with any discussion of future
operating or financial performance. In particular, these
statements include, among other things, statements relating to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our business strategy;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the development of our products;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our projected capital expenditures; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our liquidity.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This report contains or incorporates by reference
forward-looking statements which express the beliefs and
expectations of management. Such statements are based on current
expectations and involve a number of known and unknown risks and
uncertainties that could cause our future results, performance
or achievements to differ significantly from the results,
performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause
or contribute to such differences include the impact of
pharmaceutical industry regulation, the difficulty of predicting
U.S. Food and Drug Administration (&#147;FDA&#148;) and other
regulatory authority approvals, the regulatory environment and
changes in the health policies and structures of various
countries, acceptance and demand for new pharmaceutical products
and new therapies, the impact of competitive products and
pricing, uncertainties regarding market acceptance of innovative
products newly launched, currently being sold or in development,
the impact of restructuring of clients, reliance on strategic
alliances, reliance on a strategy of acquiring companies,
exposure to product liability claims, dependence on patent and
other protections for our innovative products, exposure to
potential patent liability damages for products sold &#147;at
risk&#148;, i.e., prior to the final adjudication of patent
issues, fluctuations in currency, exchange and interest rates,
operating results and other factors that are discussed herein
and in our other filings made with the SEC.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new
information, future events or otherwise. You are advised,
however, to consult any additional disclosures we make in our
6-K reports to the SEC. Also note that we provide a cautionary
discussion of risks and uncertainties under &#147;Risk
Factors&#148; on page&nbsp;6 of this report. These are factors
that we think could cause our actual results to differ
materially from expected results. Other factors besides those
listed here could also adversely affect us. This discussion is
provided as permitted by the Private Securities Litigation
Reform Act of 1995.
</FONT>

<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PART I" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="center">
<B><FONT size="2">PART I</FONT></B>

<!-- link2 "ITEM 3: KEY INFORMATION" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="left">
<B><FONT size="2">ITEM 3:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KEY
INFORMATION</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link2 "SELECTED FINANCIAL DATA" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="center">
<B><FONT size="2">SELECTED FINANCIAL DATA</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2000, the Israeli Securities Law was
amended to allow Israeli companies, such as Teva, whose
securities are listed both on the Tel Aviv Stock Exchange and on
certain stock exchanges in the United States (including Nasdaq),
to report exclusively under SEC rules and accounting principles
generally accepted in the United States
(&#147;US&nbsp;GAAP&#148;). Accordingly, on December&nbsp;18,
2000, Teva&#146;s shareholders approved a resolution under which
Teva&#146;s financial statements would be prepared under SEC
rules and US GAAP, rather than under Israeli Securities
Regulations and accounting principles generally accepted in
Israel (&#147;Israeli GAAP&#148;). All financial statements
included in this report and all financial information released
in Israel are now presented solely under US GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following selected financial data for each of
the years in the three-year period ended December&nbsp;31, 2002
and at December&nbsp;31, 2002 and 2001 are derived from
Teva&#146;s audited consolidated financial statements set forth
elsewhere in this report, which have been prepared in accordance
with US&nbsp;GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selected financial data for each of the years
in the two-year period ended December&nbsp;31, 1999 and at
December&nbsp;31, 2000 and 1999 are derived from other audited
financial statements not appearing in this report, which have
been prepared in accordance with US&nbsp;GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selected financial data at December&nbsp;31,
1998 are derived from other audited financial statements not
appearing in this report, which have been prepared in accordance
with Israeli GAAP. Such selected financial data have been
amended in accordance with US&nbsp;GAAP in connection with the
change of Teva&#146;s financial reporting from Israeli GAAP to
US&nbsp;GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selected financial data should be read in
conjunction with the other financial statements, related notes
and other financial information included in this report.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The currency of the primary economic environment
in which the operations of Teva and its subsidiaries in Israel
and in the United States are conducted is the U.S.&nbsp;dollar.
The functional currency of Teva&#146;s other subsidiaries
(principally operating in Europe and Canada) is their respective
local currency.
</FONT>

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Operating Data</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">For the Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">U.S. dollars in millions (except per ADR amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,518.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,749.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,282.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,115.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,423.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,230.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,058.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">767.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross profit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,095.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">847.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">691.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">514.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">421.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less participations and grants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">406.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">358.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">223.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">199.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of research and development in process
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">524.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">366.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financial expenses&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Losses from realization of assets and
    discontinuation of activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">414.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">276.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Share in profits (losses) of associated companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interests in (profits)&nbsp;losses of
    subsidiaries
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings per ADR*&nbsp;&#151; Basic ($)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings per ADR*&nbsp;&#151; Diluted ($)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average number of ADRs** (in millions):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">245.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">245.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Historical figures have been adjusted to reflect
    the two for one stock splits effected in December 2002 and
    February 2000.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">**&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Each ADR represents one ordinary share.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Balance Sheet Data</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As at December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">U.S. dollars in millions</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Working capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,377.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,439.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">825.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">373.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">241.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,626.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,460.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,855.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,755.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,475.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term credit, including current maturities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible senior debentures (short-term)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">562.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">176.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">276.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">324.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total short-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">738.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">276.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">324.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt, net of current maturities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible senior debentures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">810.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">912.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">550.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">391.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">201.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,161.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,246.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">813.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">391.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">201.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interests
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,829.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,380.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,151.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">747.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">664.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For over 30&nbsp;years Teva has paid dividends,
and since 1987 it has paid dividends on a regular quarterly
basis. Future dividend policy will be reviewed by the Board of
Directors based upon conditions then existing, including
Teva&#146;s earnings, financial condition, capital requirements
and other factors. Dividends are declared and paid in New
Israeli Shekels. Dividends are converted into dollars and paid
by the depositary of the ADRs for the benefit of owners of ADRs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends paid by an Israeli company to
shareholders residing outside Israel are currently subject to
withholding of Israeli income tax at a rate of up to 25%. In
Teva&#146;s case, the applicable withholding tax rate will
depend on the particular Israeli production facilities that have
generated the earnings that are the source of the dividend and,
accordingly, the applicable rate will change from time to time.
The rate of tax withheld on the dividend declared for the fourth
quarter of 2002 was 19%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the amounts of the
dividends paid in respect of each period indicated prior to
deductions for applicable Israeli withholding taxes (in cents
per ADR). All the figures have been adjusted to reflect the 2:1
stock split in December 2002.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1st interim
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2nd interim
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3rd interim
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4th interim
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Declared but not paid. Based on the rate of
    exchange on the announcement date.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "RISK FACTORS" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">
<B><FONT size="2">Risks Associated with Teva and the
Pharmaceutical Industry</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our success depends on our ability to
    successfully develop and commercialize additional pharmaceutical
    products.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our future results of operations depend, to a
significant degree, upon our ability to successfully
commercialize additional generic and/or innovative branded
pharmaceutical products. We must develop, test and manufacture
generic products as well as prove that our generic products are
the bio-equivalent of their branded counterparts. All of our
products must meet regulatory standards and receive regulatory
approvals. The development and commercialization process,
particularly with respect to innovative products, is both time
consuming and costly and involves a high degree of business
risk. Our products currently under development, if and when
fully developed and tested, may not perform as we expect,
necessary regulatory approvals may not be obtained in a timely
manner, if at all, and such products may not be able to be
successfully and profitably produced and marketed. Delays in any
part of the process or our inability to obtain regulatory
approval of our products (including the products filed by IMPAX
Laboratories Inc. and Biovail Corporation for which we have
exclusive marketing rights in the U.S.) could adversely affect
our operating results by restricting our introduction of new
products. The continuous introduction of new generic products is
critical to our business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our revenues and profits from any
    particular generic pharmaceutical products decline as our
    competitors introduce their own generic
    equivalents.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling prices of generic drugs typically
decline, sometimes dramatically, as additional companies receive
approvals for a given product and competition intensifies. To
the extent that we succeed in being the first to market a
generic version of a significant product, our sales and
profitability can be substantially increased in the period
following the introduction of such product and prior to a
competitor&#146;s introduction of the equivalent product. Our
ability to sustain our sales and profitability on any product
over time is dependent on both the number of new competitors for
such product and the timing of their approvals. Our overall
profitability depends on our ability to continuously and timely
introduce new products.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our generic pharmaceutical products face
    intense competition from brand-name companies that sell their
    own generic products or successfully extend their market
    exclusivity period.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Competition in the U.S. generic pharmaceutical
market continues to intensify as the pharmaceutical industry
adjusts to increased pressures to contain health care costs.
Brand-name companies continue to sell their products into the
generic market directly by acquiring or forming strategic
alliances with generic pharmaceutical companies. No regulatory
approvals are required for a brand-name manufacturer to sell
directly or through a third party to the generic market.
Brand-name manufacturers do not face any other significant
barriers to entry into such market. In addition, such companies
continually seek new ways to defeat generic competition, such as
filing new patents on drugs whose original patent protection is
about to expire, developing patented controlled-release
products, changing product claims and product labeling or
developing and marketing as over-the-counter products those
branded products which are about to face generic competition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Recent changes in the regulatory
    environment may prevent us from exploiting the exclusivity
    periods that are critical to the success of our generic
    products.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FDA&#146;s policy regarding the award of
180-days market exclusivity to generic manufacturers who
challenge patents relating to specific products continues to be
the subject of much litigation in the United States. The
FDA&#146;s current interpretation of the Waxman-Hatch Act is to
award 180&nbsp;days of exclusivity to the first generic
manufacturer who files a Paragraph&nbsp;IV certification under
the Act challenging the patent of the branded product,
regardless of whether the manufacturer was sued for patent
infringement. Although the FDA&#146;s interpretation may benefit
some of the products in our pipeline, it may adversely affect
others.
</FONT>

<P align="center"><FONT size="2">6
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Waxman-Hatch Act provides that the period of
180-day exclusivity is triggered by the earlier of a court
decision finding the patent at issue invalid or not infringed or
the commercial marketing of the product. Under certain
circumstances, we may not be able to exploit our 180-day
exclusivity period completely since it may be triggered prior to
our being able to market the product.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For example, recent court decisions have
interpreted the 180-day exclusivity period as starting from an
initial ruling by a federal district court (instead of a final,
unappealable ruling) regarding the validity or infringement of a
patent. If we choose to bring a product to market prior to
receiving a final ruling and an appellate court overturns the
initial ruling, we could face significant infringement damages.
These recent court decisions may cause us to take on patent
risks that we were not exposed to prior to those decisions in
order to benefit from the 180-day exclusivity period, or,
conversely, we may choose not to take advantage of the 180-day
exclusivity period rather than risk an adverse ruling in an
appellate court. In addition to these issues, our patent
challenges may be unsuccessful, which may result in a bar to the
FDA granting market approval until the relevant patent expires.
Another recent FDA ruling allows for joint 180-day exclusivity
under certain circumstances. As a result, there may be certain
circumstances in which we may share our exclusivity with one or
more companies.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">If we elect to sell a generic product prior
    to the completion of all appellate level patent litigation, we
    could be subject to liabilities for damages if a lower court
    judgment upon which we are relying is reversed.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At times we seek approval to market generic
products before the expiration of patents for those products,
based upon our belief that such patents are invalid,
unenforceable, or would not be infringed by Teva&#146;s
products. As a result, we often face significant patent
litigation. Depending upon a complex analysis of a variety of
legal and commercial factors, if we win a lower court decision
in such patent litigation, we may, in certain circumstances,
elect to market a generic product even though an appeal of the
lower court decision is pending. Should we elect to proceed in
this manner, we could face substantial patent liability damages
were a higher court to overturn the trial court&#146;s decision.
</FONT>

<DIV>&nbsp;</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our sales of Copaxone&#174; could be
    adversely affected by competition.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Copaxone&#174;, is our leading innovative
product, from which we derive substantial revenues and profits.
To date, we and our marketing partners have been successful in
our efforts to establish Copaxone&#174; as a leading therapy for
multiple sclerosis and have increased our global market share
among the four currently available major therapies for multiple
sclerosis. However, Copaxone&#174; faces intense competition,
including as a result of the recent entry of Serono SA&#146;s
beta-interferon product, Rebif&#174;, into the U.S. market and
the role that Pfizer Inc. has recently assumed as a co-marketer
with Serono of this product in the United States.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We are subject to government regulation
    that increases our costs and could prevent us from marketing or
    selling our products.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to extensive pharmaceutical
industry regulations in Israel, the United States, England,
Hungary, the Netherlands, Canada, France, Italy and other
jurisdictions. We cannot predict the extent to which we may be
affected by legislative and other regulatory developments
concerning our products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are dependent on obtaining timely approvals
before marketing most of our products. In the United States, any
manufacturer failing to comply with FDA or other applicable
regulatory agency requirements may be unable to obtain approvals
for the introduction of new products and, even after approval,
initial product shipments may be delayed. The FDA also has the
authority to revoke drug approvals previously granted and remove
from the market previously approved drug products containing
ingredients no longer approved by the FDA. Our major facilities,
both in the United States and outside the United States, and
products are periodically inspected by the FDA, which has
extensive enforcement
</FONT>

<P align="center"><FONT size="2">7
</FONT>

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<DIV align="left">
<FONT size="2">powers over the activities of pharmaceutical
manufacturers, including the power to seize, force to recall and
prohibit the sale or import of non-complying products, and halt
operations of and criminally prosecute non-complying
manufacturers.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Europe and Israel, the manufacture and sale of
pharmaceutical products is regulated in a manner substantially
similar to that in the United States. Legal requirements
generally prohibit the handling, manufacture, marketing and
importation of any pharmaceutical product unless it is properly
registered in accordance with applicable law. The registration
file relating to any particular product must contain medical
data related to product efficacy and safety, including results
of clinical testing and references to medical publications as
well as detailed information regarding production methods and
quality control. Health ministries are authorized to cancel the
registration of a product if it is found to be harmful or
ineffective or manufactured and marketed other than in
accordance with registration conditions.
</FONT>

<DIV>&nbsp;</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We may not be able to successfully
    identify, consummate and integrate recent and future
    acquisitions.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the past, we have grown, in part, through a
number of significant acquisitions. We plan to remain frequently
engaged in various stages of evaluating or pursuing potential
acquisitions and may in the future acquire other pharmaceutical
and active pharmaceutical ingredients businesses and seek to
integrate them into our own operations. The recent and future
acquisitions of additional companies involve risks that could
adversely affect our future revenues and operating results. For
example:
</FONT>
<P>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may not be able to identify suitable
    acquisition candidates or to acquire companies on favorable
    terms.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We compete with others to acquire companies. We
    believe that this competition will increase and may result in
    decreased availability or increased prices for suitable
    acquisition candidates.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may not be able to obtain the necessary
    financing, on favorable terms or at all, to finance any of our
    potential acquisitions.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may not be able to obtain the necessary
    regulatory approvals, including the approval of anti-competition
    regulatory bodies, in any countries in which we may seek to
    consummate potential acquisitions.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may ultimately fail to close an acquisition
    even if we announce that we plan to acquire a company.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may fail to integrate successfully our
    acquisitions in accordance with our business strategy.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may choose to acquire a company that is not
    profitable.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Potential acquisitions may divert
    management&#146;s attention away from our primary product
    offerings, result in the loss of key customers and/or personnel
    and expose us to unanticipated liabilities.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may not be able to retain the skilled
    employees and experienced management that may be necessary to
    operate the businesses we may acquire and, if we cannot retain
    such personnel, we may not be able to locate or hire new skilled
    employees and experienced management to replace them.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We may purchase a company that has contingent
    liabilities that include, among others, known or unknown patent
    or product liability claims.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">As a pharmaceutical company, we are
    susceptible to product liability claims that may not be covered
    by insurance.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business inherently exposes us to potential
product liability claims. From time to time, the pharmaceutical
industry has experienced difficulty in obtaining product
liability insurance coverage for certain products or coverage in
the desired amounts or with the desired deductibles. As a
result, we sell,
</FONT>

<P align="center"><FONT size="2">8
</FONT>

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<DIV align="left">
<FONT size="2">and may continue to sell, generic products that
are not covered by insurance and may also be subject to product
liability claims that are not covered by insurance or that
exceed our policy limits.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, changes in the insurance markets
subsequent to the September 11, 2001 terrorist attacks have made
it more difficult for us to obtain certain types of coverage. We
cannot assure you that we will be able to obtain the levels or
types of insurance we would otherwise have obtained prior to
these market changes or that the insurance coverage we do obtain
will not contain large deductibles or fail to cover certain
liabilities or that it will otherwise cover all potential losses.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reforms in the health care industry and the
    uncertainty associated with pharmaceutical pricing,
    reimbursement and related matters could adversely affect the
    marketing, pricing and demand for our products.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Increasing expenditures for health care have been
the subject of considerable public attention in Israel, North
America and many European countries. Both private and
governmental entities are seeking ways to reduce or contain
health care costs. In many countries in which we currently
operate, including Israel, pharmaceutical prices are subject to
regulation. In the United States, numerous proposals that would
effect changes in the United States health care system have been
introduced or proposed in Congress and in some state
legislatures. Similar activities are taking place throughout
Europe. We cannot predict the nature of the measures that may be
adopted or their impact on the marketing, pricing and demand for
our products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of governmental budgetary
constraints, the Israel Ministry of Health and the major Israeli
health funds have sought to further reduce health care costs by,
among other things, applying continuous pressure to reduce
pharmaceutical prices and reducing inventory levels. The Israeli
government has adopted regulations that permit the parallel
importation of pharmaceutical products and set a maximum price
on certain pharmaceutical products. Although such legislation is
predominantly aimed at reducing prices of imported products, as
opposed to locally manufactured products such as ours, it could
have a secondary effect on us by increasing price competition
within the Israeli pharmaceutical market.
</FONT>

<DIV>&nbsp;</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The success of our innovative products
    depends on the effectiveness of our patents and confidentiality
    agreements to defend our intellectual property
    rights.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success with our innovative products depends,
in part, on our ability to protect our current and future
innovative products and to defend our intellectual property
rights. If we fail to adequately protect our intellectual
property, competitors may manufacture and market products
similar to ours. We have been issued numerous patents covering
our innovative products, and have filed, and expect to continue
to file, patent applications seeking to protect newly developed
technologies and products in various countries, including the
United States. Any existing or future patents issued to or
licensed by us may not provide us with any competitive
advantages for our products or may even be challenged,
invalidated or circumvented by competitors. In addition, such
patent rights may not prevent our competitors from developing,
using or commercializing products that are similar or
functionally equivalent to our products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also rely on trade secrets, unpatented
proprietary know-how and continuing technological innovation
that we seek to protect, in part, by confidentiality agreements
with licensees, suppliers, employees and consultants. It is
possible that these agreements will be breached and we will not
have adequate remedies for any such breach. Disputes may arise
concerning the ownership of intellectual property or the
applicability of confidentiality agreements. Furthermore, our
trade secrets and proprietary technology may otherwise become
known or be independently developed by our competitors or, if
patents are not issued with respect to products arising from
research, we may not be able to maintain the confidentiality of
information relating to such products.
</FONT>

<P align="center"><FONT size="2">9
</FONT>

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<DIV>&nbsp;</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We have significant operations outside of
    the United States, including in Israel, that may be adversely
    affected by acts of terrorism or major
    hostilities.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Significant portions of our operations are
conducted outside of the United States. We may, therefore, be
directly affected by economic, political and military conditions
in the countries in which our businesses are located, as well as
by currency exchange rate fluctuations and the exchange control
regulations of such countries. Our executive offices and a
substantial number of our manufacturing facilities are located
in the State of Israel. Teva&#146;s Israeli operations are
dependent upon materials imported from outside of Israel. We
also export significant amounts of products from Israel.
Accordingly, our operations could be materially and adversely
affected by acts of terrorism or if major hostilities should
occur in the Middle East or trade between Israel and its present
trading partners should be curtailed, including as a result of
acts of terrorism in the United States. Any such effects may not
be covered by insurance.
</FONT>

<P align="center"><FONT size="2">10
</FONT>

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<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;4:</FONT></B></TD>
    <TD>
    <B><FONT size="2">INFORMATION ON THE COMPANY</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva Pharmaceutical Industries Limited is a
global pharmaceutical company producing drugs in all major
treatment categories. Teva is one of the world&#146;s largest
generic drug companies and has a leading position in the U.S.
generic market. Teva has successfully utilized its production
and research capabilities to establish a global pharmaceutical
business focused on the growing demand for generic drugs and on
the opportunities for proprietary branded products for specific
niche categories. Teva&#146;s active pharmaceutical ingredients
business provides both significant revenues and profits from
sales to third party generic manufacturers and strategic
benefits to Teva&#146;s own pharmaceutical production through
its cost-effective and timely delivery of significant raw
materials.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s operations are conducted directly and
through subsidiaries in Israel, Europe, North America and
several other countries. During 2002, Teva generated
approximately 64% of its revenue in North America, 24% in Europe
and 12% in the rest of the world, predominantly in Israel. For a
breakdown of Teva&#146;s sales by business segment and by
geographic market for the past three years, see
&#147;Item&nbsp;5: Operating and Financial Review and
Prospects&nbsp;&#151; Results of Operations&nbsp;&#151;
Sales&nbsp;&#151; General.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva was incorporated in Israel on
February&nbsp;13, 1944 and is the successor to a number of
Israeli corporations, the oldest of which was established in
1901. Its executive offices are located at 5 Basel Street, P.O.
Box 3190, Petach Tikva 49131 Israel, telephone number
972-3-926-7267.
</FONT>

<P align="left">
<B><FONT size="2">Pharmaceutical Products</FONT></B>

<DIV>&nbsp;</DIV>

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    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Generic Products</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva is one of the largest generic drug companies
in the world. Generic drugs are the chemical and therapeutic
equivalents of brand-name drugs, typically sold under their
generic chemical names at prices below those of their brand-name
equivalents. These drugs are required to meet similar
governmental standards as their brand-name equivalents and must
receive regulatory approval prior to their sale in any given
country. Generic drugs may be manufactured and marketed only if
relevant patents on their brand-name equivalents (and any
additional government-mandated market exclusivity periods) have
expired, been challenged and invalidated, or otherwise validly
circumvented.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generic pharmaceutical sales have increased
significantly in recent years, due in part to an increased
awareness and acceptance among consumers, physicians and
pharmacists that generic drugs are the equivalents of brand-name
drugs. Among the factors contributing to this increased
awareness are the passage of legislation permitting or
encouraging substitution and the publication by regulatory
authorities of lists of equivalent drugs, which provide
physicians and pharmacists with generic drug alternatives. In
addition, various government agencies and many private managed
care or insurance programs encourage the substitution of generic
drugs for brand-name pharmaceuticals as a cost-savings measure
in the purchase of, or reimbursement for, prescription drugs.
Teva believes that these factors, together with the large volume
of branded products losing patent protection over the coming
years, should lead to continued expansion of the generic
pharmaceuticals market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through the coordinated efforts of research and
development staff in Israel, Europe and North America, Teva
seeks to constantly expand its range of generic products.
Teva&#146;s product development strategy emphasizes not only
introducing its generic products upon the patent expiration date
of the equivalent brand-name pharmaceutical but also the goal of
market introduction at the earliest possible date, which may
involve attempting to invalidate or otherwise validly circumvent
such patents.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva is able to differentiate itself from its
competitors in its major markets by offering a range of
capabilities that it believes ultimately adds value for its
customers and enhances Teva&#146;s business:
</FONT>
<P>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">global research and development facilities that
    have provided Teva with both the largest product line and one of
    the deepest generic pipelines in the industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">FDA-inspected manufacturing facilities in a
    variety of countries around the world, which provide Teva with a
    broad array of production technologies and with the ability to
    concentrate production to achieve economies of scale; and
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">11
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">its own active pharmaceutical ingredient business
    that offers stability of supply as well as vertical integration
    efficiencies.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;North
America</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva Pharmaceuticals USA, Inc., Teva&#146;s
principal subsidiary, is one of the leading generic drug
companies in the United States. Teva USA markets approximately
140 generic products representing more than 400 dosage strengths
and packaging sizes, which are distributed and sold in the
United States. Teva believes that a broad line of products has
been and will continue to be of strategic significance as the
generics industry continues to grow and as it experiences the
effects of consolidation among buying groups, including managed
care providers, large pharmacy chains and wholesaling
organizations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Products. </FONT></I><FONT size="2">Teva USA
manufactures generic pharmaceutical products in a variety of
dosage forms, including tablets, capsules, ointments, creams and
liquids. During 2002, Teva sold a significant number of generic
products in the United States that were not sold during 2001,
including sales of the generic equivalents of the following
products (listed in the order of their launch during the year):
Glucophage&#174;, Prozac&#174; tablets and capsules,
Buspar&#174;, Demadex&#174;, Ultram&#174;, Zestril/
Prinvil&#174;, Zestoretic/ Prinzide&#174;, Zanaflex&#174;,
Adalat&#174;CC, Ceclor&#174;CD, Axid&#174;, Augmentin&#174; and
Permax&#174;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, in the United States Teva received
18 final generic drug approvals, six tentative approvals and two
approvables, including one of Biovail&#146;s and two of
Impax&#146;s. Both &#147;tentative approval&#148; and
&#147;approvable&#148; letters indicate that the FDA has
completed its review of an application. A tentative approval is
issued in cases where the file is acceptable but there is a
patent or exclusivity prohibiting the FDA from granting final
approval. An approvable letter is issued by the FDA in cases
where the application substantially meets the requirements and
it is believed that the application may be approved provided
certain product labeling or other technical issues are resolved.
The 18 final approvals include the products launched during the
year as described above, together with generic forms of
Tricor&#174;, Daypro&#174;, Luvox&#174; and Amoxil&#174;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The potential for revenue growth of generic
products in the United States is closely related to a
company&#146;s pipeline of pending abbreviated new drug
applications (&#147;ANDAs&#148;) with the FDA, as well as
tentative approvals already granted. As of February&nbsp;21,
2003, Teva had 61 product registrations awaiting FDA approval
(one from Biovail and five from Impax), including ten tentative
approvals and two approvables. Collectively, the brand-name
versions of these products had corresponding U.S. annual sales,
as of December&nbsp;31, 2002, exceeding $42&nbsp;billion.
Several of these pending products may enjoy a 180-day marketing
exclusivity period, as Teva was the first to file a patent
challenge as part of the ANDA for such products. Teva does not
include in these product registrations its four registrations
relating to the generic version of Claritin&#174;, which became
available as an over-the-counter product in 2002. Teva presently
has no direct distribution to the over-the-counter market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Branded product market size is a commonly used
measurement of the relative significance of a potential generic
product. Generic equivalents of any given product are typically
sold at prices substantially below the branded price, and in
those instances where there are multiple generic producers of
the same product, dramatically below the branded price. In most
instances, FDA approval is granted on the expiration of the
underlying patents; however, companies are rewarded by marketing
exclusivities, as provided by law, by challenging or
circumventing these patents. Aside from the financial benefits
of marketing exclusivities, Teva believes that these activities
improve healthcare by allowing consumers faster access to more
affordable medications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva actively reviews pharmaceutical patents and
seeks opportunities to challenge those patents where Teva
believes that such patents are either invalid or not infringed.
As of February&nbsp;21, 2003, Teva&#146;s product registrations
included 41 applications filed with the FDA which were
&#147;Paragraph&nbsp;IV&#148; applications&nbsp;&#151; i.e.,
applications which challenge patents of branded products. Of
these applications, 32 applications are pending FDA approval and
nine have been tentatively approved.
</FONT>

<P align="center"><FONT size="2">12
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Acquisitions. </FONT></I><FONT size="2">In
September 1999, Teva completed its acquisition of Copley
Pharmaceutical, Inc. a Massachusetts-based generic
pharmaceutical company. The transaction was accounted for as a
purchase. This acquisition significantly broadened the product
offerings of Teva USA, as only a few of Copley&#146;s products
overlapped with the existing product line of Teva USA. In
addition, this acquisition considerably fortified Teva&#146;s
pipeline of ANDAs pending before the FDA. After the acquisition,
Copley was merged into Teva USA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2000, Teva completed the acquisition of
Novopharm Limited. The Novopharm acquisition was also accounted
for as a purchase. Novopharm is Canada&#146;s second largest
generic drug company, with significant operations in the United
States and Hungary as well. Novopharm, a privately owned
Canadian corporation, commenced producing generic
pharmaceuticals in 1965. The core operations of Novopharm
include the manufacture and marketing of generic prescription
drugs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Strategic Alliances.
</FONT></I><FONT size="2">In December 1997, Teva and Biovail
Corporation International entered, through subsidiaries, into a
marketing and product development agreement which provided Teva
with exclusive U.S. marketing rights for Biovail&#146;s pipeline
of eight controlled-release generic versions of successful
brands. These products included generic versions of
Cardizem&#174;SR, Cardizem&#174;CD, Trental&#174;,
Verelan&#174;, Adalat&#174;CC, Procardia XL&#174;,
Dilacor&#174;XR and Voltaren&#174;XR. Biovail was responsible
for the regulatory filing and approval process and the
manufacturing of the products. In addition to amounts paid to
Biovail for products purchased by Teva under this agreement,
Teva paid Biovail $34.5&nbsp;million pursuant to the agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In September 1999, Teva entered into a strategic
alliance with Bio-Technology General Corp. for the development
and worldwide commercialization of generic equivalents of
biotechnology products. In addition to granting Teva U.S.
exclusive marketing rights for Bio-Technology General&#146;s
human growth hormone, Bio-Technology General will develop and
produce bio-generics which will be sold by Teva. The agreement
provides for each of the two companies to capitalize on its
particular strengths&nbsp;&#151; Bio-Technology General&#146;s
primary role will be to develop and manufacture the products,
and Teva will have exclusive marketing rights. Teva had intended
to launch Bio-Technology General&#146;s human growth hormone
product in 2002. However, just prior to launch, Novo Nordisk
Pharmaceuticals, Inc. and Novo Nordisk A/ S sued Teva USA and
Bio-Technology General for patent infringement and obtained a
preliminary injunction, which prevented the launch of the
product. Ultimately, the Court of Appeals for the Federal
Circuit reversed the preliminary injunction. The patent
infringement case is expected to go to trial in the summer of
2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2001, Teva entered into a strategic
alliance agreement for twelve controlled release generic
pharmaceutical products with Impax. The agreement grants Teva
exclusive U.S. marketing rights and an option to acquire
exclusive marketing rights in the rest of North America, South
America, the European Union and Israel. Prior to its expiration,
Teva exercised its option with respect to the marketing rights
of certain products in Canada. Two products have received
tentative approval and three are pending ANDAs, not including
the three products related to the generic version of
Claritin&#174;. An additional four products have been identified
for development by Impax. As part of the transaction, Impax
received a loan of $22&nbsp;million, portions of which may be
forgiven upon the attainment of certain milestones. Of this
loan, $2.4&nbsp;million was forgiven in 2002 upon achievement of
a certain milestone. In addition, Teva has invested
$15&nbsp;million in exchange for Impax shares according to a
fixed schedule through June 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marketing and Sales.
</FONT></I><FONT size="2">The marketing of generic
pharmaceutical products in the United States is conducted
through Teva USA. Teva USA&#146;s sales were made to the
following types of customers:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Drug store chains
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Drug wholesalers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Generic distributors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hospitals, government and managed care
    institutions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">13
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva USA has a sales force that actively markets
Teva USA&#146;s products. Key account representatives for
generic products call on purchasing agents for chain drug
stores, drug wholesalers, health maintenance organizations,
pharmacy buying groups and nursing homes. Teva USA also contacts
its retail customers and supports its wholesale selling effort
with telemarketing as well as professional journal advertising
and exhibitions at key medical and pharmaceutical conventions.
From time to time, Teva USA bids for government tendered
contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through its acquisition of Novopharm, Teva
acquired a sales force in Canada, which markets Novopharm&#146;s
products to over 6,300 pharmacies. Novopharm also uses a
hospital sales division, which covers approximately 900
hospitals throughout Canada.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Europe</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva believes that the evolving European generics
market has the potential to provide it with opportunities for
substantial growth in its sales. The European generics market
varies considerably from country to country. The Netherlands and
the United Kingdom have well-established markets for generic
drugs sold under their chemical name. In other European
countries, there is a market for branded generics, but not for
products sold under this chemical name. In France, generics have
begun to take a firmer hold on the pharmaceutical market, while
in Italy legislation that permits generic substitution has only
recently come into effect. Similarly, in July 2002, a law became
effective in Germany which for the first time allows generic
substitution by pharmacists under certain prescribed
circumstances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva currently produces for sale in Europe
approximately 300 generic products representing over 1,700
dosage strengths and packaging sizes. Among the products
launched by Teva in Europe during 2002 were the generic versions
of Zirtek&#174;, Carace/ Zestril&#174; and Claritin&#174;. In
the past four years, Teva received over 310 generic approvals,
corresponding to 101 compounds of 187 formulations. In addition,
as of December&nbsp;31, 2002, 98 compounds representing 199
formulations of over 320 marketing authorization applications
are pending approval, with over 140 additional compounds under
development. Teva believes that this pipeline of approvals and
applications will generate significant internal growth in the
next several years. For example, in 2003, Teva expects to launch
a number of significant products in the U.K. and Holland upon
anticipated patent expirations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s rapid growth in Europe over the last
few years was generated by a combination of acquisitions in the
United Kingdom, Holland, Hungary and most recently in France,
and the parallel development of existing businesses. Teva will
seek to establish itself as a leader in the European market for
generic products by leveraging a number of Teva&#146;s strengths
including its leadership in the more mature generic markets, its
ownership of an active pharmaceutical ingredients business,
which facilitates both vertical integration and the possibility
of achieving economies of scale, and its ability to utilize the
broad range of products already existing in its generic product
portfolio. Furthermore, Teva not only operates in the mature
generic markets of Europe, such as the United Kingdom and The
Netherlands, where the pharmacist can decide whether to replace
a branded product with a generic equivalent, but Teva has also
been able to make selective inroads in other emerging markets in
which the doctor may control not only the decision of whether or
not a generic is dispensed, but even which generic product is
chosen. To date, however, because of the fragmented nature of
the European generic markets, Teva&#146;s European cost
structure is higher than that which it experiences in the United
States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Acquisitions.</FONT></I><B><FONT size="2">
</FONT></B><FONT size="2">Biogal, acquired by Teva in 1995, is
one of the largest pharmaceutical companies in Hungary. Biogal
develops and produces both finished dosage pharmaceutical
products and active pharmaceutical ingredients for use in making
pharmaceutical products. Biogal produces both for its own local
market needs and for other Teva units in Europe and in Israel,
as well as third party producers of pharmaceutical products.
Biogal&#146;s products include pharmaceuticals in all major
treatment categories, and its production capabilities include
solid forms, tablets, coated pellets, soft and hard gelatin
capsules, liquid and other semi-solid forms, as well as sterile
products. The sale of finished dosage pharmaceutical products
represents approximately 48% of Biogal&#146;s sales, with the
balance coming from sales of active pharmaceutical ingredients.
</FONT>

<P align="center"><FONT size="2">14
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva also operates in Hungary through Biogal Teva
Pharma (&#147;BTP&#148;), Human Trade, Humanpharma Kft. and
Human Pharmaceutical Manufacturing Co. Ltd. Human Pharmaceutical
is a Hungarian company that produces blood and sterile products
for both the Hungarian market and for export markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Approved Prescription Services Limited
(&#147;APS/ Berk&#148;), acquired in July 1996, is one of the
largest generic drug companies in the United Kingdom. APS/
Berk&#146;s products include pharmaceuticals in all major
treatment categories. As part of Teva&#146;s global
rationalization program, APS/ Berk&#146;s production activities
were transferred during 1999 to Biogal in Hungary. APS/ Berk
continues to operate as a packaging and quality control center.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pharmachemie B.V., acquired in July 1998, is the
leading company in the generic market in The Netherlands.
Following the acquisition, Teva implemented a rationalization
program that generated savings and synergies, most notably in
its generic oncology products. During 2002, the tableting
production of Pharmachemie&#146;s products was moved from
facilities in The Netherlands to Biogal in Hungary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2002, Teva acquired Bayer Classics, the
third largest generic pharmaceutical company in France, from
Bayer Pharma S.A. Bayer Classics included both marketing and
manufacturing activities. Following the acquisition, Bayer
Classics was renamed Teva Classics.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva has several small operations in other
European markets and is constantly looking for ways to expand
them and to enter other markets. In Italy, Teva started its own
generic operations and acquired a portfolio of products from
Bayer. Other small operations are located in Germany, Belgium
and the Czech Republic. Sales from these various smaller
operations totaled approximately $48&nbsp;million in 2002 and
constituted almost 10% of total European pharmaceutical sales.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Rest
of the World</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s pharmaceutical sales outside of North
America and Europe reached $275&nbsp;million in 2002. The
Israeli market represented approximately 80% of these sales.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Israel: </FONT></B><FONT size="2">Teva is the
largest supplier of pharmaceutical products in Israel. In the
domestic market, Teva is involved in the marketing, promotion,
selling and distribution of a wide range of health care
specialty products. These include marketing and promotion of
innovative pharmaceutical products, generics, over-the-counter
and consumer products, hospital supplies, dialysis equipment and
disposables, diagnostics and home care services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Israel, Teva has aligned all of its products
and services with the needs of its main customers, namely health
funds, hospitals, private pharmacies and pharmacy chains. It has
built its Israeli product portfolio through licensing
arrangements, as well as its own product development. Teva
intends to introduce new products into the Israeli market and
maintains ongoing close contact with other pharmaceutical,
biotechnology and health care companies around the world.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marketing and Sales.
</FONT></I><FONT size="2">Teva estimates that in 2002 the
Israeli market for pharmaceuticals was approximately
$700&nbsp;million based on manufacturers&#146; selling prices,
comprised of three market categories: health care plans, private
pharmacies and chains and governmental hospitals. Teva is a
significant medical supplier to each of these market categories.
Substantially all of Teva&#146;s pharmaceutical and hospital
supplies sales in Israel are made through its own distribution
company, Salomon, Levin and Elstein Ltd., Israel&#146;s largest
drug wholesaler, which sells directly to institutional
customers, as well as to all of the pharmacies and chains.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Pricing. </FONT></I><FONT size="2">Several
issues affected Teva&#146;s pricing policy in Israel in 2002.
The national health budget was only marginally increased during
2002, which caused government-sponsored health funds to
institute cost saving measures restricting expenditures for
pharmaceutical products. Furthermore, Teva&#146;s prices were
affected by pricing regulations that mandate that the retail
prices of pharmaceuticals in Israel may not exceed the average
of prices in four European markets (the U.K., Germany, France
and Belgium) (the so-called &#147;Dutch Model&#148;). Lastly,
and to a lesser degree, the Israeli health care funds utilized
parallel
</FONT>

<P align="center"><FONT size="2">15
</FONT>

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<DIV align="left">
<FONT size="2">importing to a limited extent, primarily to
pressure Teva and other Israeli producers into granting price
reductions.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Other countries:
</FONT></B><FONT size="2">Teva&#146;s International
Pharmaceutical Division oversees Teva&#146;s various activities
in the rest of the world. Its focus is on pharmaceuticals,
mainly Copaxone&#174;, Alpha D3 (Teva&#146;s bone metabolism
product) and a line of oncology products. Sales include direct
exports from Israel and sales from Teva&#146;s other
manufacturing sites. Sales are made through affiliated
companies, local representatives and distributors in the
different markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to the volatile financial conditions in a
variety of countries in which the division operates, Teva
actively sought to limit its financial risk, which resulted in a
corresponding reduction of sales in these countries.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Proprietary
Products</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s strategy with regard to its
proprietary products is to leverage its access to Israeli-based
research in order to develop innovative compounds for use in
selected therapeutic markets. Teva&#146;s proprietary research
and development pipeline is currently focused on two specialty
areas: neurological disorders and autoimmune diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conducting its research and development, Teva
seeks to manage its resources conservatively and to limit its
risk exposure. At the drug discovery phase, Teva leverages its
relationship with the Israeli academic community to gain early
access to potential projects. Once these projects progress into
the more costly clinical study phase, Teva&#146;s strategy is to
explore corporate partnering options through which it can share
the risks associated with each project.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Copaxone&#174;</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Copaxone&#174;, Teva&#146;s leading product and
its first innovative drug, is used for the reduction in
frequency of relapses in patients with relapsing-remitting
multiple sclerosis (&#147;MS&#148;). To date, Copaxone&#174;has
been approved for marketing in 42 countries worldwide, including
the United States, Israel, Canada, 15 European Union countries,
Switzerland, Australia, Russia, Brazil and Argentina.
Copaxone&#174; was first launched in Israel in December 1996,
and the United States launch followed in March 1997. In 2002,
in-market global sales of Copaxone&#174; amounted to $539
million, of which $411&nbsp;million was in the United States.
Global sales of Copaxone&#174; in 2002 grew by 48% over those of
2001, a rate of growth that was more than double the growth of
the global market of MS products and making Copaxone&#174; the
fastest growing MS therapy worldwide.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2002, Teva launched the sale in the
United States of Copaxone&#174; in ready-to-use pre-filled
syringes, which significantly improve patients&#146; ease of use
of the product. The previous injectable MS therapies required
mixing and preparation time. During 2002, the Copaxone&#174;
pre-filled syringe was also approved and launched in Canada. By
the end of 2002, the pre-filled syringe accounted for
approximately 95% of U.S. prescriptions of Copaxone&#174;. In
response to user input, and as part of Teva&#146;s continuing
efforts to improve patient ease of use, Teva recently introduced
a more sophisticated needle to the pre-filled syringe. Teva is
continuing to work on a second generation auto-inject device.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following the successful completion of the
European Mutual Recognition Procedure (&#147;MRP&#148;) in 2001,
Teva, together with Aventis, began its launch of Copaxone&#174;
in various European countries. One of the first launches, during
the last quarter of 2001, was in Germany, the country with the
largest population of MS patients in Europe. By the end of 2002,
Copaxone&#174; had an estimated 20% market share in Germany. In
addition, Copaxone&#174; was launched at the end of 2001 in
Austria and the Nordic countries and in 2002, in Italy, Spain,
The Netherlands, Greece, Ireland and Belgium.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a first-line therapy, Copaxone&#174; offers
patients with MS a new treatment option. Copaxone&#174; is a new
class of modifying therapy that has been shown in controlled
clinical trials to be effective and generally well-tolerated.
Copaxone&#174; has also clearly shown important reductions in
relapse rates and significant effects on magnetic resonance
imaging (&#147;MRI&#148;) monitored activity and burden of
disease.
</FONT>

<P align="center"><FONT size="2">16
</FONT>

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<DIV align="left">
<FONT size="2">Copaxone&#174; has demonstrated continued
efficacy over eight years. In clinical trials, as well as
post-marketing experience, treatment with Copaxone&#174; is
well-tolerated and in addition is not associated with the
development of neutralizing antibodies. Furthermore,
Copaxone&#174; is the only drug available for patients who do
not benefit from or cannot tolerate beta-interferon.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A study published in the August 2001 issue of
<I>Neurology </I>showed that Copaxone&#174; reduced by 50% the
number of permanent &#147;black holes&#148; that developed in
patients with relapsing-remitting multiple sclerosis. Black
holes are permanent MS lesions in the brain, and represent areas
where the most severe and irreversible brain tissue damage has
occurred. More recently, an article in the November issue of
<I>Brain </I>showed that Copaxone&#174; may have neuroprotective
properties by encouraging the release of a factor that helps
protect the brain from axonal loss.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the last three years, Teva conducted two large
trials: CORAL, to determine the safety and efficacy of an oral
formulation of Copaxone&#174; in relapsing-remitting MS, and
PROMISE, to determine Copaxone&#174;&#146;s efficacy in primary
progressive MS. Although the CORAL trial provided important
information on MS, the analyses of the trial in late 2001 showed
a trend in favor of treatment which did not reach statistical
significance. Teva and H. Lundbeck A/ S, a Denmark-based,
publicly traded pharmaceutical company and Teva&#146;s strategic
partner in the development of oral Copaxone&#174;, are
continuing their collaboration on this project and conducting
experiments to determine how and whether to proceed with the
development of an oral formulation. In November 2002, Teva
announced that an interim analysis of its clinical trial on
primary progressive multiple sclerosis (PROMISE)&nbsp;showed
that it was improbable that the results of the study, in its
current protocol, would reach statistical significance, and
accordingly the trial was terminated. The scheduled interim
analysis by the study&#146;s data safety monitoring committee
came two years into the three-year study. There were no safety
concerns about treatment with Copaxone&#174;. Primary
progressive multiple sclerosis is different from
relapsing-remitting multiple sclerosis, affecting less than 10%
of multiple sclerosis patients worldwide.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In North America, Copaxone&#174; is distributed
by Aventis. Teva manufactures the product and supplies it to
Aventis through Teva USA. Teva Neuroscience Inc., a wholly owned
subsidiary of Teva, succeeded to the business of Teva Marion
Partners, which had been formed in 1995 as an equally owned
marketing partnership between Teva and Aventis. Teva
Neuroscience actively markets and promotes the product in the
United States and Canada through doctor detailing, educational
seminars, websites and patient support programs, such as Shared
Solutions&#153; and MS Watch&#153;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva and the German parent company of Aventis
also have a collaborative arrangement for the marketing of
Copaxone&#174; in Europe and other markets. Under the terms of
this arrangement, following approval in these markets,
Copaxone&#174; is co-promoted in certain European countries, and
in other countries Aventis is the sole marketer. The product is
manufactured by Teva, and Aventis purchases it from Teva and
sells and distributes it in Europe and in other markets.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Projects</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following Copaxone&#174;, Teva&#146;s most
advanced proprietary drug research projects are treatments for
Parkinson&#146;s disease.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 1999, Teva entered into a strategic
alliance with Lundbeck for the co-development and marketing in
Europe of rasagiline and etilevodopa, two Teva products for the
treatment of Parkinson&#146;s disease. Lundbeck has been
providing a substantial financial contribution to these
projects, which has enabled Teva to pursue development efforts,
while maintaining the resources allocated to Teva&#146;s generic
drug development and the expansion of its proprietary pipeline.
Under the terms of the agreement, Teva and Lundbeck will share
the marketing of these products in Europe, and Teva will retain
exclusive marketing rights in the rest of the world, including
North America.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rasagiline has demonstrated efficacy in a
Phase&nbsp;III trial (TEMPO), when used as monotherapy in
early-stage patients. This study was completed in early 2000,
showing a highly statistically significant effect
</FONT>

<P align="center"><FONT size="2">17
</FONT>

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<DIV align="left">
<FONT size="2">on the primary endpoint-progression of
Parkinsonian symptoms. Furthermore, rasagiline was
well-tolerated in this patient population.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2000, two Phase&nbsp;III studies with
rasagiline as adjunctive therapy to levodopa in more advanced
patients were initiated in Europe and North America with results
expected by the second quarter of 2003. If these results prove
successful, a subsequent new drug application for the treatment
of Parkinson&#146;s disease is expected to be filed during 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The second product, etilevodopa, underwent two
Phase&nbsp;III clinical studies in Europe and North America,
which were completed by the end of 2002. In these studies,
etilevodopa was found to be well-tolerated and as effective as
levodopa. However, on the primary endpoint, shortening the time
to onset of clinical effect, etilevodopa did not demonstrate
statistically significant superiority over standard levodopa.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, Teva has innovative research
projects in the earlier clinical stages, in the areas of
Alzheimer&#146;s disease, epilepsy, strokes and SLE (Systemic
Lupus Erythematosus), as well as several projects in the
pre-clinical stage.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intellectual
Property and Other Protections</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva relies on a combination of intellectual
property protections and regulatory exclusivities to protect its
innovative products. Teva seeks to obtain, where possible,
product, process and use patents on its innovative products.
Teva also relies on trade secrets, unpatented proprietary
know-how and confidentiality agreements, as well as trademark
and copyright protection, for its innovative products. In the
United States, law and FDA regulations provide five years of
marketing exclusivity for new chemical entities and seven years
of marketing exclusivity for orphan drugs, such as
Copaxone&#174;. Similar governmental grants of marketing
exclusivity exist in Europe as well.
</FONT>

<P align="left">
<B><FONT size="2">Active Pharmaceutical Ingredients</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to its production and sale of
pharmaceutical products, Teva manufactures and sells active
pharmaceutical ingredients. With a leading global market share
in the production of many major chemicals for generic
pharmaceuticals, Teva&#146;s active pharmaceutical ingredients
business facilitates Teva&#146;s entry into new drug markets and
offers a high quality and cost-effective source of raw
materials. The active pharmaceutical ingredients business is run
independently from Teva&#146;s finished pharmaceutical product
businesses and sells products to third parties in a competitive
market for generic products, as well as to other Teva units on
an arm&#146;s-length basis, for their generic and proprietary
manufacturing needs. This strategy has resulted in Teva becoming
a low-cost producer of active pharmaceutical ingredients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva produces more than 80 different active
pharmaceutical ingredients, using synthetic, semi-synthetic and
fermentation technologies, for use in pharmaceuticals. These
products are sold, subject to the patent position, to
formulators of pharmaceutical products in the United States,
Europe, the Far East and Latin America. These products include
Allopurinol, Amoxicillin, Atenolol, Carbidopa, Cephalexin,
Diltiazem, Doxepin, Etoposide, Furosemide, Gemfibrozil,
Gabapentin Mirtazapine, Metoprolol, Trimethoprim and
fermentation products such as Lovastatine, Simvastatin,
Pravastatin and Tobromycin. Teva believes it is among the
world&#146;s principal suppliers of many of these chemicals.
Through the establishment of joint ventures, Teva has taken
initial steps towards supplying various peptides such as
Calcitonin, Octreotide and others to its customers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order for chemicals to be approved for use as
active pharmaceutical ingredients sold in the United States, the
facilities and production procedures utilized at such facilities
must meet FDA standards. Teva&#146;s chemical plants meet such
standards and are regularly inspected by the FDA. Teva&#146;s
chemical plants located in Israel, Hungary, Italy and the U.S.
operate on a continuous multiple shift basis. Most of the
products are produced in dedicated computer-controlled automated
facilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The research and development group within the
active pharmaceutical ingredient division contributes to Teva by
creating intellectual property, providing research to
continuously reduce the cost of production of Teva&#146;s
chemical products, and developing over ten new chemical products
per year. In addition to
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<DIV align="left">
<FONT size="2">contributing to profitability, these efforts
enable Teva to remain a supplier of key products long after
other competitors cease to be able to produce these products,
which is one of the strategies promoted by Teva&#146;s active
pharmaceutical ingredient division.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s active pharmaceutical ingredient
division supplies Teva&#146;s various pharmaceutical units on
arm&#146;s-length terms, competing with other vendors in price,
quality and reliability. During 2002, these sales were
approximately 44% of the division&#146;s total sales. During
2002, Teva&#146;s pharmaceutical units purchased 31% of their
total requirements for active pharmaceutical ingredients from
Teva&#146;s active pharmaceutical ingredient division. Teva
believes that its ability to produce these chemicals is a
strategic advantage for its production of finished
pharmaceuticals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marketing and Sales.
</FONT></I><FONT size="2">Teva has been actively involved in the
marketing of active pharmaceutical ingredients in the United
States for over 20&nbsp;years. Sales consist principally of the
chemically active ingredients used in specific generic
pharmaceuticals. Most of Teva&#146;s active pharmaceutical
ingredient sales are conducted through a U.S. marketing
subsidiary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Active pharmaceutical ingredients are sold in
Europe through Teva&#146;s European subsidiaries, which are in
direct contact with Teva&#146;s major customers throughout
Europe. In Latin America, Africa and the Far East, chemical
products are sold through Teva&#146;s local subsidiaries as well
as through local distributors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Production.</FONT></I><B><FONT size="2">
</FONT></B><FONT size="2">Teva produces active pharmaceutical
ingredients worldwide through ten plants located in the United
States, Israel, Hungary and Italy. The plants manufacture active
pharmaceutical ingredients through synthetic and fermentation
technology.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Acquisitions.</FONT></I><B><FONT size="2">
</FONT></B><FONT size="2">During 2002, Teva acquired Honeywell
PFC (subsequently renamed Teva PFC), an active pharmaceutical
ingredients manufacturer, with two facilities in Italy. These
facilities, which are in close proximity to Teva&#146;s existing
two chemical plants in the area of Milan, Italy, have
strengthened Teva&#146;s competitive position, primarily in the
U.S. generic pharmaceutical market.
</FONT>

<P align="left">
<B><FONT size="2">Research and Development</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s research and development activities
can be categorized into several categories which roughly
parallel the activities of its major business units. A
significant portion of Teva&#146;s R&#38;D activities is
directed at the development of product formulations, process
validation, bioequivalency testing and other data needed to
prepare a growing list of generic drug registration files in the
U.S., Europe and elsewhere in the world. Researchers in
Teva&#146;s active pharmaceutical ingredients division
concentrate on the development of chemical processes for
improving chemical syntheses of active ingredients of interest
to the generic drug industry. Teva&#146;s innovative R&#38;D
researchers conduct product development and clinical testing for
Teva&#146;s pipeline of proprietary products, as well as
collaborate with Israel&#146;s major universities, medical
institutions and research institutes in order to derive the
benefits of extensive research activities conducted in Israel.
This access to ongoing research in Israeli institutions is an
important part of Teva&#146;s innovative research and
development strategy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s research and development expenses
were as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">U.S. dollars in millions</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross R&#38;D expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Participations and grants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net R&#38;D expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The participations and grants during the three
years shown above represented principally the participation of
Lundbeck and Aventis in the innovative R&#38;D costs of Teva,
and, to a lesser extent, grants from Israel&#146;s Office of the
Chief Scientist.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to the substantial support that
innovative research and development projects receive from third
parties such as Lundbeck and Aventis, Teva avails itself of
government funding for research
</FONT>

<P align="center"><FONT size="2">19
</FONT>

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<DIV align="left">
<FONT size="2">conducted in Israel. The Israeli government
offers grants, which are repayable as royalties from the sale of
products resulting from funded research, with the aggregate
amount of such royalties limited to the amount of the original
grant (and, in respect of grants since 1999, with the addition
of LIBOR interest). The royalties are at rates between 2% and
3.5% (depending on the number of years elapsed since the
commencement of the royalty payments) of sales relating to a
product or a development resulting from the funded research. The
maximum amount of the contingent liability in respect of
royalties to the Israeli government at December&nbsp;31, 2002
amounts to $34.4&nbsp;million.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, Teva is subject to intense
competition in the generic drug market from other generic drug
product manufacturers, brand-name pharmaceutical companies that
manufacture generic drug products, manufacturers of branded drug
products that continue to produce those products after patent
expirations and manufacturers of therapeutically similar drugs.
Teva believes that the primary competitive factors affecting it
in the United States are the ability to continually introduce
the generic equivalents for brand-name drug products in
sufficient volume soon after their relevant patents expire, as
well as price, product quality, prompt delivery, breadth of
product line, customer service and reputation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although significant profits can be realized from
a product that is the first generic version to be marketed,
price competition from additional generic versions of the same
product as well as potential price competition from the original
branded product could result over time in significant reductions
in sales and profit margins. Teva&#146;s competitors may develop
their products more rapidly or complete the regulatory approval
process sooner, and therefore market their products earlier. New
drugs and future developments in alternative drug delivery
technologies or other therapeutic techniques may provide
therapeutic or cost advantages to competing products. Some
brand-name competitors try to prevent, discourage or delay the
use of generic equivalents through regulatory processes, patent
extension, litigation and negative public relations campaigns.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva is witnessing a consolidation of its
customers, as chain drug stores and wholesalers merge or
consolidate. In addition, a number of its customers have
instituted source programs that limit the number of suppliers of
generic pharmaceutical products carried by that customer. As a
result of these developments, there is heightened competition
among generic drug producers for the business of this smaller
and more selective customer base.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In The Netherlands, Pharmachemie competes with
other generic drug product manufacturers, brand-name
pharmaceutical companies that manufacture generic drug products,
original manufacturers of branded drug products that continue to
produce those products after patent expirations and
manufacturers of therapeutically similar drugs. As in the United
States, the generic market in The Netherlands is very
competitive, with the main competitive factor being price, but
competition is also based on name, reputation and customer
service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United Kingdom, APS/ Berk competes with
other generic drug manufacturers, brand-name pharmaceutical
companies that manufacture generic drug products, manufacturers
of branded drug products that continue to produce those products
after patent expirations and manufacturers of therapeutically
similar drugs. APS/ Berk&#146;s main competitor is a
multinational pharmaceutical company, which in the past has
invested heavily in new product development, giving it a
competitive edge in bringing new generic products to market on a
timely basis. As in the United States, the United Kingdom
generic market is very competitive with the main competitive
factor being price, but competition is also based on name,
reputation and customer service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Hungary, the Teva companies compete with local
Hungarian manufacturers as well as face increasing competition
from multi-national pharmaceutical companies. In recent years,
the Hungarian pharmaceutical industry has been substantially
privatized, resulting in foreign ownership of most major
Hungarian pharmaceutical manufacturers. In addition, many
multinational pharmaceutical companies have established
Hungarian marketing companies for their products, further
intensifying the competition. Teva&#146;s acquisition of Human
Pharmaceutical strengthened Teva&#146;s position and presence in
Hungary, while
</FONT>

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<DIV align="left">
<FONT size="2">creating a more diversified products and service
portfolio, including wholesaling services through Human Trade.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Canada, Novopharm is the second largest of
five major generic drug manufacturers, three of which are
subsidiaries or divisions of other global manufacturers, and two
of which are privately owned. Novopharm, together with these
competitors, satisfies most of the Canadian demand for generic
pharmaceuticals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Canadian regulatory and customer landscape
for generic manufacturers continues to evolve. During the last
year several federal and provincial commissions were appointed
to study and make recommendations for improvement to
Canada&#146;s publicly funded Medicare system. Many of these
commissions highlighted the need to limit brand patent
extensions, and speed the approval process for generic drugs.
While a positive step, branded pharmaceutical companies continue
to lobby against such changes which would enhance generic drug
sales at the expense of the brands.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The customer base for Novopharm continues to
change as the number of independent community pharmacies shrinks
at the expense of chain drug and banner aligned store groups,
which have begun to work closely with selected suppliers for
specific products. This trend is expected to continue, resulting
in increased competition for generic drug manufacturers at the
chain and banner buying offices. These larger customers look to
generic suppliers to launch generic products immediately upon
patent expiry, maintain high levels of product availability and
provide increased levels of overall customer value and service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Israel, Teva accounts for approximately
one-quarter of the pharmaceutical market and is the largest
supplier of health care products. Teva&#146;s largest competitor
in Israel has sales of approximately half of those of Teva.
Competition is based primarily on the ability to market and
properly position products within the medical community to
create demand and the ability of a company to provide its
clients with both a broad line of products and prompt service.
Teva&#146;s products compete with those of other local
manufacturers as well as with imported products. Generic
competition has increased in recent years in Israel and the
trend is expected to continue, with additional price pressure
coming from the health care funds and other institutional
purchasers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Copaxone&#174; competes with other therapies for
the treatment of multiple sclerosis, principally the three
products that are forms of beta-interferon: Biogen Inc.&#146;s
Avonex&#174;, Schering AG/ Berlex Laboratories&#146;
Betaseron&#174; and Serono SA&#146;s Rebif&#174;. In 2002,
Serono announced that it has entered into a co-marketing
agreement with Pfizer Inc. to market Rebif&#174; in the United
States. In addition, there are other products in various stages
of clinical development for the treatment of multiple sclerosis,
most notably Antegren&#174; being developed jointly by Elan
Corporation and Biogen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the sale of active pharmaceutical ingredients,
Teva competes in all of its markets with specialty chemical
producers who are mainly located in Europe and the Far East,
particularly in Italy and Spain. Teva competes based on price,
quality, timely delivery and its ability to meet the stringent
FDA requirements for approved suppliers of raw materials. Many
of its competitors are smaller than Teva&#146;s active
pharmaceutical ingredients division in terms of sales. Teva
believes that its extensive portfolio (one of the broadest
available in the industry), combined with the breadth of its
operations and its financial resources, make Teva&#146;s active
pharmaceutical ingredients division a leader in the industry.
</FONT>

<P align="left">
<B><FONT size="2">Regulation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">United States. </FONT></I><FONT size="2">All
pharmaceutical manufacturers which sell products in the United
States are subject to extensive regulation by the U.S. federal
government, principally by the FDA and the Drug Enforcement
Agency, and, to a lesser extent, by state and local governments.
The Federal Food, Drug and Cosmetic Act, the Controlled
Substance Act and other federal statutes and regulations govern
or influence the manufacture, testing, safety, efficacy,
labeling, approval, storage, distribution, record keeping,
advertising, promotion and sale of Teva&#146;s products.
Teva&#146;s major facilities and products are periodically
inspected by the FDA, which has extensive enforcement powers
over the activities of pharmaceutical manufacturers.
Non-compliance with applicable requirements can result in fines,
criminal penalties, civil
</FONT>

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<FONT size="2">injunction against shipment of products, recall
and seizure of products, total or partial suspension of
production, sale or import of products, refusal of the
government to enter into supply contracts or to approve new drug
applications and criminal prosecution. Changes in FDA procedures
have increased the time and expense involved in obtaining ANDA
approvals and in complying with current good manufacturing
practice (cGMP) standards. The ANDA generic drug development
process and the approval process now take from two to five
years. At the same time, the Prescription Drug User Fee Act
provides the FDA with additional resources to reduce approval
times for new drugs, which are funded through user fees. The FDA
also has the authority to deny or revoke approvals of drug
active ingredients and dosage forms and the power to halt the
operations of non-complying manufacturers. Any failure by Teva
to comply with applicable FDA policies and regulations could
have a material adverse effect on the operations of Teva.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">FDA approval is required before each dosage form
of any new drug can be marketed. Applications for FDA approval
must contain information relating to bioequivalency (for
generics), safety and toxicity (for new drugs), product
formulation, raw material suppliers, stability, manufacturing
processes, packaging, labeling and quality control. FDA
procedures require commercial manufacturing equipment to be used
to produce test batches for FDA approval. Validation of
manufacturing processes is required by the FDA before a company
can market new products. The FDA conducts pre-approval and
post-approval reviews and plant inspections to implement these
requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Waxman-Hatch Act of 1984 established the
abbreviated application procedure for obtaining FDA approval for
generic forms of brand-name drugs. This act also provides a
market exclusivity provision which could delay the submission or
the approval of a competing ANDA. One such provision allows a
five-year market exclusivity period for new drug applications
(&#147;NDAs&#148;) involving new chemical compounds and a
three-year market exclusivity period for NDAs (including
different dosage forms) containing new clinical investigations
essential to the approval of the application. The market
exclusivity provisions apply equally to patented and
non-patented drug products. Another provision may extend patents
for up to five years as compensation for reduction of effective
life of the patent as a result of time spent by the FDA
reviewing a drug application.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, the Act provides for a potential
180-day period of generic exclusivity whereby the first company
to submit an ANDA challenging a brand product patent may trigger
a regulatory process whereby the FDA is required to delay the
final approval of the ANDAs of subsequent filers. Additionally,
submission of an ANDA challenging a brand patent may result in
patent litigation. If this occurs, the FDA may not approve the
ANDA until the earlier of thirty months or the resolution of the
litigation. Based on recent court rulings, the FDA has modified
and re-evaluated its regulations with regard to the 180-day
exclusivity period. This may result in the delay of entry to
market for many generic products, and may result in co-sharing
of the exclusivity period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Brand-name manufacturers have devised numerous
strategies to delay competition from lower cost generic versions
of their products. One of these strategies is the development of
an optically pure version of a drug or the development of its
metabolite just prior to the expiration of its patents. A shift
in market preference to the &#147;new&#148; product protects the
branded market. Hence, considerable resources expended by
generic manufacturers in drug development, application
submission and approval of the original generic versions may
produce reduced revenues for generic drug companies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 1997, the Food and Drug Modernization
Act was passed. One of the provisions of the Modernization Act
mandated the FDA to devise a program whereby brand sponsors may
be awarded a six-month extension to any active patents and
exclusivity for all formulations of an active ingredient if they
perform and submit adequate pediatric studies on any one dosage
form. The details of the FDA&#146;s implementation of this
provision is a subject of much debate in industry and in
government circles as well, but the effect has been to delay the
launch of numerous generic products by an additional six months.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Generic Drug Enforcement Act of 1992
established penalties for wrongdoing in connection with the
development or submission of an ANDA by authorizing the FDA to
permanently or temporarily debar companies or individuals from
submitting or assisting in the submission of an ANDA, and to
temporarily
</FONT>

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<FONT size="2">deny approval and suspend applications to market
multi-source drugs. The FDA may suspend the distribution of all
drugs approved or developed in connection with wrongful conduct
and also has authority to withdraw approval of an ANDA under
certain circumstances. The FDA can also significantly delay the
approval of a pending NDA or ANDA under its &#147;Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities
Policy.&#148; Manufacturers of drugs must also comply with the
FDA&#146;s cGMP standards or risk sanctions such as the
suspension of manufacturing or the seizure of drug products and
the FDA&#146;s refusal to approve additional ANDAs.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Products marketed outside the United States that
are manufactured in the United States are subject to various
export statutes and regulations, as well as regulation by the
country in which the products are to be sold.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Centers for Medicare &#38; Medicaid Services,
formerly known as the Health Care Financing Administration, is
responsible for the implementation of legislation enacted by
Congress in November 1990 that delineates requirements for
rebate agreements between the federal government and a
pharmaceutical manufacturer. Drug manufacturers&#146; agreements
with the Centers for Medicare &#38; Medicaid Services provide
that the drug manufacturer will remit to each state Medicaid
agency, on a quarterly basis, the following rebates: For generic
drugs marketed under ANDAs covered by the state Medicaid
program, manufacturers are required to rebate 11&nbsp;percent of
the average manufacturer price (net of cash discounts and
certain other reductions). For products marketed under NDAs,
manufacturers are required to rebate the greater of
15.1&nbsp;percent of average manufacturer price (net of cash
discounts and certain other reductions) or the difference
between such average manufacturer price and the best price
during a specified period. An additional rebate for products
marketed under NDAs is payable if the average manufacturer price
increases at a rate higher than inflation. Teva USA has such a
rebate agreement in effect with the federal government. Teva
believes that the federal and/or state governments may continue
to enact measures in the future aimed at reducing the cost of
drugs to the public. Teva cannot predict the nature of such
measures or their impact on its profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Canada. </FONT></I><FONT size="2">In Canada,
the federal and provincial governments determine the
availability and financial reimbursement of therapeutic products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Canadian federal government, under the Food
and Drug Act and the Narcotic Control Act, regulates what
therapeutic products can be sold in Canada and what level of
control applies. The Therapeutic Products Programme is the
national authority that evaluates and monitors the safety,
effectiveness and quality of drugs, medical devices and other
therapeutic products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The approval of the Therapeutic Products
Programme, through the issuance of a Notice of Compliance, is
required before each dosage form of any drug can be marketed.
Pharmaceutical manufacturers must provide information on product
formulation, raw material suppliers, stability of both the
active drug substances and the finished drug products,
manufacturing processes, packaging, labeling, quality control
and safety and efficacy. The manufacturers are also subject to
regular inspections and must have valid establishment licenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All generic drug products are approved on the
basis of a comparative safety and efficacy review and a
chemistry and manufacturing review. The Therapeutic Products
Programme has issued three separate guidances on how to
establish and conduct bioavailability studies for generic drug
products with conventional, modified release formulation and
complicated or variable pharmacokinetics. Bioequivalent products
receive a &#147;Declaration of Bioequivalence&#148; to the
corresponding products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The issuance of a Notice of Compliance for
generic drug products is also subject to the Patented Medicines
(Notice of Compliance) Regulations. The Therapeutic Products
Programme will not issue the Notice of Compliance if the patent
is still registered with the Health Canada Patent Registrar.
Generic pharmaceutical manufacturers can either wait for the
patent to expire or file a patent allegation. Filing of a patent
allegation often results in patent litigation with the brand
company. A Notice of Compliance will not be issued until the
earlier of the expiration of a twenty-four months stay or
resolution of the litigation. Brand-name manufacturers under
certain circumstances are permitted to add new patents to the
Health
</FONT>

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<FONT size="2">Canada Patent Register, which, if asserted, could
re-start the twenty-four month stay. This makes it difficult for
the generic pharmaceutical manufacturers to receive a Notice of
Compliance.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provincial governments control expenditures
on therapeutic products by establishing interchangeability
formularies and benefit lists. The provincial governments
regulate the pricing of the products and will only reimburse
products that are listed in the Formularies and Benefit Lists.
The Provincial Ministries of Health, through their own review
processes, determine the eligibility of the products by
evaluating the drug quality, bioequivalence data, drug
therapeutics, and utilization of drug and pharmacoeconomic
issues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Brand-name manufacturers may file challenges
against the interchangeability status of the generic drug
products with the Provincial Ministries of Health to block or
delay the listing of the generic products in the formularies and
benefit lists.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Israel. </FONT></I><FONT size="2">Israel, like
other countries with an advanced pharmaceutical industry,
requires pharmaceutical companies to conform to international
developments and standards. To this end and in order to meet the
three basic criteria for drug registration, namely quality,
safety and efficacy, regulatory requirements are constantly
changing in accordance with scientific advances as well as
social and ethical values. Legal requirements prohibit the
manufacture, importation and marketing of any medicinal product,
unless it is duly approved in accordance with these requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Manufacturers of pharmaceuticals, both local and
foreign, must comply with the requirements of Good Manufacturing
Practices, in order to ensure that products marketed in Israel
are of high quality. The content of an application for
registration depends on the type of product to be registered and
whether it is a new drug entity product, a generic product or a
cosmetic product.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of the 1998 amendments to the patent
law, certain pharmaceutical patents may be extended.
Additionally the Israeli government is considering introducing
data exclusivity provisions, which may prevent the marketing of
a generic product for a period of time after the initial
registration of the innovator product.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Europe. </FONT></I><FONT size="2">A directive
of the European Union requires that medicinal products must have
a marketing authorization before they are placed on the market
in the European Union. The criteria upon which grant of an
authorization is assessed are quality, safety and efficacy. In
order to control expenditures on pharmaceuticals, most member
states in the European Union regulate the pricing of such
products and in some cases limit the range of different forms of
a drug available for prescription by national health services.
These controls can result in considerable price differences
between member states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain pharmaceutical patents may be extended in
Europe by up to five years in order to extend effective patent
life to fifteen years. Some older French and Italian patents
were extended up to eight and eighteen years respectively.
Additionally, data exclusivity provisions in Europe may prevent
launch of a generic product by six or ten years from the date of
the first market authorization in the European Union.
Legislation is being considered which may shorten or lengthen
this exclusivity period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the course of 2002, Teva continued to
register its products in Europe. As part of the mutual
recognition procedure established by the European Union, an
attempt was made to simplify registration, although centralized
registration for generic products is, as yet, not possible in
Europe. Teva has significantly increased its registration
efforts in a number of main countries: Hungary, the United
Kingdom, France and Germany.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Hungary. </FONT></I><FONT size="2">Only
registered drugs can be marketed in Hungary. OGYI (the National
Pharmaceutical Institution), an agency of the Ministry of
Health, examines and approves the documents filed for health
registration. The standards of approval correspond substantially
to European Union standards. On granting the marketing
authorization, the price and amount of the National Health
Authority subsidy are published in the official Health Gazette
of the Ministry. A pharmaceutical product can only be placed on
the Hungarian market after such price and subsidy amounts have
been published.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;1, 2003, Hungary joined the
European Patent Convention and simultaneously amended its own
patent act to conform to this convention. On the whole, the new
patent act retained most provisions
</FONT>

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<FONT size="2">of the previous act, including the permission to
carry out clinical trials and tests and apply for and obtain
registration of generics even prior to the expiration of the
original patent. This new act, however, considers the
maintenance of an inventory of such generics prior to the
expiration of the patent to be an infringement of the patent,
while the maintenance of such an inventory was not considered an
infringement under the previous act.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General. </FONT></I><FONT size="2">Teva is
also governed by federal, state and local laws of general
applicability, such as laws regulating working conditions. In
addition, Teva is subject, as are manufacturers generally, to
various federal, state and local environmental protection laws
and regulations, including those governing the discharge of
material into the environment. Compliance with such
environmental provisions is not expected to have a material
effect on the operations of Teva in the foreseeable future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Data Exclusivity.
</FONT></I><FONT size="2">Data exclusivity provisions exist in
many countries worldwide, although their application is not
uniform. In general, the exclusivity prevents the submission of
generic drug applications to the health authorities for a fixed
period of time following the first approval of the brand name
product in that country. The fixed period of time ranges from
five to ten years. Additional countries, including Israel, may
introduce data exclusivity provisions in the future. This may
prevent the submission of generic drug applications for some
products even after the patent protection has expired.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In particular, European data exclusivity
provisions prevent the submission of generic drug applications
to the health authorities for a period of six to ten years
following the first approval of the brand name product in the
European Union. Most EU countries have a ten year rule, and it
is likely that EU countries with a six year exclusivity period
will extend their data exclusivity period to ten years. The data
exclusivity provisions in most countries are independent of
patent exclusivity. This may prevent the submission of generic
product applications for some products even after the patent
protection has expired.
</FONT>

<P align="left">
<B><FONT size="2">Pharmaceutical Production</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva operates 18 finished dosage pharmaceutical
plants in North America, Europe and Israel. The plants
manufacture solid dosage forms, injectables, liquids and
semi-solids. During 2002, Teva&#146;s plants produced
approximately 18 billion tablets and capsules.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Of Teva&#146;s approximately $160&nbsp;million in
capital expenditures during 2002, approximately one-third was
spent on the improvement and expansion of existing
pharmaceutical plants. Teva&#146;s recent global rationalization
projects, whereby most of the plants were designated as
technological centers of expertise, enhanced Teva&#146;s ability
to gain from economies of scale and to continuously improve its
performance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s North American facilities manufacture
solids, liquids and semi-solids, including dedicated facilities
for penicillins and cephalosporins products. Its European
facilities manufacture solids, liquids and semi-solids
(including soft gelatin caps), and sterile products (including
plasma fractionation products). Its Israeli facilities
manufacture solids, liquids and semi-solids and sterile
products. Teva&#146;s main technology&nbsp;&#151; the
manufacture of tablets and capsules&nbsp;&#151; is available in
all the three geographical areas. Teva USA derives most of its
sales from products manufactured outside of the United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s plants in the United States and
Canada, the Kfar Sava plant in Israel and the Haarlem plant in
The Netherlands are FDA-inspected. Achieving and maintaining
quality standards in compliance with the current good
manufacturing practice (cGMP) regulations, as established by the
FDA and other regulatory agencies worldwide, requires sustained
efforts and expenditures. Teva has spent, and will continue to
spend, significant funds and dedicate substantial resources to
seek to ensure that standards are continuously met.
</FONT>

<P align="left">
<B><FONT size="2">Raw Materials for Pharmaceutical
Production</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva has successfully deployed a global approach
to deal with its main suppliers of raw materials. As for
packaging materials, only a few suppliers are global and
consequently the majority of the purchases are made locally.
</FONT>

<P align="center"><FONT size="2">25
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of the raw materials used in Teva&#146;s
plants in Israel, Europe and Canada, and which are not
manufactured by Teva&#146;s active pharmaceutical ingredients
(API) division, are purchased from European, U.S. and Far East
API manufacturers. Teva USA has traditionally acquired the
majority of its raw materials from U.S.-based suppliers and
agents.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Approximately one-third of the raw materials were
purchased from Teva&#146;s API division, and an additional third
from Teva&#146;s top 25 suppliers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, Teva has succeeded in obtaining the
raw materials needed for its production requirements. To protect
itself from supply interruptions in some of those cases in which
it currently has only one supplier, Teva has built up
inventories or signed supply agreements with current suppliers
and is looking to qualify additional suppliers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, Teva USA utilizes
controlled substances in certain of its products and therefore
must meet the requirements of the Controlled Substances Act and
the regulations issued pursuant thereto and administered by the
U.S. Drug Enforcement Administration. These regulations include
quotas on procurement of controlled substances and stringent
requirements for manufacturing controls and security to prevent
pilferage of or unauthorized access to the drugs in each stage
of the production and distribution process. Teva benefits from
holding the appropriate licenses to handle such materials, which
allow it to produce products with limited market competition. On
the other hand, quotas for controlled substances may from time
to time limit the ability of Teva USA to meet demand for these
products.
</FONT>

<P align="left">
<B><FONT size="2">Organizational Structure</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth alphabetically, by
geographic area, as of March&nbsp;1, 2003, the name and
jurisdiction of Teva&#146;s principal operating subsidiaries.
Except as otherwise indicated, Teva owns 100% of the ownership
and voting interest in such subsidiaries.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><FONT size="2">North America:</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Novopharm Limited (Canada)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Neuroscience, Inc. (United States)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Pharmaceuticals USA, Inc. (United States)
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><FONT size="2">Europe:</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Approved Prescription Services Limited (United
    Kingdom)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Biogal Pharmaceutical Works Ltd.
    (Hungary)&nbsp;&#151; 99.3% owned
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Gry Pharma GmbH (Germany)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Human Pharmaceutical Works Co.
    Ltd.(Hungary)&nbsp;&#151; 99.0% owned
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Pharmachemie Group (The Netherlands)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Prosintex Industrie Chimiche Italiane S.r.l.
    (Italy)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Classics S.A. (France)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Sant&#233; SAS (France)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Pharmaceutical Fine Chemicals s.r.l. (Italy)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Pharmaceuticals Europe B.V. (The Netherlands)
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Pharma Italia S.r.l. (Italy)
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><FONT size="2">Israel:</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Abic Ltd.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Assia Chemical Industries Ltd.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">B.L.T.&nbsp;&#151; Biological Laboratories Teva
    Ltd.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Plantex Ltd.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Salomon, Levin and Elstein Ltd.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva Medical Ltd.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Properties and Facilities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Listed below are Teva&#146;s major facilities as
of March&nbsp;1, 2003:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Plant Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Square Footage</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Main Function</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kfar Sava, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">311,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing, research
    laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Netanya, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">205,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical production, research laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Jerusalem, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">158,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing, research
    laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Petach Tikva, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">115,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical production, research laboratories and
    warehousing
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Netanya, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">105,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical production
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ashdod, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">68,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hospital supplies production
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ramat Hovav, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">152,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical production
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Petach Tikva, Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">59,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate headquarters
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sellersville, Pennsylvania
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">165,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing, research
    laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mexico, Missouri
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">125,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical production
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">North Wales, Pennsylvania
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">335,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical warehousing, distribution center,
    offices
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fairfield, New Jersey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">43,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical production
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Elmwood Park, New Jersey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">27,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical production
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Eastbourne, England
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">35,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical packaging
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Milan, Italy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">34,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical production and warehousing
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pavia, Italy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">32,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical production and warehousing
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debrecen, Hungary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing, chemical
    production, warehousing and research laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">G&#246;d&#246;ll&#245;, Hungary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">105,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing, hospital supplies
    production, research laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Haarlem, The Netherlands
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">218,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing, warehousing,
    administration
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mijdrecht, The Netherlands
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">27,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Offices and warehousing
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Toronto Area, Canada (six sites)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">585,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing, research
    laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sens, France
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">186,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical manufacturing and warehousing
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Puteaux, France
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Offices
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lecco, Italy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">81,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical plant, warehousing and research
    laboratories
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Varese, Italy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chemical plant and warehousing
    </FONT></DIV>
    </TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva leases certain of its facilities. The Kfar
Sava plant, the Jerusalem pharmaceutical plant, the Netanya
chemical plant and the Ramat Hovav plant are in buildings owned
by Teva on land leased from the Israel Lands Administration. The
leases with respect to the Kfar Sava plant extend until 2032 and
2034, respectively, with an option to renew until 2081 and 2083,
respectively. The leases with respect to the Netanya chemical
plant extend until 2018 and 2022, with an option to renew each
of the leases until 2067 and 2071, respectively. The lease with
respect to the Ramat Hovav plant extends until 2043, with an
option to renew until 2092. The lease with respect to the
Jerusalem pharmaceutical plant extends until 2021, with an
option to renew until 2070. All of the above lease payments
(other than the options) have been prepaid. The corporate
headquarters in Petach Tikva are leased in part, until May 2003,
with an option to renew for five years. Novopharm presently
leases six facilities under leases which expire between 2003 and
2025. Teva owns all of its other facilities.
</FONT>

<P align="center"><FONT size="2">27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS" -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="left">
<B><FONT size="2">ITEM 5:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OPERATING
AND FINANCIAL REVIEW AND PROSPECTS</FONT></B>

<P align="left">
<B><FONT size="2">Introduction</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s operations are affected by
demographic trends and budgetary constraints of governments and
health care organizations. Each market in which Teva operates
has its own pressures, although there are common trends that
affect them all. In light of these trends and in order to
maintain and increase its competitive position, Teva is
constantly seeking additional ways of rationalizing its
operations, as well as improving its customer service. In the
generic pharmaceutical marketplace, a broad range of products
and economies of scale in both manufacturing and sales are key
competitive factors. In order to enhance its growth, Teva has
also continued to pursue an aggressive acquisition strategy, as
well as various forms of strategic alliances.
</FONT>

<P align="left">
<B><FONT size="2">Economic Environment</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since Teva&#146;s results are reported in U.S.
dollars, changes in the rates of exchange between the
U.S.&nbsp;dollar and the local currencies in the major markets
in which it operates affect Teva&#146;s results. In 2002, the
European currencies increased in value relative to the dollar,
with the Euro being revalued during the year by 18%, the
Hungarian Forint by 19% and the Pound Sterling by 10%. In
Israel, the New Israel Shekel (&#147;NIS&#148;) was devalued by
7% during 2002.
</FONT>

<P align="left">
<B><FONT size="2">Highlights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, Teva achieved significant growth in its
revenues, passing the $2.5&nbsp;billion mark for the first time,
and even greater growth in its net income. Among the more
significant factors affecting the years under review, which may
also have a bearing on future results of operations, are:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Substantially higher US generic pharmaceutical
    sales as a result of the introduction of several significant new
    generic products, the most important being the generic version
    of Augmentin&#174;, which was launched in the fourth quarter of
    2002, together with their combined positive impact on gross
    margins.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The continued success of Copaxone&#174; both in
    North America, where the pre-filled syringe was successfully
    introduced and now represents 95% of all Copaxone&#174;
    prescriptions, and the strong entry of Copaxone&#174; into the
    European market, particularly in Germany.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Higher generic pharmaceutical sales in Europe as
    a result of new product launches, the consolidation of Teva
    Classics for the first time, and the strengthening of European
    currencies.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The inclusion of Teva Classics and Teva
    Pharmaceutical Fine Chemicals Srl in the second half of 2002.
    These newly acquired companies contributed approximately
    $28&nbsp;million to Teva&#146;s 2002 sales.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Significantly increased net R&#38;D expenditures,
    resulting both from higher gross R&#38;D expenditures and a
    lower rate of third party participation in Teva&#146;s R&#38;D.
    In 2002, Teva substantially increased its research efforts to
    enhance the development of its generic pipeline, which research
    involves no third party participation. These higher generic
    R&#38;D expenditures combined with a lower level of
    participation by Aventis and Lundbeck in Teva&#146;s innovative
    R&#38;D expenditures, which in turn resulted from the completion
    or termination in 2002 of clinical trials that were ongoing in
    2001.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A further reduction in Teva&#146;s effective tax
    rate, reflecting a favorable mix in the sources of its income.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, Teva experienced the following
Phase&nbsp;III clinical trial results:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The PROMISE trial, which was conducted to
    determine Copaxone&#174;&#146;s efficacy in primary progressive
    multiple sclerosis, did not reach statistical significance.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Although the Etilevodopa trial for the treatment
    of Parkinson&#146;s disease found the drug to be well-tolerated
    and as effective as Levodopa, Etilevodopa did not demonstrate
    significant superiority to Levodopa in shortening the time to
    clinical effect.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<FONT size="2">*****
</FONT>

<P align="center"><FONT size="2">28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth, for the periods
indicated, certain financial data presented as percentages of
net sales and the increase/decrease by item as a percentage of
the amount for the previous year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the years ended December&nbsp;31, 2000 and
2001, Teva recorded non-recurring charges as follows: in 2000
for the acquisition of research and development in process and
in 2001 for restructuring activities. These charges are detailed
in the discussions below under the heading &#147;Other Income
Statement Line Items&nbsp;&#151; One-Time Charges.&#148; In
order to facilitate analyses of these years in comparable terms,
both the table of percentage changes which accompanies this
analysis and the textual descriptions below, analyze results
before, as well as after, giving effect to such charges.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Percentage of Net Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Percentage Change</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Comparison</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001&nbsp;&#150;&nbsp;2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000&nbsp;&#150;&nbsp;2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross Profit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research &#38; Development Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less Participations and Grants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(55.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research &#38; Development&nbsp;&#151; Net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, General and Administrative Expenses*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financial Expenses&nbsp;&#151; Net*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(38.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income Before Income Taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="21"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Data Before One-Time Charges</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before Income Taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Other Income has been reclassified principally to
    Selling, General and Administrative Expenses and, to a much
    lesser extent, to Financial Expenses&nbsp;&#151; Net.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Sales&nbsp;&#151; General</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Consolidated sales by geographic areas and
business segments were as follows:
</FONT>

<P align="left">
<B><FONT size="2">Sales by Geographical Areas</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Change</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Sales for the Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">U.S. dollars in millions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">North America
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Europe
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rest of the World
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">320</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">29
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Sales by Business Segments</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Change</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">from</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Sales for the Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">U.S. dollars in millions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceuticals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">API*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Third party only.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although this year Teva acquired two new
businesses, Teva Classics and Teva Pharmaceutical Fine
Chemicals, the sales growth was driven mainly by the organic
growth of both the pharmaceutical and the API business segments.
Approximately 6% of the growth in sales in 2002 was due to the
first time consolidation, during the second half of 2002, of
these two new businesses.
</FONT>

<P align="left">
<B><FONT size="2">Pharmaceutical Sales</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">North America</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, pharmaceutical sales in North America
amounted to $1,456&nbsp;million, representing an increase of 26%
over 2001. The increase in sales was attributable to
(i)&nbsp;several significant launches of new generic products in
2002, the most significant being the generic form of
Augmentin&#174; in the fourth quarter of 2002, as well as 14
other new generic product launches, and (ii)&nbsp;continued
growth in sales of Copaxone&#174; resulting in part from the
successful introduction in 2002 of the pre-filled syringe,
which, as of the end of 2002, accounted for approximately 95% of
U.S. prescriptions of Copaxone&#174;. Unlike several recent
years in which growth was impacted by acquisitions,
substantially all of the increase in sales in 2002 compared to
2001 represents organic growth, reflecting the benefits of
Teva&#146;s focus on the development of a strong generic product
pipeline. As of February&nbsp;21, 2003, Teva&#146;s
U.S.&nbsp;generic pipeline included 61&nbsp;ANDAs (one from
Biovail and five from Impax), including ten tentative approvals
and two approvables. Total annual branded sales of this pipeline
exceeds $42&nbsp;billion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, Teva USA fully implemented a
state-of-the-art computer-controlled distribution center in its
Pennsylvania facilities. This system has increased Teva
USA&#146;s capacity to handle the significantly increased
volumes of products that it sells and over 400 stock keeping
units (&#147;SKU&#148;s) which presently comprise its product
line, and is expected to contribute significantly to Teva&#146;s
ongoing effort to maintain high levels of customer service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001, pharmaceutical sales in North America
amounted to $1,158&nbsp;million, representing an increase of 24%
over 2000. The increase in sales was attributable to
(i)&nbsp;several significant launches of new generic products in
2001, including nabumetone, calcitriol and fluoxetine,
(ii)&nbsp;substantially higher sales of products that were
launched towards the end of 2000 and (iii)&nbsp;continued growth
in sales of Copaxone&#174;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While the former operations of Novopharm made a
notable contribution to U.S.&nbsp;sales in 2001 and 2002, 2001
was a year in which the operations for the Canadian market had
to be redirected. Novopharm&#146;s previous focus on growth
through export activities, primarily to the United States,
resulted in the lack of sufficient development of generic
products for the Canadian market. During 2002, Teva
substantially augmented a program, initiated subsequent to
Novopharm&#146;s acquisition, to significantly expand the
Canadian product pipeline. In addition, plant restructurings and
capital investments were made to enable Novopharm to become a
&#147;center of excellence&#148; for the production of certain
products for the American market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In both 2002 and 2001, the pricing environment
for generic products in the United States was relatively stable.
</FONT>

<P align="center"><FONT size="2">30
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Europe</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pharmaceutical sales in Europe in 2002 amounted
to $509&nbsp;million, an increase of 34% (28% in Euro terms)
compared to 2001. Increased sales in Europe reflected both
organic growth resulting from the strong penetration of
Copaxone&#174; in Europe and new generic product launches,
mainly in The Netherlands and the U.K., including omeprazole, as
well as external growth resulting from the acquisition of Teva
Classics in France. In addition, the revaluation of European
currencies against the U.S.&nbsp;dollar had a positive impact on
the U.S. dollar value of European sales. In Hungary, higher
sales were recorded both of third party distributed products and
of manufactured products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001, the increase in sales was due to the
inclusion of Human Serum and Pharmaceutical Manufacturing Co.
Ltd., the Hungarian company acquired as part of the Novopharm
acquisition, for the whole year, as compared to only nine months
in 2000, as well as to the lifting of governmental restrictions
on both pricing and product introductions in Hungary. In the
U.K., price erosion on generic products continued in 2001,
although it softened, compared to 2000, towards the end of the
year, and was partially offset by increased unit sales.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the course of 2002, Teva continued to
register its generic products in Europe. Although European Union
regulatory harmonization efforts have simplified some
pharmaceutical product registrations, centralized registration
for generic products is, as yet, not possible in Europe because
most countries still have their own distinct regulatory
requirements. Teva has significantly increased its registration
efforts principally in Hungary, the United Kingdom, France and
Germany<B><I>.</I></B>
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Rest of the World</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Israel</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pharmaceutical sales in Israel, which amounted to
$220&nbsp;million in 2002, decreased by 4% compared to 2001.
However, net of the impact of decreased exchange rates between
the NIS and the U.S.&nbsp;dollar, sales would have increased by
9%. This increased NIS sales was achieved by new product
launches as well as new distribution agreements. Teva continues
to face adverse trends in the Israeli market. These trends
included: budgetary constraints of Israel&#146;s principal
healthcare providers, the ongoing &#147;genericization&#148; of
the Israeli market (although Teva participates in both the
generic and branded markets), new regulations that seek to
harmonize private market prices with those of Western Europe
and, to a lesser extent, regulations that permit the parallel
importation of pharmaceutical products.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Other Countries</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s pharmaceutical sales to markets
outside of North America, Europe and Israel amounted to
$55&nbsp;million, a decrease of 24%, mainly due to a management
decision to reduce sales to countries where financial conditions
are unstable, such as Latin America and the CIS.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Copaxone&#174;</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In-market global sales of Copaxone&#174; in 2002
amounted to $539 million, an increase of 48% over 2001.
According to IMS data, Copaxone&#174;, Teva&#146;s largest
product, continued to increase its high market share in the U.S.
for multiple sclerosis treatments at a level of approximately
27.8% in December 2002.(1) The pre-filled syringe launched in
the United States in April 2002 has rapidly replaced the
original vial presentation of Copaxone&#174; and as of the end
of the year accounted for approximately 95% of
U.S.&nbsp;prescriptions. Teva is continually responding to
market feedback and evaluating improved ways to deliver
Copaxone&#174;and enhance its ease of use.
U.S.&nbsp;Copaxone&#174; sales represented 76% of total global
sales
</FONT>

<P align="left">
<HR size="1" width="25%" align="left" noshade>

<DIV align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(1)&nbsp;At the beginning of 2002, IMS, the prime
source for the monitoring of pharmaceutical prescription data,
changed its sampling methodology for a variety of pharmaceutical
products, including the principal MS drugs. This change may
result in inconsistencies between historical and future period
reported market share data.
</FONT>
</DIV>

<P align="center"><FONT size="2">31
</FONT>
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<DIV align="left">
<FONT size="2">in 2002. In Europe, Copaxone&#174; sales
increased dramatically as a result of the fast penetration in
several countries, the most significant being Germany, Austria,
The Netherlands and the Nordic countries. In October 2002,
Copaxone&#174; received approval in 16&nbsp;European countries
for seven days storage at room temperature.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001, in-market global sales of Copaxone&#174;
amounted to $363 million, an increase of 47% over the previous
year. U.S. sales in 2001 accounted for 81% of global sales of
Copaxone&#174;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2002, Teva announced that an interim
analysis of its clinical trial on primary progressive multiple
sclerosis (the PROMISE trial) showed that it was improbable that
the study, in its current protocol, would reach statistical
significance. The scheduled interim analysis by the study&#146;s
data safety monitoring committee came two years into the
three-year study. There were no safety concerns about treatment
with Copaxone&#174;. Primary progressive multiple sclerosis is
different from relapsing-remitting multiple sclerosis, affecting
less than 10% of multiple sclerosis patients worldwide.
</FONT>

<P align="left">
<B><FONT size="2">Active Pharmaceutical Ingredients
Sales</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales in 2002 of active pharmaceutical
ingredients to third parties increased by 18% amounting to
$259&nbsp;million. At the same time, inter-company sales of
active pharmaceutical ingredients during 2002 increased 37% and
amounted to $206&nbsp;million. These sales represent 31% of
total raw material consumption of Teva&#146;s pharmaceutical
business. The increase in sales to third parties is the result
of higher sales of lovastatin in the U.S. and increased demand
for API products worldwide, as well as the contribution of six
months of sales for Teva PFC. The higher proportion of
inter-company sales reflected the strategic importance of
vertical integration. Total sales of the API division in 2002,
including inter-company sales, increased by 26% to
$465&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The increase in API sales to third parties in
2001 reflected increased sales in the United States. In
addition, the API division sold $150&nbsp;million of raw
materials to Teva&#146;s pharmaceutical divisions during 2001,
representing 30% of their total raw material consumption.
</FONT>

<P align="left">
<B><FONT size="2">Other Income Statement Line Items</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Gross Profit</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gross profit margins reached 43.5% in 2002,
compared with 40.8% in 2001 and 39.5% in 2000, reflecting an
improved product mix resulting from higher sales of newly
launched products, as well as Copaxone&#174;. Gross margins also
improved due to the favorable currency fluctuations and
synergies achieved throughout Teva.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The majority of the factors that affected the
2002 increased gross profitability also impacted the 2001
improved margins, though to a lesser extent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to the depth of its generic pipeline and
Teva&#146;s anticipated product mix, Teva believes that the
gross margin levels achieved in 2002 are more likely to be
representative of the gross margins to be achieved during 2003
than were the gross margin levels of the prior three to five
years.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Research and Development (R&#38;D)
    Expenses</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gross R&#38;D expenses increased in 2002 in
absolute terms by 14% as a result of increased spending on
generic R&#38;D, reflecting the increased efforts of Teva in
generic research.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The net R&#38;D expenses increased by a more
substantial percentage resulting both from higher gross R&#38;D
expenditures and a lower rate of third party participation in
Teva&#146;s innovative R&#38;D. In 2002, Teva substantially
increased its research efforts to enhance the development of its
generic pipeline, which research involves no third party
participation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generic R&#38;D expenses, which accounted for 50%
of Gross R&#38;D expenses, increased by approximately 41% due to
increased R&#38;D activity for North America, including R&#38;D
efforts for
</FONT>

<P align="center"><FONT size="2">32
</FONT>

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<DIV align="left">
<FONT size="2">Novopharm, as well as generic R&#38;D efforts for
Europe. Innovative R&#38;D expenses, which amounted to
approximately 40% of Gross R&#38;D expenses for 2002, decreased
by 9%, due to lower expenditures resulting mainly from the
termination of the two Copaxone&#174; clinical trials. The
balance of 10% was dedicated to the development of other
products, principally in the area of API.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, Teva announced that although the
Etilevodopa trial for the treatment of Parkinson&#146;s disease
found the drug to be well-tolerated and as effective as
Levodopa, Etilevodopa did not demonstrate significant
superiority to Levodopa in shortening the time to clinical
effect.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Selling, General and Administrative
    Expenses</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SG&#38;A expenses in 2002 increased in absolute
terms by 13.5%, but decreased as a percentage of sales to 16.1%
from 17.2%. Conflicting trends affected this line item. Higher
legal costs resulting from patent challenge litigation in
connection with Paragraph&nbsp;IV applications in the U.S.,
rising insurance premiums, the continued launching activities of
Copaxone&#174; in Europe and provisions for doubtful debt in
Argentina ($5&nbsp;million) were more than offset by the impact
of the exclusion of the amortization of goodwill due to the
application of FAS&nbsp;142, since January&nbsp;1, 2002 and
related benefits from economies of scale resulting from higher
sales volume.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, Teva reclassified an income statement
line item captioned &#147;Other Income&nbsp;&#151; Net&#148; to
conform with industry reporting practices, principally to
SG&#38;A, and to a lesser extent to Financial
Expenses&nbsp;&#151; Net, and simultaneously made a
corresponding reclassification to prior years. Since the amounts
of this former line item were approximately the same in both
2002 and 2001, this reclassification did not result in any
meaningful change in the period-to-period comparisons.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SG&#38;A expenses in 2001 remained unchanged as a
percentage of sales when compared to 2000. The primary
contributors to the absolute increase were initial launching
activities of Copaxone&#174; in Europe and provisions for
doubtful debts in Argentina due to the uncertain economic
environment in that country.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Operating Income</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Operating income increased as a result of the
combined impact of the factors described above.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Financial Expenses</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 5% decrease in financial expenses
(net)&nbsp;for 2002 over 2001 principally reflected the lower
interest rates achieved through the two convertible debenture
issuances in November 2002 and August 2001, as well as general
decreases in global interest rates. In addition to decreased
interest charges on its short term credit, Teva took advantage
of these lower interest rates by entering into certain interest
rate swap transactions. In 2001 financial expenses decreased by
38% as a result of the combined impact of Teva&#146;s August
2001 and October 2000 convertible debt offerings and a decrease
in short term borrowing levels resulting from the application of
increased cash generated by operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Taxes as a percentage of pre-tax income amounted
to 17% in 2002, as compared with 20% in 2001 and 24% in 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The rate of tax fluctuates with the source of
taxable income. The statutory Israeli corporate tax rate is 36%.
However, Teva&#146;s effective consolidated tax rates are
considerably lower, since a major portion of Teva&#146;s income
in Israel is derived from &#147;approved enterprises&#148; and
part of its income is derived in countries whose tax rate is
lower than 36% or benefited from other tax incentives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Expansion projects of Teva and certain of its
subsidiaries in Israel have been granted &#147;approved
enterprise&#148; status. Such status confers tax benefits,
including complete tax exemption for the income generated by
such projects, for periods of time ranging from two to ten years
from the first year in which the approved enterprise first
realized taxable income, and depending upon the region of Israel
in which
</FONT>

<P align="center"><FONT size="2">33
</FONT>

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<DIV align="left">
<FONT size="2">such enterprises are located. For the period from
the end of the tax exemption until the tenth year in which the
approved enterprise first realized taxable income, such
enterprises enjoy a reduced corporate tax rate of 20% subject to
certain limitations. Teva&#146;s current tax rates in Israel are
positively affected by such exemptions that, as they relate to
projects of Teva, have terms expiring between 2002 and 2010.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following the launch in the fourth quarter of
2002 of the generic version of Augmentin&#174;, which is
manufactured in the U.S. where the applicable tax rate is
substantially higher relative to the average tax rate applicable
to Teva, the overall tax rate for the fourth quarter and for the
entire year increased, although the latter was still lower than
in previous years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The income that Teva derives from Copaxone&#174;
has benefited from Israeli tax holidays, which are designed to
encourage investment in Israeli manufactured products. A
significant portion of this tax benefit expired at the end of
2002. Therefore, Teva does not anticipate being able to sustain
the overall rate of tax that it enjoyed during 2002. Subject to
the shifts in the geographical mix of the sources of its income,
Teva currently estimates a tax rate for 2003 in the range of
20%&nbsp;- 23%. However, as a result of building a second
production facility for Copaxone&#174; in the south of Israel in
a tax-advantaged zone, Teva expects to gradually begin to
realize a new tax benefit on incremental Copaxone&#174; sales
beginning in 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Net Income</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net income totaled $410&nbsp;million in 2002, an
increase of 48% as compared with $278&nbsp;million in 2001.
Fully diluted earnings per ADR in 2002 amounted to $1.52, an
increase of 49% over 2001. Before deducting one-time charges
from the 2001 net income, the increase in net income and the
fully diluted earning per share would each be 43% respectively,
as compared with 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net income, including one-time charges in both
years 2001 and 2000, increased by 88%. Net income before
deducting one-time charges reached $288 million in 2001, an
increase of 56% as compared with 2000. Fully diluted earnings
per ADR in 2001 amounted to $1.02 and before deducting the
one-time charge, amounted to $1.06, up 79% and 50%, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At the end of 2002, Teva announced a
2:1&nbsp;stock split. The comparable earnings per ADR figures
have been adjusted to reflect the impact of the stock split.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">One-Time Charges</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table details one-time charges for
the years indicated and their respective effect on earnings per
share:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">One-Time Charges</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(after taxes)</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">U.S. dollars</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">U.S. dollars</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">in millions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">per ADR(*)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Details</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">9.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restructuring expenses resulting mainly from the
    closure and sale of facilities in connection with Teva&#146;s
    rationalization program.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">35.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Acquisition of rights, mainly in respect of
    Novopharm&#146;s in process R&#38;D.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(*)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">After giving retroactive effect to the
    distribution of a 100% stock dividend in December 2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Impact of Currency Fluctuations and
Inflation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because Teva&#146;s results are reported in
U.S.&nbsp;dollars, changes in the rate of exchange between the
U.S.&nbsp;dollar and the local currencies in the markets in
which Teva operates&nbsp;&#151; mainly the NIS, Euro, Canadian
dollar, Pound Sterling and Hungarian Forint&nbsp;&#151; affect
Teva&#146;s results. During 2002, the European currencies
revalued against the dollar. The Euro&#146;s exchange rate
relative to the dollar reached $1.05 at December&nbsp;31, 2002,
representing an 18% year-end to year-end revaluation. However,
the difference
</FONT>

<P align="center"><FONT size="2">34
</FONT>

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<DIV align="left">
<FONT size="2">between the average exchange rates in 2002 and in
2001 was lower, amounting to 6%. The Hungarian Forint and Pound
Sterling revalued by approximately 10% and 3%, respectively
(when comparing average to average). While sales in Europe
benefited significantly from the strengthening Euro, the impact
on net income was mitigated by the fact that most products sold
in Europe were produced in Europe, where costs in dollar terms
were higher as a result of the stronger currencies. This was
further mitigated by purchases of European raw materials for use
in non-European production, the dollar value of which increased.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, the NIS continued its devaluation
relative to the U.S.&nbsp;dollar, this year by a rate of 13%
(when comparing average to average). While this devaluation had
the effect of decreasing the dollar value of Israeli sales, its
net effect on the 2002 consolidated results was positive because
Teva experienced an excess of NIS denominated expenses over NIS
denominated income resulting principally from the high level of
Israeli exports.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Such European currency revaluations and
devaluation of the NIS during 2002 had the net effect of
increasing sales by approximately $16&nbsp;million, but had a
less significant positive impact on net income in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In terms of the Israeli Consumer Price Index
(CPI), 2002 was a year in which the CPI increased by 6.5%,
substantially higher than the previous three years, resulting
primarily from the devaluation of the NIS against the
U.S.&nbsp;dollar.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historically, the NIS has been devalued in
relation to the U.S. dollar and other major currencies
principally to reflect the extent to which inflation in Israel
exceeds average inflation rates in Western economies. Such
devaluations in any particular fiscal period are never
completely synchronized with the rate of inflation and therefore
may lag behind or exceed the underlying inflation rate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below sets forth the annual rate of
inflation, the annual rate of devaluation of the NIS against the
U.S. dollar and the gap between them.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inflation (CPI)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Devaluation/(Revaluation)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inflation/devaluation gap
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Critical Accounting Policies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of Teva&#146;s consolidated
financial statements in conformity with accounting principles
generally accepted in the United States requires management to
make estimates and assumptions in certain circumstances that
affect amounts reported in the accompanying consolidated
financial statements and related footnotes. Actual results may
differ from these estimates. To facilitate the understanding of
Teva&#146;s business activities, described below are certain
Teva accounting policies that are relatively more important to
the portrayal of its financial condition and results of
operations and that require management&#146;s subjective
judgments. Teva bases its judgments on its experience and
various other assumptions that it believes to be reasonable
under the circumstances. Please refer to Note&nbsp;1 to
Teva&#146;s consolidated financial statements included in this
Annual Report on Form&nbsp;20-F for the year ended
December&nbsp;31, 2002 for a summary of all of Teva&#146;s
significant accounting policies.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Revenue Recognition and Sales Reserves and
    Allowances</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenue is recognized generally when title and
risk of loss for the products is transferred to the customer.
Provisions for estimated returns, customer volume rebates,
chargebacks, discounts and shelf-stock adjustments are
established concurrently with the recognition of revenue.
Accordingly, reported Net Sales is net of these allowances. The
following briefly describes the nature of each provision and how
such provisions are estimated.
</FONT>

<P align="center"><FONT size="2">35
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva has arrangements with certain parties
establishing prices for its products for which they
independently select a wholesaler from which to purchase. A
chargeback represents the difference between the invoice price
to the wholesaler and the indirect customer&#146;s contract
price. Provisions for estimating chargebacks are calculated
using historical chargebacks experience and wholesaler inventory.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under certain conditions the customer is able to
return its purchases to Teva. Teva records a reserve for
estimated sales returns in accordance with the provision of SFAS
No&nbsp;48, &#147;Revenue Recognition When Right of Return
Exists.&#148; Returns reserves are estimated by applying a
historical relationship of customer returns to amounts invoiced.
Applying historical data the company determines the amount of
returned product that is scrapped (destroyed)&nbsp;versus
product that is returned to stock (placed back in inventory to
be resold).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Customer volume rebates are offered to key
customers to promote loyalty. These rebate programs provide
that, upon the attainment of pre-established volumes or the
attainment of revenue milestones for a specified period, the
customer receives a rebate. Since rebates are contractually
agreed upon, rebates are estimated based on the specific terms
in each agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash discounts are offered to most customers to
encourage prompt payment. Discounts are estimated based on
historical discounts taken in relation to sales.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The custom in the pharmaceutical industry is
generally to grant customers shelf-stock adjustments based on
the customers&#146; existing inventory following decreases in
the market price of the related product. Provisions for
shelf-stock adjustments are determined at the time of the price
decline and based on estimated inventory levels.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historical data has been adjusted, where
applicable, in order to give effect to subsequent events,
including primarily, the effect of increased turnover on such
provisions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Income Taxes</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provision for income tax is calculated based
on Teva&#146;s assumptions as to its entitlement to various
benefits under the applicable tax laws in the jurisdictions in
which it operates. The entitlement to such benefits depends upon
Teva&#146;s compliance with the terms and conditions set out in
these laws.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred taxes are determined utilizing the asset
and liability method based on the estimated future tax effects
of differences between the financial accounting and tax bases of
assets and liabilities under the applicable tax laws. Valuation
allowances are provided if, based upon the weight of available
evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. Taxes, which would
apply in the event of disposal of investments in subsidiaries,
have not been taken into account in computing deferred taxes, as
it is Teva&#146;s intention to hold these investments, rather
than realize them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva intends to permanently reinvest the amounts
of tax-exempt income and does not intend to cause dividend
distribution from such income. Therefore, no deferred taxes have
been provided in respect of such tax-exempt income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva may incur additional taxes if dividends are
distributed out of the income of its non-Israeli subsidiaries.
Such additional tax liability has not been provided for as Teva
does not expect these companies to distribute dividends in the
foreseeable future.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Contingencies</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva is from time to time subject to claims
arising in the ordinary course of its business, including
patent, product liability and other litigation. In determining
whether liabilities should be recorded for pending litigation
claims, Teva assesses the allegations made and the likelihood
that it will successfully defend itself. When Teva believes that
it is probable that it will not prevail in a particular matter,
it then estimates the amount of the liability based in part on
advice of outside legal counsel.
</FONT>

<P align="center"><FONT size="2">36
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Inventories</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Inventories are stated at the lower of cost or
market. Cost is determined as follows: Raw and packaging
materials and purchased products&nbsp;&#151; mainly on the
&#147;first-in, first-out&#148; basis. Finished products and
products in process: raw material and packaging
component&nbsp;&#151; mainly on the &#147;first-in,
first-out&#148; basis; labor and overhead&nbsp;&#151; on the
average basis over the production period.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Valuation of Intangible Assets, Marketable
    Securities and Long-Lived Assets</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Intangible assets:</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Goodwill reflects the excess of the purchase
price of subsidiaries acquired over the fair value of net assets
acquired. As from January&nbsp;1, 2002, pursuant to
FAS&nbsp;142, &#147;Goodwill and Other Intangible Assets,&#148;
goodwill is no longer amortized but rather is tested for
impairment annually. Teva has completed the transitional
impairment review of goodwill on January&nbsp;1, 2002, as
required by FAS&nbsp;142: the various reporting units, for which
separately identifiable cash flow information is available, were
identified and the fair values of such reporting units were
determined using expected future discounted cash flows.
Consequently, Teva has determined that there is no indication of
impairment with respect to goodwill as of January&nbsp;1, 2002.
Teva has selected December&nbsp;31 as the date on which it will
perform its annual impairment test for indefinite life
intangible assets. As of December&nbsp;31, 2002, no impairment
was required.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Intangible assets consist mainly of marketing and
other rights relating to products in respect of which an
approval for marketing was provided by the FDA or an equivalent
agency. In 2002, in accordance with FAS&nbsp;142, a review was
performed of the remaining estimated useful lives for all
recorded intangible assets. As a result of this review, one
intangible asset, relating to tradename, was determined to have
an indefinite life. Accordingly, as from January&nbsp;1, 2002,
this intangible asset is no longer amortized, but rather tested
for impairment at least annually. Other intangible assets are
amortized using the straight-line method over their estimated
period of useful life. Teva has selected December&nbsp;31 as the
date on which it will perform its annual impairment test for
indefinite life intangible assets. As of December&nbsp;31, 2002,
no impairment was required.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Marketable securities:</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Marketable securities consist of held-to-maturity
securities, which are debt securities in which Teva has invested
with the intention of holding until the maturity dates of the
securities, and of equity investments classified as
available-for-sale securities which are carried at market value,
with unrealized gains and losses, net of taxes, reported as a
separate component of accumulated other comprehensive income
(loss). If it is determined, based on valuations, that a decline
in the fair value of any of the investments is other than
temporary, an impairment loss is recorded and included in the
consolidated statements of income as financial expenses.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Long-lived assets:</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;1, 2002, Teva adopted
FAS&nbsp;144, &#147;Accounting for the Impairment or Disposal of
Long-Lived Assets.&#148; FAS&nbsp;144 requires that long-lived
assets, to be held and used by an entity, be reviewed for
impairment and, if necessary, written down to the estimated fair
values, whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable
through undiscounted future cash flows.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Allowance for doubtful accounts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva performs ongoing credit evaluations of its
customers for the purpose of determining the appropriate
allowance for doubtful accounts and generally does not require
collateral. Allowance is made for specific debts doubtful of
collection.
</FONT>

<P align="center"><FONT size="2">37
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Recently Issued Accounting
Pronouncements</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">FAS&nbsp;143</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2001, the FASB issued FAS No.&nbsp;143,
&#147;Accounting for Obligations Associated with the Retirement
of Long-Lived Assets.&#148; FAS&nbsp;143 addresses accounting
and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs, including, but not limited to, clean-up costs, etc.
FAS&nbsp;143 is effective for financial statements issued for
fiscal years beginning after June&nbsp;15, 2002. Teva does not
expect the adoption of FAS&nbsp;143 to have a material effect on
its consolidated financial statements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">FAS&nbsp;146</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the FASB issued FAS No.&nbsp;146,
&#147;Accounting for Costs Associated with Exit or Disposal
Activities.&#148; FAS&nbsp;146 requires that a liability for
costs associated with an exit or disposal activity be
recognized, at fair value, when the liability is incurred.
Previously, a liability for an exit cost was recognized at the
date of the commitment to an exit plan. FAS&nbsp;146 is to be
applied prospectively to exit or disposal activities initiated
after December&nbsp;31, 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">FIN&nbsp;45</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2002, the FASB issued FIN
No.&nbsp;45, &#147;Guarantor&#146;s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.&#148; FIN&nbsp;45 requires the guarantor
to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing such
guarantee and to provide certain disclosures. The recognition
provisions of FIN&nbsp;45 are applicable on a prospective basis
to guarantees issued or modified after December&nbsp;31, 2002.
Teva does not expect the adoption of FIN&nbsp;45 to have a
material effect on its consolidated financial statements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">FIN&nbsp;46</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the FASB issued FIN No.&nbsp;46,
&#147;Consolidation of Variable Interest Entities.&#148;
FIN&nbsp;46 classifies entities into two groups: (1)&nbsp;those
for which voting interests are used to determine consolidation;
and (2)&nbsp;those for which other interests (variable
interests) are used to determine consolidation. FIN&nbsp;46
deals with the identification of Variable Interest Entities and
the business enterprise which should include the assets,
liabilities, non-controlling interests and results of activities
of a Variable Interest Entity in its consolidated financial
statements. FIN&nbsp;46 would become effective during 2003. At
this stage, Teva is evaluating the effect of this pronouncement
on its consolidated financial statements.
</FONT>

<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;31, 2002, Teva&#146;s working
capital was $1.4&nbsp;billion, close to the level reported as of
December&nbsp;31, 2001. Several conflicting trends affected this
item. Working capital increased as a result of an increase in
cash and cash equivalents and short-term investment, reflecting
proceeds of the $450&nbsp;million convertible senior debenture
offering in November 2002, as well as the cash generated from
operations during 2002. In addition, substantially higher
accounts receivable were recorded in December 2002, as a result
of the high sales level of the generic version of
Augmentin&#174; towards the end of the year. Serving to lower
the working capital figure, $550&nbsp;million of convertible
debt, which was previously included as long term debt and is
currently presented as short term debt due to the
debenture&#146;s &#147;put option&#148; effective October 2003,
which may be exercised in exchange for cash or Teva shares. The
exercise of the put option in October 2003 at 103% of stated
value by bondholders is dependent upon Teva&#146;s stock price,
among other factors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In this context it should also be noted that
inventories have been built up in connection with the planned
rationalization program, and in order to maintain inventories
closer to their markets, which Teva
</FONT>

<P align="center"><FONT size="2">38
</FONT>

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<DIV align="left">
<FONT size="2">believes to be a cost effective measure in light
of present geopolitical circumstances (as further discussed
below) and the low interest rate environment.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash generated by operations for 2002 amounted to
$354&nbsp;million, as compared with $273&nbsp;million in 2001.
Purchase of fixed assets in 2002 amounted to $160&nbsp;million,
as compared with $115&nbsp;million in the previous year. In
addition, Teva used $156&nbsp;million of the cash generated to
finance the two acquisitions of Teva Classics and Teva
Pharmaceutical Fine Chemicals in mid-2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Among the more significant capital expenditures
during 2002 were the expansion of Teva&#146;s existing
pharmaceutical plants, including the expansion of its existing
Copaxone&#174; manufacturing facility to produce Copaxone&#174;
pre-filled syringes, expansion of its state-of-the-art API
facility in southern Israel and its API plant in Hungary; and
the deployment of modernized information systems, including Teva
USA&#146;s new Enterprise Resource Planning and warehouse
management systems.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2002, Teva raised $450&nbsp;million
by issuing twenty-year convertible senior debentures. Interest
on the debentures is payable at 0.375% per annum. The debentures
are convertible into Teva ADRs at a conversion price of $42.89
per ADR. Holders of the debentures may require Teva to
repurchase the debentures at their principal amount in November
2007, 2012, 2017 and 2022 or upon a change of control or a
termination of trading of the Teva shares. The funds from the
debentures have been invested in short-term interest-bearing
investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to Teva&#146;s financing obligations
as reflected by short term debt and long term loans, its major
contractual obligations and commercial commitments include
leases, royalty payments and participation in joint ventures
associated with research and development activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, minimum future
rentals under operating leases of buildings, machinery and
equipment for periods in excess of one year were as follows:
2003&nbsp;&#151; $13.1&nbsp;million; 2004&nbsp;&#151;
$11.6&nbsp;million; 2005&nbsp;&#151; $8.5&nbsp;million;
2006&nbsp;&#151; $6.8&nbsp;million; 2007 and
thereafter&nbsp;&#151; $16.8&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva is committed to pay royalties to owners of
know-how and to parties that financed research and development,
at rates ranging mainly from 0.5% to 10% of sales of certain
products, as defined in the agreements. In some cases, the
royalty period is not defined; in other cases, the royalties
will be paid over various periods, not exceeding 20&nbsp;years,
commencing on the date of the first royalty payment. Teva has
also undertaken to pay royalties to the Government of Israel, at
the rates of 2.0%&nbsp;&#151; 3.5% of sales relating to a
product or a development resulting from the research funded by
the Office of the Chief Scientist. The royalties due to the
Government should not exceed the amount of participation, in
dollar terms (in respect of research grants commencing
1999&nbsp;&#151; with the addition of dollar LIBOR interest).
The maximum amount of the contingent liability in respect of
royalties to the Government at December&nbsp;31, 2002 amounts to
$34.4&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva entered into joint venture agreements during
2002, with two companies pursuant to which it is to participate
in the funding of research and development conducted by these
companies in a total amount of $20&nbsp;million, payable upon
achievement of certain milestones. As of December&nbsp;31, 2002,
an amount of $4.3&nbsp;million was paid by Teva.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001, Teva entered into agreements with two
other companies pursuant to which it is to participate in the
funding of research and development conducted by these companies
in a total amount of $20&nbsp;million, payable upon achievement
of certain milestones. In addition, Teva has acquired shares in
these companies for a total amount of approximately
$10&nbsp;million which are carried at cost and included under
investments and other assets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of Teva&#146;s loan agreements and
debentures contain restrictive covenants, mainly the requirement
to maintain certain financial ratios. Teva currently meets all
applicable financial ratios.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s principal sources of short-term
liquidity are its existing cash and internally generated funds,
which Teva believes are sufficient to meet its operating needs
and anticipated capital expenditures over the near term.
Teva&#146;s existing cash is generally invested in short-term
investments that bear fixed and floating interest rates.
</FONT>

<P align="center"><FONT size="2">39
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva continues to review additional opportunities
to acquire companies in the generic industry and to acquire
complementary technologies or product rights. To the extent that
any such acquisitions involve cash payments, rather than the
issuance of shares, they may require Teva to draw upon credit
lines available to Teva from Israeli and other banks, or may
involve raising additional funds from debt or equity markets.
</FONT>

<P align="center">
<FONT size="2">******
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Geopolitical
Considerations.</FONT></I><FONT size="2"> As security has become
a global issue in the period since September&nbsp;11, 2001, Teva
is committed to taking security seriously on all levels of its
management and operations. In the past, Teva has had to operate
during regional conflicts. During all of these difficult
periods, Teva has always continued to serve its customers and
operate in an uninterrupted manner without the market noticing.
In order to reinforce its operations and service to its
customers during the upcoming anticipated U.S. military action
against Iraq, Teva has implemented measures at its corporate
headquarters and key operating facilities designed to provide
continuity of normal operations and supply during a crisis.
Furthermore, Teva has increased inventories to record levels,
expanded its supply logistics to include redundant alternatives
and enhanced its ability to shift production facilities if
necessary.
</FONT>

<P align="center"><FONT size="2">40
</FONT>

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<!-- link2 "ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES" -->
<DIV align="left"><A NAME="007"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM 6:</FONT></B></TD>
    <TD>
    <B><FONT size="2">DIRECTORS, SENIOR MANAGEMENT AND
    EMPLOYEES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information as to
the executive officers and directors of Teva as of March&nbsp;1,
2003:
</FONT>

<P align="left">
<B><FONT size="2">Executive Officers</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Officer</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Since</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Israel Makov
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President and Chief Executive Officer
    </FONT></TD>
</TR>

<TR>
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Haim Benjamini
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Human Resources
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William A. Fletcher
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Group Vice President&nbsp;&#151; North America,
    and President and CEO&nbsp;&#151; Teva North America
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chaim Hurvitz(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Group Vice President International
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Meron Mann
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Group Vice President&nbsp;&#151; Europe, and
    President and CEO Teva Pharmaceuticals Europe B.V.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Eli Shohet
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Business Development
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dan S. Suesskind
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr. Ben-Zion Weiner
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Group Vice President&nbsp;&#151; Global Products
    </FONT></TD>
</TR>

<TR>
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Aharon Agmon
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; International
    Pharmaceutical Sales
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Yehuda Arad
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Safety and Ecology
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">George S. Barrett
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President &#38; CEO&nbsp;&#151; Teva
    Pharmaceuticals USA, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rodney Kasan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President and Chief Technology Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moshe Manor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Global Products
    Division
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael Netz
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Israel Pharmaceutical
    Sales
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Christopher Pelloni
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Global Generic R&#38;D
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr. Irit Pinchasi
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Innovative R&#38;D
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr. David Reisman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Israel Pharmaceutical
    Operations
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr. Aharon Schwartz
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Strategic Business
    Planning and New Ventures
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Jacob Winter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; Global Operations
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Aharon Yaari
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President&nbsp;&#151; API Division
    </FONT></TD>
</TR>

<TR>
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ron Grupel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Internal Auditor
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Uzi Karniel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">General Counsel and Company Secretary
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Eli Hurvitz and Chaim Hurvitz are father and son.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">41
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Directors</FONT></B>

<CENTER>
<TABLE width="50%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Director</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Since</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Eli Hurvitz&nbsp;&#151; Chairman(l)(2)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ruth Cheshin(2)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Abraham E. Cohen(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leslie Dan(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amir Elstein(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prof. Meir Heth(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prof. Moshe Many(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr. Leora Meridor(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr. Max Reis(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prof. Michael Sela(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dov Shafir(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ory Slonim(7)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Harold Snyder(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Eli Hurvitz and Chaim Hurvitz are father and son.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Ruth Cheshin and Eli Hurvitz are sister- and
    brother-in-law.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Term ends in 2005.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Term ends in 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Term ends in 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Independent director elected in accordance with
    the Israeli Companies Law for a three-year term.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Independent director appointed pursuant to the
    former Israeli Companies Law for a five-year term.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Executive Officers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Israel Makov </FONT></I><FONT size="2">has
been the President and Chief Executive Officer of Teva since
April 2002. Previously he served as Teva&#146;s Chief Operating
Officer from January&nbsp;1, 2001, Executive Vice President from
1999 and Vice President for Business Development from 1995-1999.
Prior to joining Teva, Mr.&nbsp;Makov was Chief Executive
Officer of Gottex from 1993-1995, Chief Executive Officer of
Yachin Hakal Ltd. from 1991-1993 and Chairman of Axiom Ltd. from
1987-1991. Mr.&nbsp;Makov has also been a director of Bank
Hapoalim Ltd. since October 2002. He received his B.Sc. in
Agriculture from Hebrew University in 1963 and his M.Sc. in
Economics from Hebrew University in 1965.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Haim Benjamini</FONT></I><FONT size="2">,
Brigadier General (retired) of the Israel Defense Forces, has
been with Teva since 1988 as the Vice President&nbsp;&#151;
Human Resources. Before joining Teva, Mr.&nbsp;Benjamini was
Vice President of Human Resources &#38; Organization at Scitex
Corp. Ltd., Israel, from February 1982 through May 1988. He
received his B.A. in Social Sciences (Sociology and Political
Science) from Hebrew University in 1964 and his M.A. in
Organizational Behavior from the University of Chicago in 1980.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William A. Fletcher
</FONT></I><FONT size="2">has served as Group Vice
President&nbsp;&#151; North America since April 2002 and as
President and Chief Executive Officer of Teva North America
since April 2000. He previously served as President and Chief
Executive Officer of Teva USA from 1983 through March 2000.
Mr.&nbsp;Fletcher has also served as Vice President-North
American Pharmaceutical Sales since 1995. Prior to joining Teva
USA, he was Business Development Manager and International
Marketing Manager of Synthelabo, a subsidiary of L&#146;Oreal in
Paris. He graduated in International Marketing from Woolwich
Polytechnic, London (now Greenwich University) in 1969.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Chaim Hurvitz </FONT></I><FONT size="2">has
served as Group Vice President International since April 2002.
He served as Vice President&nbsp;&#151; Israeli Pharmaceutical
Sales from January 2002 until April 2002 and was the President
of Teva Pharma B.V. and Vice President&nbsp;&#151; European
Pharmaceutical Sales from 1995 to 1999. From 1993 to 1994, he
served as the General Manager of Teva&#146;s European Office in
The Netherlands and from 1990 to 1993 as the head of the
pharmaceutical and OTC departments of Abic Ltd., a Teva
subsidiary. He received his B.A in Political Science and
Economics from Tel Aviv University in 1985.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Meron Mann </FONT></I><FONT size="2">has been
with Teva since 1978, where he has served as Group Vice
President&nbsp;&#151; Europe since 2002 and has been the
President and CEO of Teva Pharmaceutical Europe B.V. since 2002.
From
</FONT>

<P align="center"><FONT size="2">42
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">1990 to 2002, he served as President of
Teva&#146;s Active Pharmaceuticals Ingredients division. He
received his M.Sc. in Industrial Engineering from the Haifa
Technion-The Israel Institute of Technology in 1978 and his
B.Sc. from Tel Aviv University in 1976.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Eli Shohet </FONT></I><FONT size="2">has been
with Teva since 1986. Since 1999, he has served as Vice
President Business Development. He previously served as Chief
Economist and assistant to Teva&#146;s CEO (1989-1993),
president of Plantex USA (1993-1996) and director of Business
Development for Teva&#146;s API division (1996-1999). He
received his B.A. in Economics from Bar-Ilan University in 1986.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dan S. Suesskind </FONT></I><FONT size="2">has
been with Teva since 1976 and has been Chief Financial Officer
since 1978. From 1970 until 1976, he was a consultant and
securities analyst with International Consultants Ltd. He
received his B.A. in Economics and Political Science from the
Hebrew University in 1965 and an M.B.A. from the University of
Massachusetts in 1969. He served as a director of Teva until
2001. Until 1998, Mr.&nbsp;Suesskind was a director of Lanoptics
Ltd. and until 1999 a director of ESC Medical Systems Ltd. He is
currently a member of the Jerusalem Foundation, Investment
Advisory Committee, Board of Trustees of Hebrew University,
Board member of the First International Bank and a board member
of Migdal Insurance Company Ltd.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Ben-Zion Weiner
</FONT></I><FONT size="2">has been with Teva since 1975 and has
been the Group Vice President&nbsp;&#151; Global Products since
April 2002. Previously, he served as Vice President&nbsp;&#151;
Research &#38; Development from 1986 to 2002. In 1975, he
received a Ph.D. in Chemistry from Hebrew University, where he
also earned B.Sc. and M.Sc. degrees. He did post-doctorate
research at Schering-Plough Corporation in the United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Aharon Agmon </FONT></I><FONT size="2">has
been Vice President&nbsp;&#151; International Pharmaceutical
Sales since 1995. During 1994 he served as Vice
President&nbsp;&#151; Israel Pharmaceutical Sales. He served as
the Managing Director of Teva Medical from 1984 to 1993. He
received his B.A. in Economics and Political Sciences from
Hebrew University in 1968 and his M.B.A. from Tel Aviv
University in 1971.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Yehuda Arad </FONT></I><FONT size="2">has
served as Teva&#146;s Vice President&nbsp;&#151; Safety and
Ecology since January 2003. Before joining Teva, Mr.&nbsp;Arad
was Senior Vice President of Rotem Amfert Negev Ltd. from
January 2001 through December 2002 and Technical Vice
President&nbsp;&#151; Dead Sea Bromine Group from January 1995
through December 2001. He received his B.Sc. in Mechanical
Engineering from Polytechnic Institute of New York in 1979 and
his M.B.A. from Ben Gurion University in 1998.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">George S. Barrett
</FONT></I><FONT size="2">has served as President and CEO of
Teva USA since March 1999. Prior to joining Teva in 1999,
Mr.&nbsp;Barrett was President and CEO of Diad Research, a
technology start-up based at the Johns Hopkins School of
Medicine. From 1991 to 1997, Mr.&nbsp;Barrett was with Alpharma
Inc. He began his tenure as President of its subsidiary Barre
National, and was appointed President of Alpharma&#146;s
U.S.&nbsp;Pharmaceutical group in 1994. From 1981 to 1991,
Mr.&nbsp;Barrett held various positions with NMC Laboratories,
serving as President from 1988 through its acquisition by
Alpharma Inc. Mr.&nbsp;Barrett received his Bachelor&#146;s
Degree from Brown University in 1977 and his M.B.A. from New
York University in 1988. Mr.&nbsp;Barrett serves as Chairman of
the Board of Directors for the Generic Pharmaceutical Industry
Association and is a director of The American Foundation for
Pharmaceutical Education and The University of Maryland School
of Pharmacy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Rodney Kasan </FONT></I><FONT size="2">has
been with Teva since 1980. He currently serves as Vice President
and Chief Technology Officer prior to that he was Vice President
Global Product Development&nbsp;&#151; Generic Pharmaceuticals.
He served as Head of Pharmaceutical Research and Development
until 1995 and subsequently as Director of Pharmaceutical
Research and Development for the Operations Division. He
received his degree in Pharmacy in Pretoria, South Africa.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Moshe Manor </FONT></I><FONT size="2">has been
the Vice President&nbsp;&#151; Global Products Division since
2002. Previously, he served as Vice President of Strategic
Product planning from 2000 to 2002, and as Vice President Israel
Pharmaceutical Sales from 1995 to 2000. He served as the General
Manager of Teva-labeled products in Israel from 1993 to 1994 and
as the Marketing Director of the Israeli Pharmaceutical Division
from 1989
</FONT>

<P align="center"><FONT size="2">43
</FONT>

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<DIV align="left">
<FONT size="2">to 1993. He received his B.A. in Economics from
the Hebrew University in 1982 and his M.B.A. from Tel Aviv
University in 1985.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael Netz </FONT></I><FONT size="2">has
been with Teva since 1989, when he started as an economist in
the Economic and Planning Department. From 1992 to 1998, he was
responsible for pharmaceuticals sales to private and
institutional pharmacies and was Counterpart Operational Manager
of Hungary&#146;s Biogal and in charge of the Branded Generic
Business Unit in Israel. From 1998 to 2002, he was General
Manager of the Teva-Abic Pharma division. Mr.&nbsp;Netz is now
Vice President&nbsp;&#151; Israel Pharmaceutical Sales. He
received his B.A. in Economics and Business Administration in
1989 and his M.B.A. in Marketing and International Management in
1993 from Tel Aviv University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Christopher Pelloni
</FONT></I><FONT size="2">has been with Teva since November
1997. He is currently Vice President of Global Generic Research
and Development (GR&#38;D) . Previously, he was Vice President
of GR&#38;D for Teva USA from June 2000 to May 2002 and Senior
Director of Pharmaceutical GR&#38;D from November 1997 to June
2000. Prior to that, he served in various management positions
with Geneva Pharmaceuticals Inc. during 28&nbsp;years of
service. He received a BS in Business Administration in 1986 and
an MBA in 1989 from Regis College (now Regis University), in
Denver, Colorado.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Irit Pinchasi
</FONT></I><FONT size="2">has been with Teva since 1986, serving
in different positions within the Global Innovative R&#38;D
Division, and has served as Vice President for the Global
Innovative R&#38;D Division since May 2002. Dr.&nbsp;Pinchasi
received her Ph.D. in Neurobiochemistry from Tel-Aviv University
in 1984, where she also earned her B.Sc. and M.Sc. degrees. She
did her post-doctorate research at the Weizmann Institute of
Science, Rehovot, Israel.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;David Reisman
</FONT></I><FONT size="2">has been with Teva since 1980. Since
1999, he has served as Vice President&nbsp;&#151; Israel
Pharmaceutical Operations. From 1996 to 1999, he served as
quality assurance director of the Chemical Division. He received
his Ph.D. in Chemistry from Bar Ilan University in 1985.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Aharon Schwartz
</FONT></I><FONT size="2">has been with Teva since 1975 and has
served as Vice President Strategic Business Planning and New
Ventures since April 2002. He previously served as Vice
President&nbsp;&#151; Global Products Division since 1999 and
Vice President of the Copaxone&#174; Division from 1995-1999.
From 1993 to 1995, he served as Vice President Business
Development/ Export Division and served as head of the
Pharmaceutical Division from 1989 to 1993. He received his Ph.D.
in Chemistry from the Weizmann Institute in 1975<I>.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Jacob Winter </FONT></I><FONT size="2">has
been with Teva since 1986 and has served as Vice
President&nbsp;&#151; Global Pharmaceutical Operations since
March 1999. Previously, he served as Vice President/ Manager of
the Israeli Pharmaceutical Operations Division from 1991 through
1998. He served as the Manager of Teva&#146;s Jerusalem
pharmaceutical plants from 1986 through 1991. He received his
B.Sc. in Industrial Engineering and Management from Tel Aviv
University in 1976.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Aharon (Arik) Yaari
</FONT></I><FONT size="2">has served as Vice
President&nbsp;&#151; API Division since 2002. He joined Teva in
1981. Among his various assignments in Teva was the Vice
President&nbsp;&#151; Marketing and Sales of Teva API and
President of Plantex USA. He received his B.A. and M.A. in
Economics from Hebrew University in 1981 and 1988.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Ron Grupel </FONT></I><FONT size="2">has been
the Internal Auditor of Teva since 1993. He received his B.A. in
Economics and Accounting in 1975 and his M.B.A. in 1979 from Tel
Aviv University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Uzi Karniel </FONT></I><FONT size="2">is
serving as General Counsel and Company Secretary. He has been
with Teva since 1971. He received his L.L.B. from Hebrew
University in 1969. He is a member of the European advisory
board of FM Insurance Company Ltd. and a member of the Executive
Committee of the Israeli Association of Publicly Traded
Companies.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Directors</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Eli Hurvitz </FONT></I><FONT size="2">has
served as Chairman of the Board of Teva since April 2002.
Previously, he was Teva&#146;s President and Chief Executive
Officer for over 25&nbsp;years and has been employed at Teva for
over 40&nbsp;years.
</FONT>

<P align="center"><FONT size="2">44
</FONT>

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<DIV align="left">
<FONT size="2">He serves as Chairman of the Board of The Israel
Democracy Institute (IDI), Chairman of the Board of
NeuroSurvival Technologies Ltd. (NST) (a private company),
Member of the Belfer Center for Science and International
Affairs at John F. Kennedy School of Government at Harvard
University, and a director of Vishay Intertechnology and of Koor
Industries Ltd. He served as the President of the Israel
Manufacturers Association from 1981 through 1986. He received
his B.A. in Economics and Business Administration from Hebrew
University in 1957.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Ruth Cheshin </FONT></I><FONT size="2">is the
President of the Jerusalem Foundation, a multi-national
organization which raises funds around the world for the
creation of social, educational and cultural projects for all
the citizens of Jerusalem. Ms.&nbsp;Cheshin is also an active
member in many of the city&#146;s most important boards.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Abraham E. Cohen
</FONT></I><FONT size="2">served as Senior Vice President of
Merck&nbsp;&#38; Co. and from 1977 to 1988 as President of the
Merck Sharp&nbsp;&#38; Dohme International Division. Since his
retirement in January 1992, Mr.&nbsp;Cohen has been active as an
international business consultant. He is presently a director of
Akzo Novel Nv., Chugai Pharmaceutical Co. USA, Pharmaceutical
Product Development, Smith Barney World Funds and Vasomedical,
Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leslie Dan </FONT></I><FONT size="2">is the
Chairman of Novopharm, which he founded and managed until its
acquisition by Teva in 2000. Mr.&nbsp;Dan serves on several
hospital boards in Canada and is a director of Draxis
Pharmaceutical Company and Viventia Biotech.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Amir Elstein </FONT></I><FONT size="2">is the
Co-General Manager of Intel Electronics Ltd. Jerusalem and has
been employed by Intel Corp. since 1982. He received his B.Sc.
in Physics and Mathematics from Hebrew University in 1980 and
his M.Sc. in the Solid State Physics Department of Applied
Physics, Hebrew University in 1982. In 1992, he received his
diploma of Senior Business Management from Hebrew University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Prof.&nbsp;Meir Heth
</FONT></I><FONT size="2">is a Professor at the Law School of
the College of Management. He has served in the past as the
Chairman of the Board of Teva and Chairman of Teva&#146;s
Executive Committee. He served as Chairman of the Board of Bank
Leumi Le&#146;Israel Ltd. and as Chairman of Bank Leumi Trust
Company of New York from 1987 to 1988. From 1978 to 1986, he was
the Chairman of the Tel Aviv Stock Exchange. Prof. Heth serves
as a director at Ofek Securities &#38; Investments and Nilit Ltd.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Prof.&nbsp;Moshe Many, M.D., Ph.D.
</FONT></I><FONT size="2">has served as president of the
Ashqelon Academic College since January 2002. He previously
served as the President of the Tisom International School of
Management. He is a former President of Tel Aviv University, the
former Medical Director of the Ramat Marpeh Hospital and the
former Deputy Chairman of Maccabi Health Care Fund. He has been
a Department Head at Tel Hashomer Hospital since 1976. He serves
as a director at Elbit Medical Imaging since 1997 and Israel
Laser Industries between 1994 to 1998. He received his M.D.
degree from Geneva University in 1952 and his Ph.D. in Surgery
from Tufts University in 1969.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Leora (Rubin) Meridor
</FONT></I><FONT size="2">has been a director of TEVA since
December 2002. She has been the Chairman of the Board of Bezeq
International, Poalim Capital Markets and Walla since 2001. From
1996 to 2000, Dr.&nbsp;Meridor served as Senior Vice President
and Head of the Credit and Risk Management Division of the First
International Bank of Israel. Between 1983 and 1996,
Dr.&nbsp;Meridor held various positions in the Bank of Israel,
the last of which was Head of the Research Department.
Dr.&nbsp;Meridor has held various teaching positions with Hebrew
University and holds a Bachelor&#146;s degree in mathematics and
physics, a Master&#146;s degree in Mathematics and a Ph.D. in
Economics from Hebrew University, Jerusalem. She serves on
several boards of directors (NICE Systems Ltd, Isrolet Ltd.,
Vitalgo Textile Works Ltd., Weizmann Institute of Science and
the New Israeli Opera) and qualifies as an independent director
under Israeli law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Max Reis
</FONT></I><FONT size="2">served as the President of Technion
Israel Institute of Technology from 1986 until his retirement in
1990. He has a Ph.D. in chemical engineering from the Imperial
College . He is a director of Degem Systems Ltd., the Union Bank
of Israel and various private companies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Prof.&nbsp;Michael Sela
</FONT></I><FONT size="2">is a Professor of Immunology. He was
the President of the Weizmann Institute of Science from 1975
through 1985 and has served as a Deputy Chairman of the Board of
Governors of the
</FONT>

<P align="center"><FONT size="2">45
</FONT>

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<DIV align="left">
<FONT size="2">Weizmann Institute of Science since 1985. He
received his Ph.D. degree in Biochemistry from Hebrew University
in 1954.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dov Shafir</FONT></I><FONT size="2">, Colonel
(retired) of the Israel Defense Forces, serves as a director of
Ofer Technologies Ltd.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Ory Slonim</FONT></I><FONT size="2">,
Advocate, has been an attorney in private practice since 1970.
He currently serves as a special consultant to the Israeli
defense minister. Mr.&nbsp;Slonim is a director of Migdal
Insurance Co., The First International Bank, Investment and
Underwriting Ltd. and U.&nbsp;Dori Engineering Construction,
Ltd., President of &#147;Variety Club&#148; in Israel and Senior
Vice President of Variety International.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Harold Snyder </FONT></I><FONT size="2">was
Senior Vice President of Teva USA and the former President of
Biocraft Laboratories, Inc. Mr.&nbsp;Snyder founded Biocraft
Laboratories in 1964. He had previously served as President of
Stoneham Laboratories Inc. He received his B.S. in Science from
New York University in 1948 and his M.A. in Natural Science from
Columbia University in 1950.
</FONT>

<P align="left">
<B><FONT size="2">Board of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to Teva&#146;s new Articles of
Association, which came into effect on January&nbsp;1, 2002,
Teva&#146;s Board of Directors is comprised of 16 directors, of
whom 15 shall be elected to the terms described below, in
addition to the number of independent directors appointed
pursuant to Israeli law as described below (currently two).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The directors are elected by the shareholders at
general meetings of Teva in three classes, each class consisting
of up to one-third of the number of directors elected (currently
five) and having terms of three years. The directors of only one
class are elected at each annual meeting so that the regular
term of only one class of directors expires annually and any
particular director stands for election only once in each
three-year period. The Board of Directors may, by 75%
supermajority and not less than nine directors, from time to
time change the number of directors of Teva to be so elected by
the shareholders at general meetings of Teva in multiples of
three, provided that the total number of directors so elected is
at least 15.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors may appoint a director to
fill a vacancy on the Board, and such director shall serve for
the remainder of the term of the replaced director. All board
and committee resolutions must be adopted by a majority of their
respective members voting on such resolutions, unless a
different majority is provided in Teva&#146;s Articles of
Association.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s Articles of Association allow for the
indemnification, exemption and insurance of its directors and
senior officers against certain liabilities that they may incur
in connection with the performance of their duties.
</FONT>

<P align="left">
<B><FONT size="2">Independent Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under Israeli law, publicly held Israeli
companies such as Teva are required to appoint two independent
directors. Such independent directors are appointed by the
general meetings by special majority and must meet certain
non-affiliation criteria&nbsp;&#151; all as provided under
Israeli law. An independent director is appointed for an initial
term of three consecutive years, and may be reappointed for one
additional three-year term. Regulations promulgated under
Israeli law set the minimum and maximum compensation that may be
paid to independent directors. At present, Mr.&nbsp;Ori Slonim
and Dr.&nbsp;Leora Meridor serve in this capacity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All directors are entitled to review Teva&#146;s
documentation and examine Teva&#146;s assets, as required to
perform their duties as directors and to receive assistance, in
special cases, from outside experts at the expense of Teva
(subject to approval by the Board or by court).
</FONT>

<P align="left">
<B><FONT size="2">Committees of the Board</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s Articles of Association provide that
the Board of Directors may delegate its powers to one or more
committees of the Board as it deems appropriate to the extent
such delegation is permitted under the
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">Israel Companies Law. Each committee must include
at least one independent director. The Board has appointed
audit, remuneration, finance, science and technology, and
community affairs committees.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Israel&#146;s Companies Law mandates the
appointment of an audit committee comprised of at least three
directors. The audit committee must include both independent
directors and may not include certain members of the Board.
Under the Israeli Companies Law, the audit committee is
responsible for overseeing the business management practices of
the company in consultation with the company&#146;s internal
auditor and independent auditors, making recommendations to the
Board to improve such practices and approving any transactions
with affiliates, as described below under
&#147;Item&nbsp;10&nbsp;&#151; Additional
Information&nbsp;&#151; Memorandum and Articles of
Association&nbsp;&#151; Directors&#146; Powers.&#148; The
current members of Teva&#146;s audit committee are Dov Shafir
(Chairman), Ory Slonim, Dr.&nbsp;Leora Meridor, Dr.&nbsp;Max
Reis, Prof.&nbsp;Moshe Many and Prof.&nbsp;Meir Heth.
</FONT>

<P align="left">
<B><FONT size="2">Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aggregate direct compensation paid or accrued
on behalf of all directors and executive officers as a group
during 2002 was $8,551,497. This amount includes directors&#146;
fees and expenses for non-employee directors of $319,000 and
amounts set aside or accrued to provide pension, retirement or
similar benefits of $251,000. This amount does not include
$13,128,843 from the exercise of previously granted stock
options, nor expenses (including business travel, professional
and business association dues and expenses) reimbursed to
officers and directors and other fringe benefits commonly
reimbursed or paid by companies in Israel. None of the
non-employee directors have agreements with Teva that provide
for benefits upon termination of service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva has adopted a number of stock option or
stock incentive programs in the past, as have certain of its
subsidiaries, principally Teva USA and its predecessor entities,
covering either ordinary shares or ADRs. In 2002, Teva&#146;s
directors and executive officers were granted an aggregate of
1,640,000 options to purchase 3,280,000 ordinary shares or ADRs,
at an average exercise price of $29.16 per share or ADR and an
average expiration date in 2009.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For further information regarding outstanding
Teva options, see Note&nbsp;9 to the Notes to Consolidated
Financial Statements.
</FONT>

<P align="left">
<B><FONT size="2">Share Ownership</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of February&nbsp;16, 2003, all the directors
and executive officers as a group held 21,884,033 ordinary
shares (approximately 8.3% of Teva&#146;s outstanding shares).
This figure includes the shares beneficially owned by Leslie
Dan, who beneficially owns 1.3% of Teva&#146;s outstanding
shares, Eli Hurvitz, who beneficially owns approximately 1.7% of
Teva&#146;s outstanding shares, and Harold Snyder, who
beneficially owns approximately 2.4% of Teva&#146;s outstanding
shares. Such persons are the only directors or officers who hold
1% or more of Teva&#146;s outstanding shares.
</FONT>

<P align="left">
<B><FONT size="2">Employees and Labor Relations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, Teva employed
approximately 9,600 employees, 3,100 of whom were based in
Israel. Approximately 90% of Teva&#146;s employees in Israel are
represented by local or national trade unions. Teva considers
its labor relations with its employees around the world to be
good.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Israeli law generally requires severance pay upon
dismissal or retirement of an employee or, in some
circumstances, upon termination of employment for other reasons.
See Note&nbsp;5 to the Notes to Consolidated Financial
Statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In North America, Teva employs approximately
2,600&nbsp;persons, of whom approximately 1,650 are in the
United States and 950 are in Canada. Except for
244&nbsp;employees at certain former Biocraft facilities who are
represented under collective bargaining agreements with Drug,
Chemical, Cosmetic, Plastic and Affiliated Warehouse Employees
Locals&nbsp;815 (New Jersey) and 688 (Missouri), which are
affiliated with the International Brotherhood of Teamsters, none
of its employees are represented by labor unions.
</FONT>

<P align="center"><FONT size="2">47
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Holland, Teva&#146;s subsidiary, Pharmachemie
employs approximately 550&nbsp;persons. Most of its employees
are represented by labor unions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United Kingdom, Teva&#146;s subsidiary
APS/Berk employs approximately 240&nbsp;persons. Except for some
production employees, most of its employees are not represented
by labor unions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Hungary, Teva&#146;s subsidiaries Biogal and
Human, its manufacturing and development units, employ
approximately 1,900&nbsp;persons, substantially all of whom are
represented by labor unions. Teva&#146;s marketing and
distribution units BTP and Human Trade employ together
approximately 310&nbsp;persons. In France, Teva&#146;s
subsidiaries Teva Classics and Teva Sante, acquired in midyear
from Bayer, employ about 240&nbsp;persons. Most of the employees
are represented by unions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Italy, Teva&#146;s subsidiaries of its API
division employ about 300&nbsp;persons, 200 of them joined Teva
through a midyear acquisition of Honeywell Pharmaceutical Fine
Chemicals. Teva&#146;s marketing and distribution unit employs
about 85&nbsp;persons. Most of the employees are represented by
unions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are an additional 375&nbsp;persons employed
in various small groups around the world.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Over the past three years, the number of Teva
employees by geographic area were as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Geographic Area</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Europe
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">North America
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rest of the World
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Grouped by function, approximately 60% of
Teva&#146;s employees work in pharmaceutical production, 12% in
sales and marketing, 12% in research and development and 12% in
general and administrative. Over 35% of Teva&#146;s employees
are university graduates.
</FONT>

<P align="center"><FONT size="2">48
</FONT>
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<DIV align="left"><A NAME="008"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;7:</FONT></B></TD>
    <TD>
    <B><FONT size="2">MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To the best knowledge of Teva, as of
February&nbsp;15, 2003, there is no shareholder who beneficially
owns 5% or more of Teva&#146;s ordinary shares. All holders of
Teva ordinary shares have one vote per share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Leslie Dan, a director of Teva,
beneficially owned approximately 2.5&nbsp;million ordinary
shares of Teva (including shares exchangeable for Teva ordinary
shares) as of December&nbsp;31, 2002 representing approximately
1.3% of Teva&#146;s outstanding shares as of such date. As of
December&nbsp;31 2001, Mr.&nbsp;Dan had beneficially owned
approximately 16.9&nbsp;million ordinary shares of Teva
(including shares exchangeable for Teva ordinary shares)
representing approximately 6.3% of the then outstanding Teva
shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Novopharm acquisition in
2002, Teva entered into a registration rights agreement with Dan
Family Holdings Ltd., an affiliate of Mr.&nbsp;Dan and his
children. Under the agreement, Dan Family Holdings Ltd. and
certain affiliates of Mr.&nbsp;Dan and his children have the
right to request that Teva file a registration statement under
the Securities Act (on up to an aggregate of three occasions)
covering the sale of certain Teva ordinary shares or ADRs
beneficially owned by such persons. In addition, under the
agreement, if Teva proposes to register any of its ordinary
shares or ADRs, whether or not for sale for its own account, Dan
Family Holdings Ltd. and such affiliates of Mr.&nbsp;Dan and his
children may require Teva to include all or a portion of such
shares or ADRs in the registration and any related underwriting.
As a result of various transactions during 2002, Teva believes
that the registration rights now apply to up to 9,581,107
ordinary shares beneficially owned by such persons. In general,
all fees and expenses of such registration (other than
underwriting discounts and selling commissions) will be paid by
Teva.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under a registration rights agreement entered
into in connection with the closing of the Biocraft acquisition
in 1996, Harold Snyder, a director of Teva, and certain
affiliated trusts have the right to request that Teva file a
registration statement under the Securities Act (on up to three
occasions) covering the sale of the ADRs owned by such persons.
In addition, under the agreement, if Teva proposes to register
any of its ordinary shares or ADRs, whether or not for sale for
its own account, these persons may require Teva to include all
or a portion of such ADRs in the registration and any related
underwriting. In general, all fees and expenses of such
registration (other than underwriting discounts and selling
commissions) will be paid by Teva. However, based on current
trading volume of the ADRs on the NASDAQ National Market, these
ADRs can be sold without registration under Rule&nbsp;144 under
the Securities Act. As a result, under the terms of the
registration rights agreement, these registration rights cannot
currently be exercised.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002 Teva paid Almad Investments
CDN&nbsp;$4,267,063 for the rental of office and manufacturing
space in Canada. Leslie Dan and his family own Almad.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of January&nbsp;31, 2003, there were 1,110
record holders of ADRs, whose holdings represented approximately
79% of the total outstanding ordinary shares, substantially all
of which record holders were in the United States.
</FONT>

<P align="center"><FONT size="2">49
</FONT>

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<!-- link2 "ITEM 8: FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;8:</FONT></B></TD>
    <TD>
    <B><FONT size="2">FINANCIAL INFORMATION</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Consolidated Statements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;Item&nbsp;18&nbsp;&#151; Financial
Statements.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Export Sales</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva manufactures products and chemicals in its
facilities in Israel, the United States, Canada and Europe. A
substantial amount of these products and chemicals are exported.
For a breakdown of Teva&#146;s sales by geographic market for
the past three years, see &#147;Item&nbsp;5: Operating and
Financial Review and Prospects&nbsp;&#151; Results of
Operations&nbsp;&#151; Sales&nbsp;&#151; General.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">General</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva from time to time seeks to develop generic
products for sale prior to patent expiration in various
territories. In the United States, to obtain generic approval
for a product prior to the expiration of the originator patent,
Teva must challenge the patent under the procedures set forth in
the Waxman-Hatch Act of 1984. To the extent that it seeks to
utilize such patent challenge procedures, Teva is involved and
expects to be involved in patent litigation regarding the
validity or infringement of the originator&#146;s patent.
Additionally, Teva may be involved in patent litigation
involving the extent to which alternate manufacturing process
techniques may infringe on originator or third party process
patents. No provision for these matters has been included in the
accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva and its subsidiaries are from time to time
subject to claims arising in the ordinary course of their
business, including product liability claims. Teva believes that
it has meritorious defenses to such claims and legal proceedings
pending as of December&nbsp;31, 2002, and that, in any event, it
has adequate product liability insurance to cover material
damages related to product liability claims pending as of
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s business inherently exposes it to
potential product liability claims. From time to time, the
pharmaceutical industry has experienced difficulty in obtaining
product liability insurance coverage for certain products or
coverage in the desired amounts or with the desired deductibles.
As a result, Teva sells and may continue to sell, pharmaceutical
products that are not covered by insurance and may also be
subject to product liability claims that are not covered by
insurance or that exceed Teva&#146;s policy limits.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Pending and Resolved Matters</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2001, Teva USA won a judgment in a
patent infringement action in the U.S.&nbsp;Federal District
Court in Boston, Massachusetts, brought against it by SmithKline
Beecham Corp. and Beecham Group p.l.c. (together,
&#147;Beecham&#148;) regarding the U.S.&nbsp;patent covering
nabumetone, the active ingredient in Relafen&#174;. The court
ruled in Teva USA&#146;s favor. Following the district
court&#146;s decision, Teva USA launched its nabumetone product.
As the first applicant to challenge the listed patent for this
drug, Teva USA had enjoyed a statutory 180-day period of generic
marketing exclusivity. In August 2002, the United States Court
of Appeals for the Federal Circuit affirmed the district
court&#146;s judgment that Beecham&#146;s patent was invalid and
did not disturb the district court&#146;s judgment that
Beecham&#146;s patent was unenforceable due to inequitable
conduct. On January&nbsp;14, 2003, Beecham&#146;s time to file a
petition of certiorari with the U.S.&nbsp;Supreme Court lapsed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;17, 2001, Teva and Teva USA
filed a complaint in the District Court in Boston, Massachusetts
against Beecham and GlaxoSmithKline p.l.c. On November&nbsp;12,
2002, following a favorable decision in the nabumetone action
described above, Teva and Teva USA filed an amended complaint
against Beecham and GlaxoSmithKline p.l.c., and added
Carl&nbsp;J. Rose and Richard&nbsp;K. Anderson as defendants
(all defendants collectively, &#147;GSK defendants&#148;). The
amended complaint alleges that the GSK defendants unlawfully
prevented Teva and Teva USA from manufacturing, marketing and
selling generic
</FONT>

<P align="center"><FONT size="2">50
</FONT>

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<DIV align="left">
<FONT size="2">formulations of Relafen&#174; and asserts claims
under the Sherman Act, certain state antitrust and unfair
competition statutes, the Massachusetts Consumer Protection Act,
and state common law and equitable principles. Teva and Teva USA
seek actual damages, including lost profits and loss of market
share, trebled, plus their costs of suit, as well as
restitution, disgorgement and other equitable relief. The time
for the GSK defendants to answer or move to dismiss the amended
complaint has not yet expired. Discovery has commenced and a
trial date has been set for January 2004.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva USA is a manufacturer of Adipex-P brand
phentermine hydrochloride, and has been sued in both class
actions and individual lawsuits relating to the alleged negative
health effect of phentermine and fenfluramine. While neither
drug had been indicated or approved for combination use by the
FDA, physicians sometimes prescribed the two together in a
combination treatment for weight control known as
&#147;fen-phen.&#148; Plaintiffs have filed lawsuits from August
1997 to the present in a variety of state and federal
jurisdictions seeking monetary damages in unspecified amounts.
The federal actions have been consolidated for pretrial purposes
to the United States District Court for the Eastern District of
Pennsylvania in a multidistrict litigation proceeding. Based
upon the advice of counsel, Teva believes that it has adequate
insurance to cover these claims and that the outcome of the
remaining litigation in which Teva USA is involved will not have
a material adverse effect on Teva&#146;s financial position. No
provision for this matter has been included in the accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s Hungarian subsidiary, Biogal
Pharmaceutical Works Ltd., was sued in July 1999 in the County
Court of Debrecen, Hungary by a Hungarian institute
(Gy&#243;gyszerkutat&#243; Int&#233;zet Kft) for additional
royalties arising out of a series of contracts for the
development of a pharmaceutical active ingredient. Although the
plaintiff has not made any claims for a specific amount, the
court, in an interim decision, ordered Biogal to submit an
accounting on the contested terms. Biogal has appealed the
decision and, based on the advice of counsel, expects to
prevail. No provision for this matter has been included in the
accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;13, 2002, a claim was filed in
the Tel&nbsp;Aviv District Court by Paka Industries Ltd. against
Teva, Teva Assets Ltd., an Israeli subsidiary of Teva, and a
senior officer and a former senior officer of Teva Assets, in
the amount of approximately $17&nbsp;million. The claim relates
to a 1998 agreement between Paka and Teva Assets, under which
Teva Assets sold off the assets (excluding real property) of its
plant to the plaintiff. Paka claims to have been deceived and
consequently lost the entire investment in the acquired plant.
Teva, based on the advice of counsel, believes that its chances
of prevailing are good. Accordingly, no provision for this
matter has been included in the accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2000, a claim was filed in the
Tel&nbsp;Aviv District Court, and is now pending against Teva,
with respect to damages caused to the plaintiff as a result of
the use of a product containing the ingredient
diethylstilbestrol (&#147;DES&#148;). In May and November 2001,
69 plaintiffs filed an additional claim against Teva, in the
District Court of Jerusalem, for damages caused by the use of
two products containing DES. In July 2002, the plaintiffs
amended their claim to include the Clalit Health Services as a
further defendant (in addition to the Ministry of Health). In
December 2002, nine women requested the District Court of
Jerusalem to join the claim as plaintiffs, while four plaintiffs
requested to withdraw from the proceedings. The court has not
yet ruled on this matter. The aggregate amount of the two claims
is approximately $10&nbsp;million, not including general
damages. Teva is vigorously defending itself against these
claims. Because the above claims are still in their early
stages, no determination can be made of the likelihood of
prevailing in the actions; however, based on the advice of
counsel, Teva believes it has meritorious defenses. No provision
for this matter has been included in the accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;5, 2001, a claim was filed against
Teva in the Tel&nbsp;Aviv District Court with respect to the use
of a pharmaceutical product known as &#147;Chorigon Ampoules
5000&nbsp;Units.&#148; The plaintiffs allege that they were
administered with allegedly defective ampoules of the product
during the course of an in&nbsp;vitro fertilization treatment,
resulting in the failure of the treatment and causing financial
damages and mental anguish. The plaintiffs filed a petition to
certify the claim as a class action. The plaintiffs have since
filed a reply to Teva&#146;s response. Because the claim is
still in its early stage, Teva&#146;s counsel is unable to
express an opinion as to the merits of the claim. Nevertheless,
based on information to date, Teva believes that this
</FONT>

<P align="center"><FONT size="2">51
</FONT>

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<DIV align="left">
<FONT size="2">matter will not have a material adverse effect on
its results of operations and financial condition and that
provision for this matter in the accounts is not required.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva USA, along with Elan Corporation, Elan
Pharma Ltd. and Biovail Corporation International, were
defendants in a patent litigation brought by Bayer&nbsp;AG and
Bayer Corporation on May&nbsp;8, 2000 in the U.S.&nbsp;District
Court for the District of Delaware. On July&nbsp;17, 2000, the
court transferred the case to the Northern District of Georgia.
Bayer had alleged that Elan&#146;s Nifedipine Extended Release
Tablets&nbsp;CC, 30&nbsp;mg, which are marketed by Teva USA,
infringed a Bayer patent. On August&nbsp;16, 2002, Teva USA was
dismissed from the case pursuant to a settlement agreement under
which Teva USA did not pay any damages or provide any other
consideration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva USA, along with Biovail, are defendants in
two related patent litigations brought by Bayer&nbsp;AG, Bayer
Corporation and, in one of the cases, Pfizer Inc. Both cases
involve allegations against Teva USA of infringement of the same
patent that had been at issue in the above discussed Georgia
case and both cases are currently pending in the
U.S.&nbsp;District Court for the District of Puerto Rico. The
first case was commenced on February&nbsp;16, 2001 by
Bayer&nbsp;AG and Pfizer against Teva USA and Biovail for patent
infringement relating to the sale of Biovail&#146;s Nifedipine
Extended Release Tablets&nbsp;XL, 60&nbsp;mg, which are marketed
in the United States by Teva USA. The second case was commenced
on February&nbsp;20, 2001 by Bayer Corporation against Biovail
and Teva USA for patent infringement relating to the sale of
Biovail&#146;s Nifedipine Extended Release Tablets&nbsp;CC,
60&nbsp;mg, which are also marketed in the United States by Teva
USA. The plaintiffs in each of the two cases are seeking
enhanced damages and attorneys&#146; fees in unspecified
amounts, preliminary and permanent injunctions, and a recall of
the products at issue. Each of these cases is in the pre-trial
phase and no provision for these matters has been included in
the accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva USA is a named defendant, along with Biovail
Corp. and Elan Corporation, plc, in two civil actions currently
pending in the federal district courts in the District of
Columbia and New York City. Teva is also named as a defendant in
the case pending in New York City. The cases allege generally
that arrangements between Biovail and Elan relating to sales of
Nifedipine Extended Release Tablets&nbsp;CC, in connection with
which Teva USA acted as a distributor for Biovail, were unlawful
under the federal antitrust laws. The challenged arrangements
were previously the subject of a consent decree entered into by
the U.S.&nbsp;Federal Trade Commission with Biovail and Elan, to
which Teva and Teva USA were not parties. The cases seek
injunctive relief, unspecified monetary damages, attorneys&#146;
fees, and costs. Each of the cases is brought on behalf of an
alleged class of persons that purchased Nifedipine Extended
Release Tablets&nbsp;CC made by Elan or Biovail and sold in the
United States by Teva USA. A motion is currently pending before
the federal Judicial Panel on Multidistrict Litigation seeking
consolidation of these cases with four other cases pending in
the District of Columbia and two other cases pending in the
Southern District of New York; Teva and Teva USA are not parties
in those other cases. Teva USA and Teva (to the extent they
remain a defendant in any of these cases) intend to defend
vigorously against these claims. These cases are in a very
preliminary stage, so it is not possible to assess the
likelihood of an unfavorable outcome or the magnitude of any
potential loss. No provision for these matters has been included
in the accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2002, Teva USA won a judgment in the
U.S.&nbsp;District Court in Norfolk, Virginia in a declaratory
judgment action it brought against GlaxoSmithKline
(&#147;GSK&#148;) regarding seven U.S.&nbsp;patents related to
potassium clavulanate, an active ingredient in Augmentin&#174;
(or &#147;amoxiclav&#148;). The court ruled that all seven
patents were invalid based on double patenting. GSK has appealed
the judgment and oral argument is scheduled for March&nbsp;5,
2003 on the appeal. Annual sales of the branded product in the
U.S.&nbsp;were estimated to be in excess of $1&nbsp;billion.
Following the district court decision, and subsequent FDA
approval, Teva USA launched its amoxiclav product, which
contains potassium clavulanate. Although Teva believes that the
findings of fact and legal conclusions of the district court are
well founded and that the decision will be upheld, were GSK to
be successful in its appeal, Teva USA could be required to pay
damages to GSK related to the sales of Teva USA&#146;s amoxiclav
products and enjoined from selling its amoxiclav products. No
provision for these matters has been included in the accounts.
</FONT>

<P align="center"><FONT size="2">52
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2002, GSK filed a complaint against
Teva USA in the Pennsylvania Court of Common Pleas. Ranbaxy
Pharmaceuticals, Inc. is a defendant in the same case, though
GSK does not allege any connection between Teva USA and Ranbaxy.
The Complaint alleges that Teva USA&#146;s amoxiclav products
are derived from a strain of Streptomyces clavuligerus stolen
from GSK. The complaint asserts causes of action for alleged
trade secret misappropriation, unfair competition, and
conversion. The suit seeks equitable relief and imposition of a
constructive trust related to Teva USA&#146;s amoxiclav
products. The case is scheduled to be ready for trial in
February 2004. Although Teva believes that the likelihood of GSK
prevailing is low, if GSK&#146;s allegations were proven true,
Teva USA could be required to pay damages to GSK related to the
sales of Teva USA&#146;s amoxiclav products and enjoined from
selling its amoxiclav products. No provision for these matters
has been included in the accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On August&nbsp;5, 2002, Lek Pharmaceuticals d.d.
filed a complaint against Teva USA in the United States District
Court for the District of New Jersey. Lek has accused Teva USA
of misappropriating Lek&#146;s trade secrets and proprietary
information pertaining to formulations for Teva USA&#146;s
amoxiclav products. In its complaint, Lek seeks equitable relief
and unspecified damages. Teva USA filed its answer on
September&nbsp;24, 2002, denying all allegations of wrongdoing.
The parties have agreed on a discovery plan and all fact and
expert discovery is scheduled to be completed by
December&nbsp;17, 2003. Although Teva believes that the
likelihood of Lek prevailing is low, if Lek&#146;s allegations
are proven true, Teva USA could be required to pay damages to
Lek related to the sales of Teva USA&#146;s amoxiclav products
and enjoined from selling its amoxiclav products. No provision
for these matters has been included in the accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Bayer and Bayer&#146;s marketing joint venturer
GSK have been named in extensive litigation for personal
injuries allegedly related to the use of the product
Baycol&#174;, a blood lipid reducing agent, which Bayer withdrew
from the market in August 2001. Teva is the manufacturer of
gemfibrozil, the generic version of Lopid&#174;, another blood
lipid reducing drug, which was at times prescribed in
combination with Baycol&#174;. In five cases where there
allegedly was concomitant use of Baycol&#174; and gemfibrozil,
Teva USA has been named as a co-defendant of Bayer and GSK in
the Court of Common Pleas of the Commonwealth of Pennsylvania,
County of Philadelphia. The Complaints in each of these cases
allege that plaintiff was injured as a result of exposure to
gemfibrozil, either alone or in combination with Baycol&#174;.
Because these claims are still in their early stages,
Teva&#146;s counsel is unable to express an opinion as to their
merits. Nevertheless, based upon currently available
information, Teva believes that these cases will not have a
material adverse effect on its results of operations and
financial condition. No provision for these matters has been
included in the accounts.
</FONT>

<P align="left">
<B><FONT size="2">Dividend Policy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;Item&nbsp;3: Key
Information&nbsp;&#151; Dividends.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Significant Changes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as otherwise disclosed in this annual
report, there has been no significant change in Teva&#146;s
financial position since December&nbsp;31, 2002.
</FONT>

<P align="center"><FONT size="2">53
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "ITEM 9: THE OFFER AND LISTING" -->
<DIV align="left"><A NAME="010"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;9:</FONT></B></TD>
    <TD>
    <B><FONT size="2">THE OFFER AND LISTING</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">ADRs</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2000 and in December 2002, Teva
effected a 2&nbsp;for 1 stock split. Each holder of an ordinary
share, or an ADR, as the case may be, was issued another share.
All figures in this annual report have been adjusted to reflect
the stock splits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s ADRs have been traded in the United
States since 1982 and were admitted to trading on the Nasdaq
National Market in October 1987. The ADRs are quoted under the
symbol TEVA. The Bank of New York serves as Depositary for the
ADRs. In November 2002, Teva was added to the NASDAQ 100 Index.
Each ADR represents one ordinary share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information
regarding the high and low prices of the ADR on Nasdaq for the
periods specified in U.S.&nbsp;dollars.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">High</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Low</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Last six months:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">February 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">January 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">December 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">November 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">October 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">September 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Last eight quarters:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q4 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q3 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q2 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q1 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q4 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q3 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q2 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q1 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Last five years:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1999
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1998
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.03</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;28, 2003, the last reported sale
price for the ADRs on the Nasdaq National Market was $37.78. The
American Stock Exchange, the Chicago Options Exchange and the
Pacific Stock Exchange quote options on Teva&#146;s ADRs under
the symbol TEVA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s ADRs are also traded on SEAQ
International in London and on the exchanges in Frankfurt and
Berlin.
</FONT>

<P align="left">
<B><FONT size="2">Ordinary Shares</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s ordinary shares have been listed on
the Tel Aviv Stock Exchange since 1951. The table below sets
forth in U.S.&nbsp;dollars the high and low last reported sale
prices of the ordinary shares on the Tel Aviv Stock Exchange
during the periods as reported by such Exchange (restated to
reflect the stock splits). The
</FONT>

<P align="center"><FONT size="2">54
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">translation into U.S.&nbsp;dollars is based on
the daily representative rate of exchange published by the Bank
of Israel then in effect.
</FONT>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">High</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Low</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Last six months:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">February 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">January 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">December 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">November 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">October 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">September 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Last eight quarters:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q4 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q3 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q2 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q1 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q4 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q3 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q2 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Q1 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Last five years:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1999
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1998
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;27, 2003, the last reported sale
price of the ordinary shares on the Tel&nbsp;Aviv Stock Exchange
was $37.56.
</FONT>

<P align="center"><FONT size="2">55
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "ITEM 10: ADDITIONAL INFORMATION" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="left">
<B><FONT size="2">ITEM
10:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADDITIONAL
INFORMATION</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link2 "MEMORANDUM AND ARTICLES OF ASSOCIATION" -->
<DIV align="left"><A NAME="012"></A></DIV>

<DIV align="center">
<B><FONT size="2">MEMORANDUM AND ARTICLES OF
ASSOCIATION</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">Register</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s registration number at the Israeli
registrar of companies is 52-001395-4.
</FONT>

<P align="left">
<B><FONT size="2">Directors&#146; Powers</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Israeli Companies Law (the &#147;Companies
Law&#148;) requires approval by both the Board of Directors and
the audit committee of, among other things, the following
actions or transactions:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;proposed transactions in which an
    executive officer or director (an &#147;office holder&#148;) has
    a direct or indirect personal interest and which is outside the
    ordinary course of the company&#146;s business, which is not in
    accordance with market conditions or which may materially
    influence the earnings, assets or liabilities of the company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;material actions which may otherwise be
    deemed to constitute a breach of fiduciary duty of any office
    holder of the company, that are done in good faith and that are
    in the interest of the company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;terms of service of directors (including
    terms of their employment as officers of the company); and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(d)&nbsp;indemnification, insurance and
    exemptions to office holders.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Under the Companies Law, certain other
transactions (listed in Section&nbsp;270 of the Companies Law)
that require approval by the Board of Directors and the audit
committee may also require shareholder approval (including, in
certain cases, a specified percentage of disinterested
shareholders).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An office holder with an interest in any of the
above transactions may not be present and may not vote at the
Board of Directors and audit committee&#146;s meetings at which
such transaction is approved. In cases where the approval of the
audit committee is required, the audit committee may only
approve such transactions if two independent directors are
members of the committee and at least one of them is present at
the meeting at which the transaction is approved.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Companies Law requires that an office holder
promptly disclose any &#147;personal interest&#148; (including a
personal interest of certain relatives or a corporation or
entity in which the office holder or such relative is an
interested party) that he may have, and all related material
information known to him, in connection with any existing or
proposed transaction by the company and codifies the duty of
care and fiduciary duties that an office holder has to the
company. The company must approve such transactions as not being
adverse to the best interests of the company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Neither Teva&#146;s Memorandum or Articles of
Association, nor the laws of the State of Israel, mandate
retirement or non-retirement of directors at a certain age, or
share ownership for a director&#146;s qualification.
</FONT>

<P align="left">
<B><FONT size="2">Description of Teva Ordinary Shares</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The par value of Teva&#146;s ordinary shares is
NIS&nbsp;0.10&nbsp;per share, and all issued and outstanding
ordinary shares are fully paid and non-assessable. Holders of
paid-up ordinary shares are entitled to participate equally in
the payment of dividends and other distributions and, in the
event of liquidation, in all distributions after the discharge
of liabilities to creditors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s Board of Directors may declare
interim dividends and propose the final dividend with respect to
any fiscal year out of profits available for dividends after
statutory appropriation to capital reserves. Declaration of a
final dividend (not exceeding the amount proposed by the Board)
requires shareholder approval through the adoption of an
ordinary resolution. All ordinary shares represented by the ADRs
will be issued in registered form only. Ordinary shares do not
entitle their holders to preemptive rights.
</FONT>

<P align="center"><FONT size="2">56
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Voting is on the basis of one vote per share. An
ordinary resolution (for example, resolutions for the approval
of final dividends and the appointment of auditors) requires the
affirmative vote of a majority of the shares voting in person or
by proxy. Certain resolutions (for example, resolutions amending
the Articles of Association and authorizing changes in the
rights of shareholders) require the affirmative vote of at least
75% of the shares voting in person or by proxy, and certain
amendments of the Articles of Association require the
affirmative vote of at least 85% of the shares voting in person
or by proxy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Neither Teva&#146;s Memorandum or Articles of
Association, nor the laws of the State of Israel, restrict in
any way the ownership or voting of Teva&#146;s ordinary shares
by nonresidents or persons who are not citizens of Israel,
except with respect to citizens or residents of countries that
are in a state of war with Israel.
</FONT>

<P align="left">
<B><FONT size="2">Meetings of Shareholders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Companies Law, Teva is required to hold
an annual meeting every year no later than fifteen months after
the previous annual meeting. In addition, Teva is required to
hold a special meeting:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;at the direction of the Board of
    Directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;if so requested by two directors or
    one-fourth of the serving directors; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(3)&nbsp;upon the request of one or more
    shareholders who have at least 5% of the issued share capital
    and at least 1% of the voting rights or one or more shareholders
    who have at least 5% of the voting rights.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the Board of Directors receives a demand to
convene a special meeting, it must publicly announce the
scheduling of the meeting within 21&nbsp;days after the demand
was delivered. The meeting must then be held no later than
35&nbsp;days after the notice was made public.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The agenda at an annual meeting is determined by
the Board of Directors. The agenda must also include proposals
for which the convening of a special meeting was demanded, as
well as any proposal requested by one or more shareholders who
hold no less than 1% of the voting rights, as long as the
proposal is one suitable for discussion at an annual meeting.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A notice of an annual meeting must be made public
and delivered to every shareholder registered in the
shareholders register at least 30&nbsp;days before the meeting
is convened. The shareholders entitled to participate and vote
at the meeting are the shareholders as of the record date set in
the decision to convene the meeting, provided that the record
date is not more than 40&nbsp;days, and not less than four days,
before the date of the meeting.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Companies Law, a shareholder who
intends to vote at a meeting must demonstrate that he owns
shares in accordance with the regulations. Under these
regulations, a shareholder whose shares are registered with a
member of a stock exchange (such as NASDAQ or the Tel Aviv Stock
Exchange) must provide Teva with an authorization from such
member regarding his ownership as of the record date.
</FONT>

<P align="left">
<B><FONT size="2">Right of Non-Israeli Shareholders to
Vote</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Neither the Memorandum of Association, the
Articles of Association, nor the laws of the State of Israel
restrict in any way the ownership or voting of Teva&#146;s
ordinary shares by nonresidents or persons who are not citizens
of Israel, except with respect to citizens or residents of
countries that are in a state of war with Israel.
</FONT>

<P align="left">
<B><FONT size="2">Change of Control</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Companies Law, a merger requires
approval by the Board of Directors and by the shareholders of
each of the merging companies. In approving a merger, the Board
of Directors must determine that there is no reasonable
expectation that, as a result of the merger, the merged company
will not be able to meet its obligations to its creditors.
Creditors may also seek a court order to enjoin or delay the
merger if there is an expectation that the merged company will
not be able to meet its obligations to
</FONT>

<P align="center"><FONT size="2">57
</FONT>

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<DIV align="left">
<FONT size="2">its creditors. A court may also issue other
instructions for the protection of the creditors&#146; rights in
connection with a merger.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Companies Law, a control share
acquisition of a public company (in which there is no holder of
a control share) and a share acquisition in which, following the
purchase, the purchaser holds more than 45% of the voting rights
of the company (in case there is no holder of more than 50% of
the voting rights) are prohibited unless a special purchase
offer is made to all shareholders. Such a special purchase offer
requires, among other things, that the Board of Directors of the
target company either states its opinion regarding the
expedience of the purchase offer or state why it cannot state
its opinion.
</FONT>

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<P align="center">
<B><FONT size="2">FOREIGN EXCHANGE REGULATIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Nonresidents of Israel who purchase ADRs with
U.S.&nbsp;dollars or other non-Israeli currency will be able to
receive dividends, if any, and any amounts payable upon the
dissolution, liquidation or winding up of the affairs of Teva,
as well as the proceeds of any sale of the ordinary shares in
Israel into freely reportable dollars, at the rate of exchange
prevailing at the time of conversion.
</FONT>

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<P align="center">
<B><FONT size="2">U.S. FEDERAL INCOME TAX
CONSIDERATIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of the principal U.S.
federal income tax consequences to U.S.&nbsp;Holders (as defined
below) of ADRs who hold such securities as capital assets. For
purposes of this summary, a &#147;U.S.&nbsp;Holder&#148; means a
holder of an ADR that is:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a citizen or resident of the United States;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a corporation (or another entity taxable as a
    corporation for U.S.&nbsp;federal income tax purposes) created
    or organized in the United States or under the laws of the
    United States or any political subdivision thereof;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an estate, the income of which is includable in
    gross income for U.S.&nbsp;federal income tax purposes
    regardless of its source; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a trust if a U.S. court is able to exercise
    primary supervision over the administration of the trust and one
    or more U.S.&nbsp;persons have the authority to control all
    substantial decisions of the trust.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This summary of United States income tax laws is
based on the United States Internal Revenue Code (the
&#147;Code&#148;), its legislative history, existing and
proposed regulations thereunder, judicial decisions and
published positions of the Internal Revenue Service, all as of
the date of this annual report and all of which are subject to
change (including changes in interpretation), possibly with
retroactive effect.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The discussion set forth below is intended only
as a summary of the principal U.S.&nbsp;federal income tax
consequences to U.S.&nbsp;Holders of ADRs and does not purport
to be a complete analysis of all potential tax consequences of
owning ADRs. In particular, this discussion does not take into
account the specific circumstances of any particular investor
(such as tax-exempt entities, certain insurance companies,
broker-dealers, investors subject to the alternative minimum
tax, investors that actually or constructively own 10% or more
of the voting securities, investors that hold ordinary shares or
ADRs as part of a straddle or hedging or conversion transaction,
or investors whose functional currency is not the
U.S.&nbsp;dollar), some of which may be subject to special
rules. Investors are advised to consult their tax advisors with
respect to the tax consequences of the ownership of ADRs,
including the consequences under applicable state and local law
and federal estate tax law, and the application of foreign laws
or the effect of nonresident status on U.S.&nbsp;taxation.
</FONT>

<P align="left">
<B><FONT size="2">Holder for U.S. Federal Income Tax
Purposes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of the Code, a holder of ADRs will
be treated as the beneficial owner of the underlying ordinary
shares represented by the ADRs.
</FONT>

<P align="center"><FONT size="2">58
</FONT>

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<P align="left">
<B><FONT size="2">Taxation of Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amount of any distribution paid to a
U.S.&nbsp;Holder, including any Israeli taxes withheld from the
amount of such distribution, will be subject to
U.S.&nbsp;federal income taxation as ordinary income to the
extent paid out of current or accumulated earnings and profits,
determined for U.S.&nbsp;federal income tax purposes. The amount
of any distribution of property other than cash will be the
property&#146;s fair market value on the date of the
distribution. To the extent that an amount received by a
U.S.&nbsp;Holder exceeds that U.S.&nbsp;Holder&#146;s allocable
share of current and accumulated earnings and profits, such
excess will be applied first to reduce that
U.S.&nbsp;Holder&#146;s tax basis in the shares and then, to the
extent the distribution exceeds that U.S.&nbsp;Holder&#146;s tax
basis, will be treated as capital gain. Any dividend received
will not be eligible for the dividends-received deduction
generally allowed to U.S.&nbsp;corporations in respect of
dividends received from U.S.&nbsp;corporations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">U.S Holders may claim the amount of any Israeli
income taxes withheld as either a deduction from gross income or
as a dollar-for-dollar credit against their U.S.&nbsp;federal
income tax liability. Individuals who do not claim itemized
deductions but instead utilize the standard deduction may not
claim the amount of the Israeli income taxes withheld as a
deduction from their gross income, but such amounts may be taken
as a credit against the individual&#146;s U.S.&nbsp;federal
income tax liability. The Code sets forth complex limitations on
the amount of the credit, which varies in application from
taxpayer to taxpayer. These limitations include rules which
limit foreign tax credits allowable for specific classes of
income to the amount of U.S.&nbsp;federal income taxes otherwise
payable on each class of income. The total amount of allowable
foreign tax credits in any year may not exceed the pre-credit
U.S.&nbsp;tax liability for the year attributable to foreign
source taxable income. However, pursuant to a <I>de minimis
</I>exception certain individuals may claim a credit of up to
$300 ($600&nbsp;for joint filers) without being subject to these
limitations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">U.S. tax law provides that foreign tax credits
are not allowed for withholding taxes imposed in respect of
short-term or hedged positions in securities or in respect of
arrangements in which a U.S.&nbsp;Holder&#146;s expected
economic benefit, after non-U.S.&nbsp;taxes, is insubstantial.
U.S.&nbsp;Holders should consult their tax advisors concerning
the application of these rules in light of their particular
circumstances.
</FONT>

<P align="left">
<B><FONT size="2">Taxation of the Disposition of ADRs</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the sale or exchange of ADRs, a
U.S.&nbsp;Holder will generally recognize gain or loss for
U.S.&nbsp;federal income tax purposes in an amount equal to the
difference between the amount realized and the
U.S.&nbsp;Holder&#146;s tax basis in the ADRs. Such gain or loss
will be capital gain or loss if the ADRs were capital assets in
the hands of the U.S.&nbsp;Holder. There are different tax rates
that may apply depending upon the date of sale, the holding
period and the individual&#146;s marginal rate of tax. In
general, the capital gain of a non-corporate U.S.&nbsp;Holder is
subject to tax at ordinary rates for ADRs held for one year or
less and to a maximum tax rate of 20% for ADRs held for more
than one year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The surrender of ADRs in exchange for ordinary
shares, or vice versa, will not be a taxable event for
U.S.&nbsp;federal income tax purposes, and U.S.&nbsp;Holders
will not recognize any gain or loss upon such an exchange.
</FONT>

<P align="left">
<B><FONT size="2">U.S. Information Reporting and Backup
Withholding</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A U.S. Holder generally will be subject to
information reporting with respect to dividends paid on, or
proceeds from the sale or other disposition of, an ADR unless
the U.S.&nbsp;Holder is a corporation or comes within another
category of exempt recipients. If it is not exempt, a
U.S.&nbsp;Holder may also be subject to backup withholding at a
rate of 31% with respect to dividends or proceeds from the sale
or disposition of an ADR unless a taxpayer identification number
is provided and the other applicable requirements of the backup
withholding rules are complied with. Any amount withheld under
these rules will be creditable against the
U.S.&nbsp;Holder&#146;s U.S.&nbsp;federal income tax liability
or refundable to the extent that it exceeds this liability,
provided that the required information is furnished to the
Internal Revenue Service.
</FONT>

<P align="center"><FONT size="2">59
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">U.S. Holders should review the summary below
under &#147;Israeli Taxation&#148; for a discussion of the
Israeli taxes which may be applicable to them.
</FONT>

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<DIV align="left"><A NAME="015"></A></DIV>

<P align="center">
<B><FONT size="2">ISRAELI TAXATION</FONT></B>

<P align="left">
<B><FONT size="2">Corporate Tax Rate</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The regular corporate tax rate in Israel is 36%
for undistributed earnings. However, Teva&#146;s effective
consolidated tax rates (before deduction of one-time charges)
for the years ended December&nbsp;31, 2000, 2001 and 2002 were
24.4%, 19.6% and 17.0%, respectively, since part of Teva&#146;s
income is derived from Approved Enterprises (as discussed below)
and operations outside of Israel.
</FONT>

<P align="left">
<B><FONT size="2">Law for the Encouragement of Industry (Taxes),
1969 (the &#147;Industry Encouragement Law&#148;)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva and certain of its Israeli subsidiaries
currently qualify as Industrial Companies pursuant to the
Industry Encouragement Law. As such, Teva and these subsidiaries
qualify for certain tax benefits, including a deduction of 12.5%
per annum of the purchase price of a good-faith acquisition of a
patent or of certain other intangible property rights and the
right to file consolidated tax returns. Currently, Teva files
consolidated tax returns together with certain Israeli
subsidiaries. The tax laws and regulations dealing with the
adjustment of taxable income for local inflation provide that
industrial enterprises such as those of Teva and its
subsidiaries which qualify as Industrial Companies can claim
special rates of depreciation such as up to 40% on a straight
line basis for industrial equipment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eligibility for the benefits under the Industry
Encouragement Law is not subject to receipt of prior approval
from any government authority. Teva cannot assure you that Teva
or any of its Israeli subsidiaries that presently qualify as
&#147;Industrial Companies&#148; will continue to qualify as
such in the future, or that the benefits will be granted in the
future.
</FONT>

<P align="left">
<B><FONT size="2">Law for the Encouragement of Capital
Investments, 1959 (the &#147;Investment Law&#148;)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Industrial projects of Teva and certain of its
Israeli subsidiaries have been granted the status of an
&#147;Approved Enterprise&#148; under the Investment Law. This
law provides that capital investments in production facilities
may, upon application to the Israel Investment Center, be
designated as an Approved Enterprise. Each certificate of
approval for an Approved Enterprise relates to a specific
investment program delineated both by its financial scope,
including its capital sources, and by its physical
characteristics, i.e., the equipment to be purchased and
utilized pursuant to the program. The tax benefits derived from
any such certificate of approval relate only to taxable profits
attributable to the specific program, based upon criteria set in
the certificate of approval. In addition, certain financial
benefits are available (as discussed below). In the event that
Teva and its subsidiaries which have been granted Approved
Enterprise status are operating under more than one approval or
that their capital investments are only partly approved (a
&#147;Mixed Enterprise&#148;), their effective corporate tax
rate will be the result of a weighted combination of the various
applicable rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income derived from an Approved Enterprise is
subject to a tax rate of 25%, rather than the usual rate of 36%,
for a period of seven years, commencing with the year in which
the Approved Enterprise first generates taxable income. This
period cannot extend beyond 12&nbsp;years from the year of
commencement of operations or 14&nbsp;years from the year in
which approval was granted, whichever is earlier.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva is a &#147;Foreign Investors Company&#148;
(&#147;FIC&#148;), as defined by the Investment Law, and is
entitled to further reductions in the tax rate normally
applicable to Approved Enterprises. Because its current level of
foreign ownership is more than 49%, its Approved Enterprise
income is taxable at a 20% rate. The period of such benefit is
ten years, commencing with the year in which the Approved
Enterprise first generates taxable income. This ten-year period
cannot extend beyond 12&nbsp;years from the year of commencement
of operations or 14&nbsp;years from the year in which approval
was granted, whichever is earlier. Unless extended, FIC benefits
are granted to enterprises seeking approval not later than
December
</FONT>

<P align="center"><FONT size="2">60
</FONT>

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<DIV align="left">
<FONT size="2">31, 2002. We cannot assure you that Teva will
continue to qualify as an FIC in the future, or that the
benefits will be granted in the future.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of the projects of Teva and certain of its
subsidiaries were granted Approved Enterprise status for which
the companies elected to apply for alternative tax
benefits&nbsp;&#151; waiver of grants in return for tax
exemptions on undistributed income. Upon distribution of such
exempt income, the distributing company will be subject to
corporate tax at the rate ordinarily applicable to the Approved
Enterprise&#146;s income. Such tax exemption on undistributed
income is for a period limited to two to ten years, depending
upon the location of the enterprises. During the remainder of
the benefits period (until the expiration of ten years), a
corporate tax rate of 20% as above will apply.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends paid by companies owning Approved
Enterprises, the source of which is income derived from an
Approved Enterprise during the benefits period, are generally
taxed at a rate of 15% (which is withheld and paid by the
company paying the dividend) if such dividends are paid during
the benefits period or at any time up to 12&nbsp;years
thereafter. The 12-year limitation does not apply to a FIC.
</FONT>

<P align="left">
<B><FONT size="2">Taxation of Non-Israeli Subsidiaries</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Non-Israeli subsidiaries are generally taxed
based upon tax laws applicable in their countries of residence.
</FONT>

<P align="left">
<B><FONT size="2">Income Taxes on Dividends Distributed by Teva
to Non-Israeli Residents</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends distributed by an Israeli company to
non-Israeli residents are subject to a 25% tax to be withheld at
source (15% in the case of dividends distributed from the
taxable income attributable to an Approved Enterprise), unless a
different rate is provided in a treaty between Israel and the
shareholder&#146;s country of residence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the U.S.-Israel Tax Treaty, the maximum
Israeli tax and withholding tax on dividends paid to a holder of
ordinary shares who is a resident of the United States is
generally 25%, but is reduced to 12.5% if the dividends are paid
to a corporation that holds in excess of 10% of the voting
rights of Teva during Teva&#146;s taxable year preceding the
distribution of the dividend and the portion of Teva&#146;s
taxable year in which the dividend was distributed. Dividends of
an Israeli company derived from the income of an Approved
Enterprise will still be subject to a 15% dividend withholding
tax. The withheld tax is the final tax in Israel on dividends
paid to non-residents who do not conduct a business in Israel.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-resident of Israel who has interest or
dividend income derived from or accrued in Israel, from which
tax was withheld at the source, is generally exempt from the
duty to file tax returns in Israel in respect of such income,
provided such income was not derived from a business conducted
in Israel by the taxpayer.
</FONT>

<P align="left">
<B><FONT size="2">Capital Gains and Income Taxes Applicable to
Non-Israeli Shareholders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Israeli law generally imposes a capital gains tax
on the sale of securities and any other capital asset. The basic
capital gains tax rate applicable to corporations effective
until December&nbsp;31, 2002 had been 36%, and the maximum tax
rate for individuals had been 50%. Effective January&nbsp;1,
2003, the capital gains tax rate imposed upon sale of capital
assets acquired after that date has been reduced to 25%; capital
gains accrued from assets acquired before that date are subject
to a blended tax rate based on the relative periods of time
before and after that date that the asset was held.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, if the ordinary shares are traded on
the Tel Aviv Stock Exchange (or listed on a stock exchange
recognized by the Israeli Ministry of Finance), gains on the
sale of ordinary shares held by non-Israeli tax resident
investors will generally be exempt from Israeli capital gains
tax. Notwithstanding the foregoing, dealers in securities in
Israel are taxed at regular tax rates applicable to business
income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The U.S.-Israeli Tax Treaty exempts U.S.
residents who hold an interest of less than 10% in an Israeli
company, including Teva, and who held an interest of less than
10% during the 12&nbsp;months prior to
</FONT>

<P align="center"><FONT size="2">61
</FONT>

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<DIV align="left">
<FONT size="2">a sale of their shares, from Israeli capital
gains tax in connection with such sale. Certain other tax
treaties to which Israel is a party also grant exemptions from
Israeli capital gains taxes.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Recent Tax Reform Legislation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2002, the Israeli Parliament approved a
law enacting extensive changes to Israel&#146;s tax law (the
&#147;Tax Reform Legislation&#148;) generally effective
January&nbsp;1, 2003. Among the key provisions of the Tax Reform
Legislation are (i)&nbsp;changes which may result in the
imposition of taxes on dividends received by an Israeli company
from its foreign subsidiaries; and (ii)&nbsp;the introduction of
the &#147;controlled foreign corporation&#148; concept according
to which an Israeli company may become subject to Israeli taxes
on certain income of a non-Israeli subsidiary if the
subsidiary&#146;s primary source of income is passive income
(such as interest, dividends, royalties, rental income or
capital gains). An Israeli company that is subject to Israeli
taxes on the income of its non-Israeli subsidiaries will receive
a credit for income taxes paid by the subsidiary in its country
of residence.
</FONT>

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<P align="center">
<B><FONT size="2">DOCUMENTS ON DISPLAY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva files annual and special reports and other
information with the SEC. You may inspect and copy such material
at the public reference facilities maintained by the SEC at
Room&nbsp;1024, 450&nbsp;Fifth Street, N.W., Washington, D.C.
20549, as well as at the SEC&#146;s regional offices at
500&nbsp;West Madison Street, Suite&nbsp;1400, Chicago, Illinois
60661 and the Woolworth Building, 233&nbsp;Broadway, New York,
New York 10279. You may also obtain copies of such material from
the SEC at prescribed rates by writing to the Public Reference
Section of the SEC, 450&nbsp;Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The SEC maintains an Internet website at
http://www.sec.gov that contains reports, proxy statements,
information statements and other material that are filed through
the SEC&#146;s Electronic Data Gathering, Analysis and Retrieval
(&#147;EDGAR&#148;) system. Teva began filing through the EDGAR
system beginning on October&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s ADRs are quoted on the Nasdaq
National Market. You may inspect reports and other information
concerning Teva at the offices of the National Association of
Securities Dealers, Inc., 1735&nbsp;K&nbsp;Street, N.W.,
Washington, D.C. 20006.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information about Teva is also available on its
website at http://www.tevapharm.com. Such information on its
website is not part of this annual report.
</FONT>

<P align="center"><FONT size="2">62
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->
<DIV align="left"><A NAME="017"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM 11:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">General</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva takes various measures to compensate for the
effects of both inflation and devaluation. These measures
include traditional currency hedging transactions as well as
attempts to maintain a balance between monetary assets and
liabilities in each of Teva&#146;s principal operating
currencies, the U.S.&nbsp;dollar, the NIS, the Euro, the
Canadian dollar (CAD), the British pound (GBP) and the Hungarian
Forint (HUF). These measures are mainly designed to deal with
general economic trends and exposures to Teva as a whole, and
therefore most of the costs and benefits of such measures are
not allocated to specific income statement line items, but are
concentrated to a large extent under the caption &#147;financial
expenses&nbsp;&#151; net&#148;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva can borrow funds in NIS, U.S.&nbsp;dollars
or any other major currency. Given that Teva&#146;s functional
currency is the U.S.&nbsp;dollar, Teva would logically prefer to
borrow in U.S. dollars. However, to provide a
&#147;natural&#148; hedge against the potential erosion of
shekel-based financial assets, Teva also borrows funds
denominated in shekels. During 2002 while the average interest
on the Israeli shekel borrowings was 7.5%, those costs were
compensated by the annual devaluation of 13%. Teva uses
financial instruments and derivatives in order to limit its
exposure to risks deriving from changes in exchange rates and
interest rates. The use of such instruments does not expose Teva
to additional exchange rate or interest rate risks because the
derivatives are held to hedge corresponding assets owned by
Teva. No derivative instruments are entered into for trading
purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s derivative transactions during 2002
were executed through Israeli banks and foreign banks, including
Hungarian banks. In the opinion of Teva&#146;s management, the
credit risk of these banks is de minimis.
</FONT>

<P align="left">
<B><FONT size="2">Exchange Rate Risk Management</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s functional currency and that of most
of its consolidated subsidiaries is the U.S.&nbsp;dollar, with
the exception of its European and Canadian subsidiaries, where
the functional currency is the local currency in each country.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accordingly, in Teva&#146;s subsidiaries in which
the functional currency is the U.S.&nbsp;dollar, Teva covers
itself against exposure deriving from the gap between current
assets and current liabilities in each currency other than the
U.S.&nbsp;dollar (&#147;balance sheet exposure&#148;). The
majority of the balance sheet exposure in such subsidiaries is
in European currencies and Israeli shekels. In Teva&#146;s
European subsidiaries, protection is taken against the gap
between current assets and current liabilities in currencies
other than the functional-local currency (generally against the
U.S.&nbsp;dollar and other European currencies). Teva strives to
limit its exposure through &#147;natural&#148; hedging, i.e.,
attempting to have similar levels of assets and liabilities in
any one currency. Thus, for example, borrowings for acquisitions
and borrowings for activities of acquired companies are
generally taken in the functional currency of such companies.
The rest of the exposure, which is not set off naturally, is
covered by the use of derivative instruments. To the extent
possible or desirable, this is done on a consolidated basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In certain cases, Teva protects itself against
exposure from a specific transaction&nbsp;&#151; for example,
the acquisition of a company or a large investment in
assets&nbsp;&#151; which is done in a currency other than the
functional currency. To a large extent Teva uses the
&#147;Cylinder strategy&#148; (purchasing calls on the dollar,
usually together with writing put options on the dollar at a
lower exchange rate). Teva usually limits the hedging
transactions to three-month terms.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below details the balance sheet
exposure, by currency and geography, as at December&nbsp;31,
2002 (at fair value in millions). All data in the table has been
converted for convenience into U.S. dollar equivalents.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">US</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">English</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Canadian</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">New Israeli</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Dollar</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Euro</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pound</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Dollar</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shekel</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European Union
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Canada
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hungary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>

<P align="left">
<B><FONT size="2">Explanatory notes:</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">1.&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Total exposure is the summation of the absolute
    value figures.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">2.&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The data under Euro, both in the foregoing and
    the following tables, includes exposures in the currencies of
    all the countries that joined the European Union.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Net Exposure:</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">EUR/USD</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">GBP/USD</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">CAD/USD</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">NIS/USD</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exposure after setting off positions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Natural Hedge
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Exposure
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The set-off does not include exposure against the
HUF.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below details (in millions) the hedging
acquired in derivative instruments in order to limit the
exposure to exchange rate fluctuations. The data is as at
December&nbsp;31, 2002 and is presented in U.S. dollar
equivalent terms.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Hedging</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002 Weighted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cross</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average Settlement</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Currency</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Currency</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Prices/Strike Prices</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Forward:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Euro
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">HUF</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">GBP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">HUF</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">382.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">USD
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">HUF</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">262.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Canadian Dollar
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">HUF</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152.23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New Israeli Shekel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">USD</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Canadian Dollar
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">USD</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Options:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New Israeli Shekel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">USD</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Canadian Dollar
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">USD</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Euro
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">USD</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">USD
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">HUF</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">241.38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Euro
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">HUF</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">GBP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">HUF</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">378.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>

<P align="left">
<B><FONT size="2">Explanatory notes:</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">1.&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">An option&#146;s value reflects its fair value
    disregarding the notional amount represented by such an option.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">2.&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">See explanatory note 2 in the preceding table.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">3.&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In addition to the above, Teva protects itself
    for the next 12&nbsp;months against Operational Exposure.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">64
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Interest Rate Risk Management</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The majority of Teva&#146;s debt bears interest
at a fixed rate primarily as a result of the issuance of three
series of senior convertible debentures over the last three
years&nbsp;&#151; $550&nbsp;million in 2000 with a coupon of
1.5%, $360 million in 2001 with a coupon of 0.75% and
$450&nbsp;million in 2002 with a coupon of 0.375%. In addition
to the debentures, Teva&#146;s fixed interest bearing debt also
includes the $110&nbsp;million of senior notes issued to U.S.
institutional investors in three series: $20&nbsp;million due
2005, $75&nbsp;million due 2008 and $15 million due 2018, and
Missouri Economic Development Bonds. The blended fixed interest
rate of the senior notes is approximately 6.9% per annum, and
the Missouri Economic Development Bonds bear floating or fixed
interest rates according to a particular formula.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, Teva entered into a number of swap
agreements with respect to a series of $75&nbsp;million
principal amount of senior notes due 2008. As a result of these
agreements Teva is currently paying an effective interest rate
of Libor plus 0.9% on $30&nbsp;million of these notes and a
fixed rate of 4.5% on the remaining $45&nbsp;million of these
notes, as compared to the original 6.9% fixed rate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The remaining debt consists of bank loans at
floating interest rates. In currencies other than Israeli
shekels, these borrowings are usually linked to the relevant
LIBOR plus a spread of 0.2%&#151;0.7%. Part of Teva&#146;s
Canadian subsidiary debt is at floating rate based on the
Canadian bankers acceptance rate +0.65%. In Israel, most
borrowings are NIS demand loans bearing interest rates set at
the inter-bank rate plus a spread of 0.35%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The excess of funds is invested in the United
States primarily in short-term investments. As of
December&nbsp;31, 2002, the average maturity of the portfolio
was May 2003, with average credit quality of AA+ and a minimum
credit quality of BBB+.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva&#146;s liabilities, the average interest
they bear and their repayment schedule by currencies as at
December&nbsp;31, 2002 are set forth in the table below in U.S.
dollar equivalent terms (in millions).
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2008 &#38;</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Currency</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2005</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2006</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2007</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Thereafter</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Fixed interest-Debentures:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">US Dollar
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.375%- 7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Floating Rates:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">US Dollar
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New Israeli Shekel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Euro
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">English Pound
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Canadian Dollar
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">744</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>

<P align="left">
<B><FONT size="2">Explanatory note:</FONT></B>

<P align="left">
<FONT size="2">See explanatory note 2 in the preceding table.
</FONT>

<P align="center"><FONT size="2">65
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PART II" -->
<DIV align="left"><A NAME="018"></A></DIV>

<P align="center">
<B><FONT size="2">PART II</FONT></B>

<!-- link2 "ITEM 15: CONTROLS AND PROCEDURES" -->
<DIV align="left"><A NAME="019"></A></DIV>

<P align="left">
<B><FONT size="2">ITEM 15:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONTROLS
AND PROCEDURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Disclosure controls and procedures.
</I>Teva&#146;s Chief Executive Officer and Chief Financial
Officer have evaluated the effectiveness of its disclosure
controls and procedures within the 90&nbsp;days prior to the
date of filing of this Annual Report on Form&nbsp;20-F. Based
upon such review, the Chief Executive Officer and Chief
Financial Officer have concluded that Teva has in place
appropriate controls and procedures designed to ensure that
information required to be disclosed by Teva in the reports it
files or submits under the Securities Exchange Act of 1934, as
amended, and the rules thereunder, is recorded, processed,
summarized and reported within the time periods specified in the
SEC&#146;s rules and forms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Internal controls.</I> Since the date
of the evaluation described above, there have not been any
significant changes in Teva&#146;s internal controls or in other
factors that could significantly affect those controls.
</FONT>

<P align="center"><FONT size="2">66
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PART III" -->
<DIV align="left"><A NAME="020"></A></DIV>

<P align="center">
<B><FONT size="2">PART III</FONT></B>

<!-- link2 "ITEM 18: FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="021"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;18:</FONT></B></TD>
    <TD>
    <B><FONT size="2">FINANCIAL STATEMENTS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">(a)&nbsp;Consolidated Financial
Statements:</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of Independent Auditors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Income for the Years
    Ended December&nbsp;31, 2000, 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Balance Sheets at December&nbsp;31,
    2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended December&nbsp;31, 2000,
    2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Cash Flows for the
    Years Ended December&nbsp;31, 2000, 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Consolidated Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reports of Independent Auditors with Respect to
    Subsidiaries
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">(b)&nbsp;Financial Statement
Schedule:</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of Independent Accountants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schedule&nbsp;II&nbsp;&#151; Valuation and
    Qualifying Accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">S-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">67
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "ITEM 19: EXHIBITS" -->
<DIV align="left"><A NAME="022"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp; 19:</FONT></B></TD>
    <TD>
    <B><FONT size="2">EXHIBITS</FONT></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Memorandum of Association(1)(2)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Restated Articles of Association(1)(3)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Amended and Restated Deposit Agreement, dated
    February&nbsp;12, 1997, among Teva Pharmaceutical Industries
    Limited, The Bank of New York, as depositary, and the holders
    from time to time of ADRs(4)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Form of American Depositary Receipt(4)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Indenture, dated as of October&nbsp;11, 2000, by
    and among Teva Pharmaceutical Finance, LLC, Teva Pharmaceutical
    Industries Limited and The Bank of New York, as trustee(5)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Form of Global Debentures (included in
    Exhibit&nbsp;2.3)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Indenture, dated as of August&nbsp;20, 2001, by
    and among Teva Pharmaceutical Finance, NV, Teva Pharmaceutical
    Industries Limited and The Bank of New York, as trustee(6)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Form of Global Debentures (included in
    Exhibit&nbsp;2.5)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Indenture, dated as of November&nbsp;18, 2002, by
    and among Teva Pharmaceutical Finance B.V., Teva Pharmaceutical
    Industries Limited and The Bank of New York, as trustee(3)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Form of Global Debentures (included in
    Exhibit&nbsp;2.7)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Other long-term debt instruments: The registrant
    hereby undertakes to provide the Securities and Exchange
    Commission with copies upon request.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Purchase Agreement, dated February&nbsp;1, 2000,
    between Dan Family Holdings Ltd. and Almad Investments Limited
    and 1377077 Ontario Inc. and Teva Pharmaceutical Industries Ltd.
    and related exhibits, relating to the acquisition of Novopharm
    Limited(7)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Amending and Indemnity Agreement, dated as of
    April&nbsp;4, 2000, between Dan Family Holdings Ltd., Almad
    Investments Limited, 1377077 Ontario Inc., Teva Pharmaceutical
    Industries Ltd., Novopharm Limited and Leslie L. Dan and related
    exhibits, relating to the acquisition of Novopharm Limited(8)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Subsidiaries of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Consent of Kesselman &#38; Kesselman
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Consent of KPMG Hungaria Kft
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Consent of Ehrenkrantz Sterling &#38; Co. LLC
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.4(i)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to
    Section&nbsp;906 of the Sarbanes-Oxley Act of 2002
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.4(ii)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to
    Section&nbsp;906 of the Sarbanes-Oxley Act of 2002
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">English translation or summary from Hebrew
    original, which is the official version.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to Exhibit&nbsp;3.1 to
    Teva&#146;s Registration Statement on Form&nbsp;F-1 (Reg.
    No.&nbsp;33-15736).
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to Teva&#146;s
    Registration Statement on Form F-3 (Reg. No.&nbsp;333-102259).
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to Teva&#146;s
    Registration Statement on Form F-6 (Reg. No.&nbsp;333-11474).
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to Teva&#146;s
    Registration Statement on Form F-3 (Reg. No.&nbsp;333-13126).
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to Teva&#146;s
    Registration Statement on Form F-3 (Reg. No.&nbsp;333-140106).
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to Exhibit&nbsp;10.5(i)
    to Teva&#146;s Annual Report on Form&nbsp;20-F for the year
    ended December&nbsp;31, 1999.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to
    Exhibit&nbsp;10.5(ii) to Teva&#146;s Annual Report on
    Form&nbsp;20-F for the year ended December&nbsp;31, 1999.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">68
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="023"></A></DIV>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The registrant hereby certifies that it meets all
of the requirements for filing on Form&nbsp;20-F and that it has
duly caused and authorized the undersigned to sign this annual
report on its behalf.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES LIMITED
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ DAN S. SUESSKIND
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Name: Dan S. Suesskind
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Title: Chief Financial Officer
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Date: March&nbsp;4, 2003
</FONT>

<P align="center"><FONT size="2">69
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "CERTIFICATIONS" -->
<DIV align="left"><A NAME="024"></A></DIV>

<P align="center">
<B><FONT size="2">CERTIFICATIONS</FONT></B>

<P align="left">
<FONT size="2">I, Israel Makov, certify that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">1.</FONT></TD>
    <TD align="left">
    <FONT size="2">I have reviewed this annual report on
    Form&nbsp;20-F of Teva Pharmaceutical Industries Limited;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">2.</FONT></TD>
    <TD align="left">
    <FONT size="2">Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">3.</FONT></TD>
    <TD align="left">
    <FONT size="2">Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">4.</FONT></TD>
    <TD align="left">
    <FONT size="2">The registrant&#146;s other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules&nbsp;13a-14 and 15d-14) for the registrant and we have:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;designed such
    disclosure controls and procedures to ensure that material
    information relating to the registrant, including its
    consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this
    annual report is being prepared;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;evaluated the
    effectiveness of the registrant&#146;s disclosure controls and
    procedures as of a date within 90&nbsp;days prior to the filing
    date of this annual report (the &#147;Evaluation Date&#148;); and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;presented in this
    annual report our conclusions about the effectiveness of the
    disclosure controls and procedures based on our evaluation as of
    the Evaluation Date;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">5.</FONT></TD>
    <TD align="left">
    <FONT size="2">The registrant&#146;s other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrant&#146;s auditors and the audit committee of
    registrant&#146;s board of directors (or persons performing the
    equivalent function):
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all significant
    deficiencies in the design or operation of internal controls
    which could adversely affect the registrant&#146;s ability to
    record, process, summarize and report financial data and have
    identified for the registrant&#146;s auditors any material
    weaknesses in internal controls; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;any fraud,
    whether or not material, that involves management or other
    employees who have a significant role in the registrant&#146;s
    internal controls; and
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">6.</FONT></TD>
    <TD align="left">
    <FONT size="2">The registrant&#146;s other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">/s/ ISRAEL MAKOV
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Israel Makov
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I><FONT size="2">Chief Executive Officer</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Date: March&nbsp;4, 2003
</FONT>

<P align="center"><FONT size="2">70
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">CERTIFICATIONS</FONT></B>

<P align="left">
<FONT size="2">I, Dan&nbsp;S. Suesskind, certify that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">1.</FONT></TD>
    <TD align="left">
    <FONT size="2">I have reviewed this annual report on
    Form&nbsp;20-F of Teva Pharmaceutical Industries Limited;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">2.</FONT></TD>
    <TD align="left">
    <FONT size="2">Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">3.</FONT></TD>
    <TD align="left">
    <FONT size="2">Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">4.</FONT></TD>
    <TD align="left">
    <FONT size="2">The registrant&#146;s other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules&nbsp;13a-14 and 15d-14) for the registrant and we have:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;designed such
    disclosure controls and procedures to ensure that material
    information relating to the registrant, including its
    consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this
    annual report is being prepared;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;evaluated the
    effectiveness of the registrant&#146;s disclosure controls and
    procedures as of a date within 90&nbsp;days prior to the filing
    date of this annual report (the &#147;Evaluation Date&#148;); and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;presented in this
    annual report our conclusions about the effectiveness of the
    disclosure controls and procedures based on our evaluation as of
    the Evaluation Date;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">5.</FONT></TD>
    <TD align="left">
    <FONT size="2">The registrant&#146;s other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrant&#146;s auditors and the audit committee of
    registrant&#146;s board of directors (or persons performing the
    equivalent function):
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all significant
    deficiencies in the design or operation of internal controls
    which could adversely affect the registrant&#146;s ability to
    record, process, summarize and report financial data and have
    identified for the registrant&#146;s auditors any material
    weaknesses in internal controls; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;any fraud,
    whether or not material, that involves management or other
    employees who have a significant role in the registrant&#146;s
    internal controls; and
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">6.</FONT></TD>
    <TD align="left">
    <FONT size="2">The registrant&#146;s other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">/s/ DAN&nbsp;S. SUESSKIND
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Dan S. Suesskind
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I><FONT size="2">Chief Financial Officer</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Date: March&nbsp;4, 2003
</FONT>

<P align="center"><FONT size="2">71
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED FINANCIAL STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">For the Year Ended December 31, 2002</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">REPORT OF INDEPENDENT AUDITORS</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">CONSOLIDATED FINANCIAL STATEMENTS:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statements of income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance sheets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statements of changes in shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statements of cash flows
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">F-6&nbsp;&#150; F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to financial statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">F-8&nbsp;&#150; F-43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">REPORTS OF INDEPENDENT AUDITORS WITH RESPECT
    TO SUBSIDIARIES</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">F-44&nbsp;&#150; F-45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The amounts are stated in U.S. dollars ($) in
millions.
</FONT>

<P align="center"><FONT size="2">F-1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT AUDITORS</FONT></B>

<P align="left">
<FONT size="2">To the shareholders of
</FONT>

<DIV align="left">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the consolidated balance sheets
of Teva Pharmaceutical Industries Limited (the
&#147;Company&#148;) and its subsidiaries as of
December&nbsp;31, 2002 and 2001 and the consolidated statements
of income, changes in shareholders&#146; equity and cash flows
for each of the three years in the period ended December 31,
2002. These financial statements are the responsibility of the
Company&#146;s Board of Directors and management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial
statements of certain subsidiaries whose sales included in
consolidation constitute approximately 16% of total consolidated
sales for the year ended December&nbsp;31, 2000. The financial
statements of those subsidiaries were audited by other
independent auditors, whose reports have been furnished to us,
and our opinion, insofar as it relates to amounts included for
those subsidiaries, is based on the reports of the other
independent auditors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits in accordance with
auditing standards generally accepted in Israel and in the
United States, including those prescribed by the Israeli
Auditors (Mode of Performance) Regulations, 1973. 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 the
Company&#146;s Board of Directors and management, as well as
evaluating the overall financial statement presentation. We
believe that our audits and the reports of the other independent
auditors provide a reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, based upon our audits and the
reports of the other independent auditors, the consolidated
financial statements referred to above, present fairly, in all
material respects, the consolidated financial position of the
Company and its subsidiaries as of December&nbsp;31, 2002 and
2001, and the consolidated results of their operations, changes
in shareholders&#146; equity and their cash flows for each of
the three years in the period ended December&nbsp;31, 2002, in
conformity with accounting principles generally accepted in the
United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As discussed in note 1g, effective
January&nbsp;1, 2002, the Company changed its method of
accounting for goodwill and other indefinite life intangible
assets, to conform with FASB Statement of Financial Accounting
Standards No.&nbsp;142 &#147;Goodwill and Other Intangible
Assets&#148;.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">/s/ KESSELMAN &#38; KESSELMAN
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">Kesselman &#38; Kesselman
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">Certified Public Accountants (Isr.)
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Tel-Aviv, Israel
</FONT>

<DIV align="left">
<FONT size="2">February&nbsp;17, 2003
</FONT>
</DIV>

<P align="center">
<FONT size="2">Kesselman &#38; Kesselman is a member of
PricewaterhouseCoopers International Limited,
</FONT>

<DIV align="center">
<FONT size="2">a company limited by guarantee registered in
England and Wales.
</FONT>
</DIV>

<P align="center"><FONT size="2">F-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF INCOME</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. dollars in millions, except</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">earnings per ADR)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net sales</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,518.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,749.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cost of sales</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,423.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,230.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,058.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Gross profit</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,095.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">847.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">691.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Research and development expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less&nbsp;&#151; participations and grants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Selling, general and administrative
    expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">406.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">358.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Restructuring expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Acquisition of research and development in
    process</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating income</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">524.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">366.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financial
    expenses</FONT></B><FONT size="2">&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income before income taxes</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income taxes</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">414.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">276.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Share in profits (losses)&nbsp;of associated
    companies</FONT></B><FONT size="2">&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Minority interests in losses (profits)&nbsp;of
    subsidiaries</FONT></B><FONT size="2">&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="14"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Earnings per ADR:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Weighted average number of ADRs (in
    millions):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
the financial statements.
</FONT>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="12" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Current assets:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">809.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">768.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">855.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">651.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">218.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">781.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">570.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,901.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,177.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Investments and other assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">313.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Property, plant and equipment,
    </FONT></B><FONT size="2">net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">675.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">554.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Intangible assets and debt issuance costs,
    </FONT></B><FONT size="2">net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">176.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Goodwill</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">466.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,626.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,460.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="12" align="center" valign="top">
    <B><FONT size="2">LIABILITIES AND SHAREHOLDERS&#146;
    EQUITY</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Current liabilities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">176.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accruals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">785.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">531.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible senior debentures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">562.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,524.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">738.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Long-term liabilities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employee related obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible senior debentures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">810.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">912.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,268.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,339.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Commitments and contingencies,
    </FONT></B><FONT size="2">see note 8
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,792.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Minority interests</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Shareholders&#146; equity:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ordinary shares of NIS 0.10 par value;
    December&nbsp;31, 2002 and 2001: authorized&nbsp;&#151;
    999.6&nbsp;million and 499.6&nbsp;million, respectively; issued
    and outstanding&nbsp;&#151; 263.2&nbsp;million and
    256.2&nbsp;million, respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">481.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">480.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,345.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(58.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of Company shares held by
    subsidiaries&nbsp;&#151; December&nbsp;31, 2002 and
    2001&nbsp;&#151; 4.6&nbsp;million and 4.5&nbsp;million ordinary
    shares, respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,829.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,380.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,626.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,460.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">/S/ E. HURVITZ
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">/S/ I. MAKOV
    </FONT></TD>
</TR>

<TR>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">E. Hurvitz<BR>
    Chairman of the Board</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">I. Makov<BR>
    President and Chief Executive Officer</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
the financial statements.
</FONT>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS&#146; EQUITY</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="26%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ordinary shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">shares (in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Par</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">shares held by</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">millions)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">income (loss)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">subsidiaries</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="31"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="31" align="center" nowrap><B><FONT size="1">(U.S. dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Balance at January&nbsp;1, 2000</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">250.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">163.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">608.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(29.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(25.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">747.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Changes during 2000:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">148.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">148.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Differences from translation of non-dollar
    currency financial statements of subsidiaries and associated
    companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(22.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(22.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Unrealized holding losses on available-for-sale
    securities&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">125.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Deferred compensation related to employee stock
    option plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Amortization of deferred compensation related to
    employee stock option plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Exercise of options by employees
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">*</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(29.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(29.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Exercise of warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">*</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Shares issued in connection with the acquisition
    of Novopharm (note&nbsp;2a)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">*</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">73.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">73.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Special shares that are exchangeable into
    12.8&nbsp;million ordinary shares issued in connection with the
    acquisition of Novopharm (note&nbsp;2a)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">226.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">226.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Cost of acquisition of Company shares, net of
    proceeds from sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Balance at December&nbsp;31, 2000</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">255.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">476.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">728.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(52.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(31.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,151.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Changes during 2001:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">278.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">278.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Differences from translation of non-dollar
    currency financial statements of subsidiaries and associated
    companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(6.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(6.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Unrealized holding gains on available-for-sale
    securities&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">272.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Deferred compensation related to employee stock
    option plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Amortization of deferred compensation related to
    employee stock option plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Exercise of options by employees
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">*</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(36.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(36.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Cost of acquisition of Company shares, net of
    proceeds from sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(11.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(11.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Balance at December&nbsp;31, 2001</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">256.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">480.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">970.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(58.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(42.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,380.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Changes during 2002:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">410.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">410.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Differences from translation of non-dollar
    currency financial statements of subsidiaries and associated
    companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">85.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">85.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Unrealized holding losses on available-for-sale
    securities&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">486.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Amortization of deferred compensation related to
    employee stock option plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Exercise of options by employees
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">*</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Ordinary shares issued in exchange for special
    shares (note&nbsp;2a)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">*</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">*</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Distribution of stock dividend
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Cost of acquisition of Company shares, net of
    proceeds from sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(6.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(8.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Balance at December&nbsp;31, 2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">263.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">33.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">481.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,345.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(48.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,829.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents an amount of less than $
    0.1&nbsp;million.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
the financial statements.
</FONT>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from operating
    activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income and expenses not involving cash
    flows*<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in certain assets and
    liabilities*<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(141.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(137.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(114.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash provided by operating
    activities*<SUP>(2)</SUP></FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">353.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">273.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows used in investing
    activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(160.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(114.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(89.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment grants relating to property, plant and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of subsidiaries*<SUP>(3)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(156.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of property, plant and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of long term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of long-term investments and other
    assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(202.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(45.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net decrease (increase)&nbsp;of short-term
    investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(148.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash used in investing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(664.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(190.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(84.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from financing
    activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from exercise of options by employees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of acquisition of Company shares, net of
    proceeds from sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from exercise of warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of convertible senior
    debentures, net of issuance costs (2002&nbsp;&#151;
    $10.8&nbsp;million; 2001&nbsp;&#151; $7.7&nbsp;million;
    2000&nbsp;&#151; $12.6&nbsp;million)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">439.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">352.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">537.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term loans and other long-term liabilities
    received
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discharge of long-term loans and other long-term
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(64.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(309.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net decrease in short-term credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(64.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(46.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash provided by financing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">337.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">265.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Translation differences on cash balances of
    certain subsidiaries</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net increase in cash and cash
    equivalents</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">348.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">343.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance of cash and cash equivalents at
    beginning of year</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">768.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance of cash and cash equivalents at end of
    year</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">809.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">768.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>

<P align="left">
<FONT size="2">*&nbsp;See details on page&nbsp;F-7.
</FONT>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
the financial statements.
</FONT>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">DETAILS TO THE CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">(1)Adjustments to reconcile net income to net
    cash provided by operating activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income and expenses not involving cash flows:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of research and development in process
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in employee related obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation related to
    employee stock option plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital gains
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Share in losses (profits)&nbsp;of associated
    companies&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interests
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other items&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in certain assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(101.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(147.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(115.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(149.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(73.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(56.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in accounts payable and accruals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(141.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(137.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(114.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">(2)Supplemental disclosure of cash flow
    information:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">(3)Acquisition of subsidiaries (in 2002 and
    2000):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets and liabilities of the subsidiaries upon
    acquisition:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Working capital (excluding cash and cash
    equivalents)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(100.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-lived assets other than goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(36.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(112.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minority interests in subsidiary at date of
    acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development in process
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill arising on acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of investment in shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">234.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of shareholders loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of special shares exchangeable into
    ordinary shares of the Company (note&nbsp;2a)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(226.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
the financial statements.
</FONT>

<P align="center"><FONT size="2">F-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<P align="left">
<B><FONT size="2">Note 1&nbsp;&#151; Significant Accounting
Policies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General:</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Operations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva Pharmaceutical Industries Limited (the
&#147;Company&#148;) is an Israeli corporation which, together
with its subsidiaries and associated companies (&#147;Teva&#148;
or the &#147;Group&#148;), is engaged in development,
production, marketing and distribution of products in two
reportable operating segments, Pharmaceuticals and Active
Pharmaceutical Ingredients.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Functional currency</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The currency of the primary economic environment
in which the operations of the Company and its subsidiaries in
Israel and in the United States are conducted is the U.S. dollar
(&#147;dollar&#148; or &#147;$&#148;), this in view of the
overall trend of increasing dollar sales of the Company.
Operating expenses (including purchase of materials) incurred in
non-Israeli currencies, mainly the dollar, constitute over 50%
of the total operating expenses of each of those companies. Most
purchases of materials are also made in non-Israeli currencies
(mainly the dollar). Thus, the functional currency of these
companies is the dollar.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The functional currency of the remaining
subsidiaries and associated companies, mainly European and
Canadian companies, is their local currency. The financial
statements of those companies are included in the consolidation
based on translation into dollars in accordance with Statement
of Financial Accounting Standards (&#147;FAS&#148;) 52 of the
Financial Accounting Standards Board of the United States
(&#147;FASB&#148;): assets and liabilities are translated at
year end exchange rates, while operating results items are
translated at average exchange rates during the year.
Differences resulting from translation are presented under
shareholders&#146; equity, in the item accumulated other
comprehensive income (loss).
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Accounting principles</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements are
prepared in accordance with accounting principles generally
accepted in the United States.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Use of estimates in the preparation of
    financial statements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 dates of
the financial statements and the reported amounts of revenues
and expenses during the reporting years. The most significant
estimates and assumptions relate to sales reserves and
allowances, income taxes, inventories, contingencies and
intangible assets impairment. Actual results could differ from
those estimates.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">b.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Principles of consolidation:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements include the
accounts of the Company and all of its subsidiaries. In these
financial statements, &#147;subsidiaries&#148; are companies
controlled to the extent of over 50%, the financial statements
of which are consolidated with those of the Company. Significant
intercompany transactions and balances were eliminated in
consolidation; profits from intercompany sales, not yet realized
outside the Group, have also been eliminated.
</FONT>

<P align="center"><FONT size="2">F-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 1&nbsp;&#151; Significant Accounting
Policies (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">c.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Inventories:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These are valued at the lower of cost or market.
Cost is determined as follows:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Raw and packaging materials and purchased
products&nbsp;&#151; mainly on the &#147;first-in,
first-out&#148; basis. Finished products and products in
process: raw material and packaging component&nbsp;&#151; mainly
on the &#147;first-in, first-out&#148; basis; labor and
overhead&nbsp;&#151; on the average basis over the production
period.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">d.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Investee companies:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These investments are included among investments
and other assets. Companies controlled to the extent of 20% or
more, which are not subsidiaries (&#147;associated
companies&#148;), are accounted for by the equity method. Other
non-marketable investments are carried at cost.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">e.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Marketable securities:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Held-to-maturity securities consist of debt
securities, which are carried at amortized cost. At
December&nbsp;31, 2002 and 2001, the carrying value of these
securities&nbsp;&#151; which approximated their fair
value&nbsp;&#151; amounting to $709.8&nbsp;million and
$20.9&nbsp;million, respectively, was included among cash and
cash equivalents&nbsp;&#151; $371.5&nbsp;million
(2001&nbsp;&#151; $20.9&nbsp;million); short-term
investments&nbsp;&#151; $223.9&nbsp;million; and investments and
other assets&nbsp;&#151; $114.4&nbsp;million. These debt
securities mature as follows: 2003&nbsp;&#151;
$595.4&nbsp;million; and 2004 to 2006&nbsp;&#151;
$114.4&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other marketable securities consist of equity
investments classified as available-for-sale securities and
presented in investments and other assets. Marketable securities
are carried at market value with unrealized gains and losses,
net of taxes, reported as a separate component of accumulated
other comprehensive income (loss). The fair market value, cost
and gross unrealized holding losses of such securities at
December&nbsp;31, 2002 were $22.5&nbsp;million,
$31.5&nbsp;million and $9.0&nbsp;million, respectively;
December&nbsp;31, 2001&nbsp;&#151; $15.2&nbsp;million,
$16.0&nbsp;million and $0.8&nbsp;million, respectively. In 2002,
it was determined that the impairment in value of one the
investments was other then temporary. Consequently, the
accumulated unrealized loss in the amount of $3.4&nbsp;million
relating to such investment, was charged to financial expenses.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">f.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Property, plant and equipment:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant and equipment are carried at
cost, after deduction of the related investment grants
($11.5&nbsp;million at December&nbsp;31, 2002 and 2001).
Equipment leased under capital leases is classified as the
Group&#146;s assets and included at the present value of lease
payments as determined by the lease agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expenses in respect of loans and credit
applied to finance the construction or acquisition of property,
plant and equipment, incurred until the assets are ready for
their intended use, are charged to cost of such assets. Interest
capitalized for each of the years ended December&nbsp;31, 2002,
2001 and 2000 was less than $1&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Depreciation is computed using the straight-line
method over the estimated useful life of the assets:
buildings&nbsp;&#151; mainly 25&nbsp;years; machinery and
equipment&nbsp;&#151; 8-12&nbsp;years; motor vehicles, computer
equipment, furniture and other assets&nbsp;&#151; mainly
7&nbsp;years. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of the
related asset.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">g.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill,
intangible assets and debt issuance costs:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Goodwill reflects the excess of the purchase
price of subsidiaries acquired over the fair value of net assets
acquired. In conjunction with the adoption of FAS 141,
&#147;Business Combinations&#148;, the Company reclassified an
intangible asset relating to assembled work force with a
carrying value of $3.8&nbsp;million net of
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 1&nbsp;&#151; Significant Accounting
Policies (continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">income taxes to goodwill. As from January&nbsp;1,
2002, pursuant to FAS 142, &#147;Goodwill and Other Intangible
Assets&#148;, goodwill is no longer amortized but rather tested
for impairment at least annually. Prior to the adoption of FAS
142, goodwill was amortized in equal annual installments, mainly
over a period of 30&nbsp;years. As of January&nbsp;1, 2002, the
Company has completed the transitional impairment review of
Goodwill, as required by FAS 142: the various reporting units,
for which separately identifiable cash flow information is
available, were identified and the fair values of such reporting
units were determined using expected future discounted cash
flows. Consequently, the Company has determined that there is no
indication of impairment with respect to Goodwill as of
January&nbsp;1, 2002. The Company has selected
December&nbsp;31st as the date on which it will perform its
annual goodwill impairment test. As of December&nbsp;31, 2002,
no impairment was required.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Intangible assets consist mainly of marketing and
other rights relating to products in respect of which an
approval for marketing was received from the US Food and Drug
Administration (&#147;FDA&#148;) or the equivalent agencies in
other countries. In 2002, in accordance with FAS&nbsp;142, a
review was performed of the remaining estimated useful lives for
all recorded intangible assets. As a result of this review, an
intangible asset with a carrying value of $29.6&nbsp;million,
relating to tradename, was determined to have an indefinite
life. Accordingly, as from January&nbsp;1, 2002, this intangible
asset is no longer amortized, but rather tested for impairment
at least annually. Other intangible assets are amortized using
the straight-line method over their estimated period of useful
life, as follows: marketing and product rights&nbsp;&#151;
mainly 12&nbsp;years; other intangible assets&nbsp;&#151; mainly
5-14&nbsp;years. The Company has selected December&nbsp;31st as
the date on which it will perform its annual impairment test for
the indefinite life intangible asset. As of December&nbsp;31,
2002, no impairment was required.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Debt issuance costs in respect of issuance of
debentures are deferred and amortized as a component of interest
expense over the period from issuance of the debentures through
first redemption date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">h.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment in
value of long-lived assets:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;1, 2002, the Company adopted FAS
144, &#147;Accounting for the Impairment or Disposal of
Long-Lived Assets&#148;. FAS 144 requires that long-lived
assets, to be held and used by an entity, be reviewed for
impairment and, if necessary, written down to the estimated fair
values, whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable
through undiscounted future cash flows. The adoption of FAS 144
did not have a material effect on the financial position and
results of operations of the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">i.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income taxes:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred taxes are determined utilizing the asset
and liability method based on the estimated future tax effects
of differences between the financial accounting and tax bases of
assets and liabilities under the applicable tax laws. Deferred
income tax provisions and benefits are based on the changes in
the deferred tax asset or tax liability from period to period.
Valuation allowances are provided if, based upon the weight of
available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Taxes which would apply in the event of disposal
of investments in subsidiaries have not been taken into account
in computing deferred taxes, as it is the Company&#146;s
intention to hold these investments, not to realize them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Teva intends to permanently reinvest the amounts
of tax-exempt income and does not intend to cause dividend
distribution from such income (see note 10a). Therefore, no
deferred taxes have been provided in respect of such tax-exempt
income.
</FONT>

<P align="center"><FONT size="2">F-10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 1&nbsp;&#151; Significant Accounting
Policies (continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Group might incur additional taxes if
dividends are distributed out of the income of non-Israeli
companies in the Group. Such additional tax liability has not
been provided for in these financial statements as the Company
does not expect these companies to distribute dividends in the
foreseeable future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">j.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Company shares
held by subsidiaries:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Company shares held by subsidiaries are presented
as a reduction of shareholders&#146; equity, at their cost to
the subsidiaries, under cost of Company shares held by
subsidiaries. Gains and losses on sale of these shares, net of
related income taxes, are carried to additional paid-in capital.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">k.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
recognition:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenue is recognized when title and risk of loss
for the products is transferred to the customer. Provisions for
estimated returns, customer volume rebates, chargebacks,
discounts and shelf-stock adjustments are established
concurrently with the recognition of revenue, and are deducted
from net sales.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">l.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and
development expenses:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Research and development expenses are charged to
income as incurred. Participations and grants in respect of
research and development expenses are recognized as a reduction
of research and development expenses as the related costs are
incurred, or as the related milestone is met.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">m.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shipping and
handling costs:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shipping and handling costs, which amounted to
$35.9&nbsp;million, $23.4&nbsp;million and $19.3&nbsp;million
for the years ended December&nbsp;31, 2002, 2001 and 2000,
respectively, are included in Selling, general and
administrative expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">n.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising
expenses:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Advertising expenses are charged to income as
incurred. Advertising expenses for the years ended
December&nbsp;31, 2002, 2001 and 2000 were $28.7&nbsp;million,
$21.4&nbsp;million and $10.1&nbsp;million, respectively.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">o.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Concentration of credit risks&nbsp;&#151;
    allowance for doubtful accounts:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of the Group&#146;s cash and cash
equivalents and short-term investments as of December&nbsp;31,
2002 and 2001 were deposited with Israeli, U.S. and European
banks. The Company is of the opinion that the credit risk in
respect of these balances is remote.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of the Group&#146;s sales are made in North
America, Europe and Israel, to a large number of customers. The
sales to each of certain two customers constitute approximately
9% of total consolidated sales in the year ended
December&nbsp;31, 2002 (2001&nbsp;&#151; 8% to each of certain
two customers and 2000&nbsp;&#151; 6% to each of certain three
customers).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, the exposure to the concentration of
credit risks relating to trade receivables is limited, due to
the relatively large number of customers and their wide
geographic distribution. The Group performs ongoing credit
evaluations of its customers for the purpose of determining the
appropriate allowance for doubtful accounts and generally does
not require collateral. An appropriate allowance for doubtful
accounts is included in the accounts. The allowance in respect
of trade receivables amounts to $30.4&nbsp;million and
$15.6&nbsp;million at December&nbsp;31, 2002 and 2001,
respectively, and has been determined for specific debts
doubtful of collection.
</FONT>

<P align="center"><FONT size="2">F-11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 1&nbsp;&#151; Significant Accounting
Policies (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">p.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Derivatives:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company carries out transactions involving
foreign exchange derivative financial instruments (mainly
forward exchange contracts and written and purchased currency
options). The transactions are designed to hedge the cash flows
resulting from existing assets and liabilities and transactions
expected to be entered into over the next twelve months, in
currencies other than the functional currency. However, except
for one interest rate swap transaction, these contracts do not
qualify for hedge accounting under FAS&nbsp;133,
&#147;Accounting for Derivative Instruments and Hedging
Activities&#148;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, the Company entered into an interest
rate swap transaction in respect of a portion of a series of
debentures issued in a private placement in 1998. This
derivative qualifies as a fair value hedge under FAS&nbsp;133,
and is recognized on the balance sheet at its fair value. The
carrying amount of the hedged liability is adjusted for the
entire changes in the fair value of the derivative. All other
derivatives are recognized on the balance sheet at their fair
value, with changes in the fair value carried to the statements
of income and included in financial expenses&nbsp;&#151; net.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">q.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Cash and cash equivalents:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Group considers all highly liquid
investments, which include short-term (up to three months) bank
deposits that are not restricted as to withdrawal or use and
short-term debentures, the period to maturity of which did not
exceed three months at time of investment, to be cash
equivalents.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">r.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Earnings per American Depository Receipt
    (&#147;ADR&#148;):</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Basic earnings per ADR are computed by dividing
net income by the weighted average number of ADRs/ ordinary
shares and ordinary &#147;A&#148; shares (including special
shares exchangeable into ordinary shares) outstanding during the
year, net of Company shares held by subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In computing diluted earnings per ADR, basic
earnings per ADR are adjusted to take into account the potential
dilution that could occur upon: (1)&nbsp;the conversion of the
convertible senior debentures due 2005, using the if-converted
method, by adding to net income interest expense on these
debentures and issuance costs, net of tax benefits, and by
adding the weighted average number of shares issued upon assumed
conversion of these debentures (no account was taken of the
potential dilution that could occur upon the conversion of the
convertible senior debentures due 2021 and 2022, since as at
December&nbsp;31, 2002 and 2001, the conditions necessary for
conversion of these debentures have not been satisfied); and
(2)&nbsp;the exercise of options granted under employee stock
option plans, using the treasury stock method.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Basic and diluted earnings per ADR are computed
after giving retroactive effect to distribution of 100% stock
dividend in December 2002 (see note&nbsp;9a).
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">s.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Stock based compensation:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for its employee stock
option plans using the intrinsic value based method of
accounting prescribed by APB&nbsp;25 and related
interpretations. Accordingly, the compensation cost relating to
stock options is charged on the date of grant of such options,
to shareholders&#146; equity, under deferred compensation, and
is thereafter amortized by the straight-line method and charged
against income over the expected service period of the related
employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">FAS 123, &#147;Accounting for Stock-Based
Compensation&#148;, established a fair value based method of
accounting for employee stock options or similar equity
instruments, and encourages adoption of such method for stock
compensation plans. However, it also allows companies to
continue to account for those plans using the accounting
treatment prescribed by APB&nbsp;25. FAS&nbsp;148 amends
FAS&nbsp;123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for
</FONT>

<P align="center"><FONT size="2">F-12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 1&nbsp;&#151; Significant Accounting
Policies (continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">such plans. The Company has elected to continue
accounting for employee stock option plans according to
APB&nbsp;25, and has accordingly complied with the disclosure
requirements set forth in FAS&nbsp;123, as amended by
FAS&nbsp;148, for companies electing to apply APB&nbsp;25.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table illustrates the effect on net
income and earning per ADR, assuming the Company had applied the
fair value recognition provisions of FAS&nbsp;123 to its
stock-based employee compensation:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(In millions, except</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">earnings per ADR)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: amortization of deferred compensation
    related to employee stock option plans, included in consolidated
    statements of income, net of related tax effect
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: amortization of deferred compensation, at
    fair value, net of related tax effect
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings per ADR:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic&nbsp;&#151; as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic&nbsp;&#151; pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted&nbsp;&#151; as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted&nbsp;&#151; pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">t.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive
income:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Comprehensive income, presented in
shareholders&#146; equity, includes, in addition to net income:
(i)&nbsp;translation gains and losses of non-dollar currency
financial statements of subsidiaries and associated companies
(accumulated balance at December&nbsp;31, 2002&nbsp;&#151; gain
of $27.4&nbsp;million; 2001&nbsp;&#151; loss of
$58.2&nbsp;million); and (ii)&nbsp;unrealized holding losses on
available-for-sale securities, net of tax (accumulated balance
at December&nbsp;31, 2002&nbsp;&#151; $10.1&nbsp;million;
2001&nbsp;&#151; $0.3&nbsp;million).
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">u.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Recently issued accounting
    pronouncements:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2"> <B><I>1)&nbsp;FAS 143</I></B>
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    August 2001, the FASB issued FAS No.&nbsp;143, &#147;Accounting
    for Obligations Associated with the Retirement of Long-Lived
    Assets&#148;. FAS&nbsp;143 addresses accounting and reporting
    for obligations associated with the retirement of tangible
    long-lived assets and the associated asset retirement costs,
    including, but not limited to, clean-up costs, etc. FAS&nbsp;143
    is effective for financial statements issued for fiscal years
    beginning after June&nbsp;15, 2002. The Company does not expect
    the adoption of FAS&nbsp;143 to have a material effect on its
    consolidated financial statements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2"> 2)&nbsp;FAS 146</FONT></I></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    June 2002, the FASB issued FAS No.&nbsp;146, &#147;Accounting
    for Costs Associated with Exit or Disposal Activities&#148;.
    FAS&nbsp;146 requires that a liability for costs associated with
    an exit or disposal activity be recognized, at fair value, when
    the liability is incurred. Previously, a liability
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><FONT size="2">Note 1&nbsp;&#151; Significant Accounting
    Policies (continued)</FONT></B></TD>
</TR>
</table>
<p>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</tr>
<tr>
<td><font size="2">&nbsp;</font></td>
<td><FONT size="2">for an exit cost was recognized at the date of
the commitment to an exit plan. FAS 146 is to be applied
prospectively to exit or disposal activities initiated after
December&nbsp;31, 2002.
</FONT>
</table>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2"> 3)&nbsp;FIN 45</FONT></I></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    November 2002, the FASB issued FIN No.&nbsp;45,
    &#147;Guarantor&#146;s Accounting and Disclosure Requirements
    for Guarantees, Including Indirect Guarantees of Indebtedness of
    Others&#148;. FIN&nbsp;45 requires the guarantor to recognize,
    at the inception of a guarantee, a liability for the fair value
    of the obligation undertaken in issuing such guarantee and to
    provide certain disclosures. The recognition provisions of
    FIN&nbsp;45 are applicable on a prospective basis to guarantees
    issued or modified after December&nbsp;31, 2002. The Company
    does not expect the adoption of FIN 45 to have a material effect
    on its consolidated financial statements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2"> 4)&nbsp;FIN&nbsp;46</FONT></I></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    January 2003, the FASB issued FIN No.&nbsp;46,
    &#147;Consolidation of Variable Interest Entities&#148;.
    FIN&nbsp;46 classifies entities into two groups: (1)&nbsp;those
    for which voting interests are used to determine consolidation;
    and (2)&nbsp;those for which other interests (variable
    interests) are used to determine consolidation. FIN 46 deals
    with the identification of Variable Interest Entities
    (&#147;VIE&#148;) and the business enterprise which should
    include the assets, liabilities, non-controlling interests, and
    results of activities of a VIE in its consolidated financial
    statements. FIN&nbsp;46 would become effective during 2003. At
    this stage, the Company is evaluating the effect of this
    pronouncement on its consolidated financial statements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">v.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reclassifications:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain comparative figures have been
reclassified to conform to the current year presentation.
</FONT>

<P align="left">
<B><FONT size="2">Note 2&nbsp;&#151; Certain
Transactions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisitions:</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2002
acquisitions</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the Company acquired full control
and ownership of Honeywell Pharmaceutical Fine Chemicals S.r.l.,
an Italian manufacturer of active pharmaceutical ingredients
(later renamed Teva Pharmaceutical Fine Chemicals
S.r.l.&nbsp;&#151; &#147;TPFC&#148;). The acquisition was made
in order to broaden Teva&#146;s API product line, which provides
strategic depth to its generic business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the Company also acquired full
control and ownership of Bayer Classics S.A., a French generic
pharmaceutical company (later renamed Teva Classics
S.A.&nbsp;&#151; &#147;Teva Classics&#148;), as well as a
shareholders&#146; loan of $34&nbsp;million granted to the
acquired company by the vendor. The acquisition was made in
order to expand Teva&#146;s presence in the fast growing
emerging generic pharmaceutical market in France.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total consideration paid for the two acquisitions
(including the shareholder&#146;s loan mentioned above and
acquisition costs) was $168 million in cash.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounted for these acquisitions by
the purchase method. The results of operations of TPFC and Teva
Classics have been included in the consolidated financial
statements of Teva commencing
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 2&nbsp;&#151; Certain Transactions
(continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">the third quarter of 2002. The following table
summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">U.S. $ in</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">millions</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant, and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other long lived assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">209.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The intangible assets acquired include product
rights of $13.6 million and customer lists of $7.7 million, with
a weighted-average useful life of 6&nbsp;years. No in-process
research and development was identified.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Hereafter are certain unaudited pro forma
combined statements of income data for the years ended
December&nbsp;31, 2002 and 2001, as if the acquisition of TPFC
and Teva Classics occurred on January&nbsp;1, 2002 and 2001,
respectively, after giving effect to purchase accounting
adjustments, including amortization of certain identifiable
intangible assets, the elimination of intercompany transactions
and profits not yet realized outside the Group.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The pro forma financial information is not
necessarily indicative of the combined results that would have
been attained had the acquisitions taken place at the beginning
of 2002 and 2001, respectively, nor is it necessarily indicative
of future results.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Except earning per ADR)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,546.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,133.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">412.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings per ADR:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2000 acquisition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2000, Teva acquired full control and ownership
of Novopharm Ltd. (&#147;Novopharm&#148;), a Canadian-based
generic company, as well as a shareholders&#146; loan of
approximately $74&nbsp;million granted to Novopharm by the
vendor, and other rights of the vendor. In consideration, the
vendor was issued 4.2&nbsp;million ordinary shares of Teva and
12.8&nbsp;million special shares that are exchangeable into
ordinary
</FONT>

<P align="center"><FONT size="2">F-15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 2&nbsp;&#151; Certain Transactions
(continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">shares of the Company at his discretion at a
one-to-one ratio. The ordinary shares and the special
shares&nbsp;&#151; with a total value determined to be
$300&nbsp;million&nbsp;&#151; entitled the holders, assuming
full conversion, to approximately 6.2% of the Company&#146;s
issued and outstanding share capital at the date of issuance. In
addition, in 2000, Teva acquired shares in a subsidiary of
Novopharm the latter did not already own for a total amount of
$12&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An amount of $34.4&nbsp;million out of the cost
of acquisition was attributed to in-process research and
development. This amount was expensed upon acquisition, in
accordance with generally accepted accounting principles.
Goodwill, representing the excess of cost of acquisition over
the fair value of net assets on acquisition date, not
attributable to in-process research and development, after
adjustments in 2001 and 2002, amounted to $257&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additional purchase liabilities recorded included
$10.5&nbsp;million for severance pay and related costs
associated with the shut-down and consolidation of certain
acquired facilities, which was completed in 2002. At
December&nbsp;31, 2002, none of the purchase liabilities in
respect of the above were outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cooperation
agreements:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2"> 1)&nbsp;With Impax</FONT></I></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    June 2001, a subsidiary entered into an agreement with Impax
    Laboratories, Inc. (&#147;Impax&#148;) under which Teva was
    granted exclusive U.S. marketing rights and an option to acquire
    exclusive marketing rights for certain Impax products in the
    rest of North America, South America, the European Union and
    Israel. Under the agreement, Teva granted Impax a
    $22&nbsp;million loan bearing 8% annual interest, and
    payable&nbsp;&#151; principal and accrued interest&nbsp;&#151;
    in 2004 in cash or in Impax stock, unless previously forgiven.
    Pursuant to the agreement, portions of the loan (principal and
    accrued interest) are to be forgiven upon the achievement by
    Impax of certain milestones. If not forgiven, Teva may elect to
    have repayment of the loan made in part in terms of a
    non-exclusive right to market certain products.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, Teva invested $15&nbsp;million in Impax common stock.
This investment is treated as an &#147;available-for-sale&#148;
investment and included, together with the loan mentioned above,
under investments and other assets.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2002, Teva exercised the option to acquire exclusive marketing
rights for additional Impax products in Canada. In addition,
Impax achieved a milestone as defined in the agreement, which
resulted in the forgiveness of the accrued interest balance in
the amount of $2.4&nbsp;million. This amount is reflected in
intangible assets and is to be amortized over the estimated
economic life of the marketing rights.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><I><FONT size="2">2)&nbsp;</FONT></I></B></TD>
    <TD align="left">
    <B><I><FONT size="2">With Aventis</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;Under
    agreements entered into by Teva and Aventis Pharmaceuticals,
    Inc. (&#147;Aventis&#148;), sale and distribution of
    Copaxone&#174;, an innovative product of the Company for the
    treatment of multiple sclerosis, in North America is being
    carried out by Aventis. As from January&nbsp;1, 2001, marketing
    of Copaxone&#174; in the U.S. and Canada is done by indirect
    wholly-owned entities of the Company, operating under the name
    &#147;Teva Neuroscience&#148;.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aventis
    also participates in certain research and development expenses
    of Teva relating to the development of the oral version of
    Copaxone&#174; and to a new indication for injectible
    Copaxone&#174; (collectively referred to as the
    &#147;Studies&#148;). Such participation will not exceed maximum
    amounts stipulated in the agreement. Upon receipt of approval
    from the U.S. Food and Drug Administration relating to either
    one of the Studies, the related amount of participation is to be
    refunded to Aventis.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 2&nbsp;&#151; Certain Transactions
(continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;Under
    separate agreements between the Company and the German parent
    company of Aventis, Aventis distributes and sells Copaxone&#174;
    in Europe and certain other countries. In the core European
    countries, Copaxone&#174; is jointly marketed by Teva and
    Aventis. In addition, under certain conditions, Teva has
    reserved the right to reacquire the marketing and distribution
    rights in Europe to the injectible formulation of Copaxone&#174;
    for consideration to be computed based on a certain formula, as
    stipulated in the agreement.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    2001 and 2000, amounts of $10&nbsp;million and $5 million,
    respectively, were paid by Aventis. Such amount, less the
    portion due to the relevant research institute, were deducted
    from research and development expenses under grants and
    participations.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><I><FONT size="2">3)&nbsp;</FONT></I></B></TD>
    <TD align="left">
    <B><I><FONT size="2">With Lundbeck</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;In
    1999, the Company entered into a cooperation agreement with a
    Danish company, H.&nbsp;Lundbeck A/S (&#147;Lundbeck&#148;), for
    the joint global development and for the marketing, mainly in
    Europe, of two innovative products of the Company for the
    treatment of Parkinson&#146;s disease. The exclusive marketing
    rights for the rest of the world will remain in the hands of the
    Company.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
    the agreement, commencing in 1999, Lundbeck participates in the
    research and development expenses of Teva at varying rates,
    subject to maximum amounts stipulated in the agreement.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;Teva
    and Lundbeck have entered into an additional cooperation
    agreement, for the global development and for the marketing,
    mainly in Europe, of the oral version of Copaxone&#174;. Under
    the agreement, Lundbeck is to fund the research and development
    of the product performed by Teva, up to a maximum amount
    stipulated in the agreement. Other provisions of the agreement
    relate to the additional funding by Lundbeck of certain other
    development, pre-marketing and marketing activities relating to
    the product. Such additional funding is to be made under certain
    conditions and up to a maximum amount, as stipulated in the
    agreement.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 4)&nbsp;With BTG</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
    to an agreement entered into in 1999, between Teva and Bio
    Technology General Corp. (&#147;BTG&#148;) Teva is to make
    payments of up to $20&nbsp;million to BTG relating to certain
    biotech products. Through December&nbsp;31, 2002 an amount of
    $12.5&nbsp;million was paid, of which $10&nbsp;million relates
    to certain marketing and distribution rights which are expected
    to become effective no later than 2004 and is included among
    intangible assets. The remaining amount of $2.5&nbsp;million
    represents participation in research and development expenses of
    BTG relating to certain products in development and was recorded
    as research and development expenses in the year ended
    December&nbsp;31, 2000. The balance is to be paid on fulfillment
    of certain conditions, as per the agreement.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 5)&nbsp;With other parties</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    2002, Teva entered into agreements with two companies pursuant
    to which it is to participate in the funding of research and
    development conducted by these companies in a total amount of
    $20&nbsp;million, payable upon achievement of certain
    milestones. In consideration, Teva would be granted certain
    exclusive marketing rights with respect to the products to be
    developed. Through December&nbsp;31, 2002, an amount of
    $4.3&nbsp;million, representing participation in
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 2&nbsp;&#151; Certain Transactions
(continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">development expenses of these companies, relating
    to certain products under research and development, was paid by
    Teva and expensed in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    2001, Teva entered into agreements with two other companies
    pursuant to which it is to participate in the funding of
    research and development conducted by these companies in a total
    amount of $20&nbsp;million, payable upon achievement of certain
    milestones. In consideration, Teva would be granted certain
    exclusive worldwide rights with respect to the products to be
    developed. In addition, Teva acquired shares in these companies
    for a total amount of approximately $10 million which are
    carried at cost and included under investments and other assets.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Note 3&nbsp;&#151; Property, Plant and
Equipment</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Property, plant and equipment, net, consisted
of the following:</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Buildings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">282.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Machinery and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">645.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">548.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Motor vehicles, computer equipment, furniture and
    other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payments on account
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,208.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,034.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less&nbsp;&#151; accumulated depreciation and
    amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(532.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(480.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">675.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">554.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Depreciation and amortization expense was
$76.5&nbsp;million, $71.5 million and $68.0&nbsp;million in the
years ended December&nbsp;31, 2002, 2001 and 2000, respectively.
In the year ended December&nbsp;31, 2001 an additional
impairment charge of $9.7&nbsp;million was made in connection
with the Group&#146;s restructuring plans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Land includes leasehold land, the rights to which
extend over original periods of 49&nbsp;years ending in the
years 2007-2043, with an option for an additional period of
49&nbsp;years.
</FONT>

<P align="left">
<B><FONT size="2">Note 4&nbsp;&#151; Goodwill, Intangible Assets
and Debt Issuance Costs</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The changes in the carrying amount of goodwill
for the year ended December&nbsp;31, 2002, are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pharmaceuticals</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">A.P.I</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of January&nbsp;1, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">459.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">466.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill acquired during the year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Translation differences
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance as of December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">534.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 4&nbsp;&#151; Goodwill, Intangible Assets
and Debt Issuance Costs (continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible
assets and debt issuance costs:</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">1)&nbsp;Intangible assets and debt issuance
    costs, net, consisted of the following:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Original</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amortization</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">balance</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangible assets (mainly&nbsp;&#151; product
    rights)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">177.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tradename
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt issuance costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">239.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">176.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">2)&nbsp;Amortization of intangible assets
    amounted to $21.4&nbsp;million; $16.2&nbsp;million and
    $10.8&nbsp;million in the years ended December&nbsp;31, 2002,
    2001 and 2000, respectively. As of December&nbsp;31, 2002, the
    estimated aggregate amortization of intangible assets for the
    years 2003 to 2007 is as follows: 2003&nbsp;&#151;
    $22&nbsp;million; 2004&nbsp;&#151; $22 million; 2005&nbsp;&#151;
    $19&nbsp;million; 2006&nbsp;&#151; $17&nbsp;million and
    2007&nbsp;&#151; $12&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">3)&nbsp;Amortization of debt issuance costs
    amounted to $10.0&nbsp;million, $3.7&nbsp;million and
    $0.7&nbsp;million in the years ended December&nbsp;31, 2002,
    2001 and 2000, respectively, and included among financial
    expenses&nbsp;&#151; net.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effect of
FAS 142 adoption:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the Company&#146;s
reported results adjusted to eliminate the effect of
amortization of goodwill and of tradename, as of January&nbsp;1,
2000:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions, except</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">earnings per ADR)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income&nbsp;&#151; as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add, amortization of goodwill and tradename, net
    of taxes, charged through 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">As adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">296.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings per ADR&nbsp;&#151; basic, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add&nbsp;&#151; amortization of goodwill and
    tradename, net of taxes, charged through 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">As adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings per ADR&nbsp;&#151; diluted, As reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add, amortization of goodwill and tradename, net
    of taxes, charged through 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">As adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<B><FONT size="2">Note 5&nbsp;&#151; Employee Related
Obligations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee
related obligations consisted of the following:</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S.$ in</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued severance pay
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Obligation in respect of defined benefit plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Costs of severance pay and defined contribution
plans charged to income in the years ended December&nbsp;31,
2002, 2001 and 2000 was $22.2&nbsp;million, $16.9&nbsp;million
(excluding $2.3&nbsp;million in respect of restructuring) and
$15.9&nbsp;million, respectively. Pension costs under the
defined benefit plans in those years amounted to
$3.7&nbsp;million, $2.8&nbsp;million and $2.7&nbsp;million,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The main terms of the different arrangements with
employees are described in b. below. Further details relating to
defined benefit plans are presented in c. below.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">b.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Terms of arrangements:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2"> 1)&nbsp;In Israel</FONT></I></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
    law generally requires payment of severance pay upon dismissal
    of an employee or upon termination of employment in certain
    other circumstances. The following principal plans relate to the
    Group&#146;s employees in Israel:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;Pension
    plans for the majority of the Group&#146;s employees: under
    collective labor agreements, these external pension plans
    provide 72% of the severance pay liability. The pension and
    severance pay liabilities covered by these plans are not
    reflected in the financial statements as the pension and
    severance pay risks have been irrevocably transferred to the
    pension funds.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;Insurance
    policies for employees in managerial positions: the policies
    provide coverage for severance pay and pension liabilities of
    managerial personnel.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;Severance
    pay liabilities not covered above are fully provided for in the
    financial statements on an undiscounted basis, based upon the
    number of years of service and the latest monthly salary of the
    Group&#146;s employees in Israel.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 2)&nbsp;Non-Israeli
    subsidiaries</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    majority of the employees in the European subsidiaries are
    entitled to a retirement grant when they leave the subsidiaries.
    In the consolidated financial statements, an accrual of the
    Company&#146;s liability is made, based on the length of service
    and remuneration of each employee at the balance sheet date.
    Other employees in Europe are entitled to pension according to a
    defined benefits scheme providing benefits based on final
    pensionable pay or according to a hybrid pension scheme that
    provides retirement benefits on a defined benefit and a defined
    contribution basis. Professionally qualified independent
    actuaries value these schemes, the rates of contribution payable
    are being determined by the actuaries. Pension costs for the
    defined benefit section of the scheme are accounted for on the
    basis of charging the expected cost of providing pensions over
    the period during which the subsidiaries benefit from the
    employees&#146; services.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 5&nbsp;&#151; Employee Related
Obligations (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    North American subsidiaries provide various defined contribution
    plans for the benefit of their employees. Under these plans,
    contributions are based on specified percentages of pay.
    Additionally, a multi-employer plan is maintained in accordance
    with various union agreements.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">c.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Certain details relating to defined benefit
    plans:</FONT></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">1)&nbsp;The consolidated components of net
    periodic benefit costs are as follows:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected return on plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Recognized net actuarial loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employers&#146; pension cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<HR size="1" width="18%" align="left" noshade>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;Represents
an amount of less than $ 0.1&nbsp;million.
</FONT>

<P align="center"><FONT size="2">F-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 5&nbsp;&#151; Employee Related
Obligations (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> 2)&nbsp;The consolidated components of the
    projected benefit obligation and plan assets are as follows:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Change in benefit obligation:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Projected benefit obligation at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plan participants&#146; contribution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial loss (gain)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisitions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exchange rate differences
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefit obligation at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Change in plan assets:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actual return on plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employer contribution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plan participants&#146; contribution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exchange rate differences
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Reconciliation of funded status:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unfunded obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized net actuarial loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net obligation, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Weighted average assumptions:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discount rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected return on plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rate of compensation increase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pension increase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<B><FONT size="2">Note 6&nbsp;&#151; Long-Term Loans and Other
Long-Term Liabilities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term
loans and other long-term liabilities consisted of the
following:</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Interest rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">as of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">(%)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans from banks(1)(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">3.3&nbsp;&#150;&nbsp;4.5
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">209.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debentures&nbsp;&#151; in dollars:(2)(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Principal amount
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">6.9
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value hedge adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">355.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">338.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less&nbsp;&#151; current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The balance as of December&nbsp;31, 2002 is
    composed of: (1)&nbsp;a loan in the amount of
    $142.1&nbsp;million due 2005 and bearing interest determined on
    the basis of Euro LIBOR (mainly)&nbsp;and Great Britain Pound
    LIBOR; and (2)&nbsp;a loan in the amount of $78.0&nbsp;million
    due 2006 and bearing interest determined on the basis of the
    Canadian dollar LIBOR.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The balance as of December&nbsp;31, 2002 and 2001
    is composed of debentures, which were issued in 1998 in a
    private placement to institutional investors in the United
    States for periods of 7, 10 and 20&nbsp;years at a fixed annual
    interest rate, the weighted average of which is 6.9%. In 2002,
    the Company entered into two interest rate swap transactions
    with respect to portions of these debentures (see note 11d),
    effectively changing the weighted annual interest rate on the
    debentures at December&nbsp;31, 2002 from 6.9% to 4.6%. Only the
    first interest swap transaction qualifies for hedge accounting
    under FAS 133, resulting in an increase of $9.2 million
    (identical to the fair value of the related derivative) in the
    carrying value of the portion of the debentures it hedges, to
    adjust it to the fair value of such portion based on the risk
    being hedged.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mainly Missouri Economic Development bonds
    bearing interest at a variable or fixed rate determined
    according to a certain formula (2.0% at December&nbsp;31, 2002),
    maturing serially through September 2004. The Bond is secured by
    a letter of credit, which provides for a mortgage on the Mexico,
    Missouri facility.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Certain loan agreements and debentures contain
    restrictive covenants, mainly the requirement to maintain
    certain financial ratios.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><FONT size="2">As
of December&nbsp;31, 2002, the required annual principal
payments of long-term debt, starting from the year 2004, are as
follows: 2004&nbsp;&#151; $8.1&nbsp;million; 2005&nbsp;&#151;
$162.5&nbsp;million; 2006&nbsp;&#151; $78.0&nbsp;million;
2007&nbsp;&#151; $0.6&nbsp;million; 2008 and
thereafter&nbsp;&#151; $93.0&nbsp;million. The above does not
include the three series of convertible senior debentures
described in note&nbsp;7.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><FONT size="2">The
Company and certain subsidiaries entered into negative pledge
agreements with certain banks and institutional investors. Under
the agreements, the Company and the said subsidiaries have
undertaken not to register floating charges on assets in favor
of any third parties without the prior consent of the banks, to
maintain certain financial ratios and to fulfill other
restrictions, as stipulated by the agreements.
</FONT>

<P align="center"><FONT size="2">F-23
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<B><FONT size="2">Note&nbsp;7&nbsp;&#151; Convertible Senior
Debentures</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><FONT size="2">In
November 2002, Teva Pharmaceutical Finance B.V. (&#147;Teva
Finance B.V.&#148;), an indirect wholly-owned subsidiary of the
Company, sold an aggregate principal amount of $450&nbsp;million
of its 0.375% Convertible Senior Debentures due 2022. Interest
is payable on a semi-annual basis. Payment of all principal,
interest, premium and additional amounts (as defined), if any,
payable on the debenture is unconditionally guaranteed by the
Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless previously redeemed or repurchased,
holders of the debentures may convert them into ADRs, each of
which represents one ordinary share of the Company, under
certain circumstances set forth in the offering memorandum, at a
conversion price of $42.8989 per ADR, (upon a full conversion
10,489,779 ordinary shares are issuable), subject to adjustments
in certain circumstances. On or after November&nbsp;18, 2007,
Teva Finance&nbsp;B.V. may redeem some or all of the debentures
at the principal amount of such debentures, plus accrued and
unpaid interest. On certain dates set forth in the offering
memorandum, each holder may require Teva Finance&nbsp;B.V. to
repurchase some or all of the holders&#146; debentures at the
principal amount of such debentures, plus accrued and unpaid
interest. With respect to the earliest of such dates&nbsp;&#151;
November&nbsp;18, 2007&nbsp;&#151; or upon a change in control
or a termination of trading of Teva ADRs, if repurchase of
debentures is requested Teva Finance&nbsp;B.V. can elect to pay
the repurchase price in cash or in Teva ADRs (the number of Teva
ADRs to be computed as set forth in the offering memorandum), or
any combination thereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><FONT size="2">In
August 2001, Teva Pharmaceutical Finance N.V. (&#147;Teva
Finance N.V.&#148;), an indirect wholly-owned subsidiary of the
Company, sold an aggregate principal amount of $360&nbsp;million
of its 0.75% Convertible Senior Debentures due 2021. Interest is
payable on a semi-annual basis. Payment of all principal,
interest, premium and additional amounts (as defined), if any,
payable on the debenture is unconditionally guaranteed by the
Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless previously redeemed or repurchased,
holders of the debentures may convert them into ADRs, each of
which represents one ordinary share of the Company, under
certain circumstances set forth in the offering memorandum, at a
conversion price of $42.912 per ADR, (upon a full conversion
8,389,262 ordinary shares are issuable), subject to adjustments
in certain circumstances. On or after August&nbsp;20, 2004, Teva
Finance N.V. may redeem some or all of the debentures at the
principal amount of such debentures, plus accrued and unpaid
interest. On certain dates set forth in the offering memorandum,
each holder may require Teva Finance N.V. to repurchase some or
all of the holders&#146; debentures, at the principal amount of
such debentures plus accrued and unpaid interest. With respect
to the earliest of such dates&nbsp;&#151; August&nbsp;20,
2004&nbsp;&#151; or upon a change in control or a termination of
trading of Teva ADRs, if repurchase of debentures is requested
Teva Finance N.V. can elect to pay the repurchase price in cash
or in Teva ADRs (the number of Teva ADRs to be computed as set
forth in the offering memorandum), or any combination thereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><FONT size="2">In
October 2000, Teva Pharmaceutical Finance, LLC (&#147;Teva
Finance LLC&#148;), an indirect wholly-owned subsidiary of the
Company, sold an aggregate principal amount of $550&nbsp;million
of its 1.50% Convertible Senior Debentures due 2005. Interest is
payable on a semi-annual basis. Payment of all principal,
interest, premium and additional amounts (as defined), if any,
payable on the debenture is unconditionally guaranteed by the
Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless previously redeemed or repurchased,
holders of the debentures may convert them into ADRs, each of
which represents one ordinary share of the Company, at a
conversion price of $43.1157 per ADR, (upon a full conversion
12,756,374 ordinary shares are issuable), subject to adjustments
in certain circumstances. On or after October&nbsp;15, 2003,
Teva Finance LLC may redeem some or all of the debentures at the
redemption prices set forth in the offering memorandum. On
October&nbsp;15, 2003 or upon a change of control or termination
of trading of Teva ADRs each holder may require Teva Finance LLC
to
</FONT>

<P align="center"><FONT size="2">F-24
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 7&nbsp;&#151; Convertible Senior
Debentures (continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">repurchase some or all of the holders&#146;
debentures at a redemption price set forth in the offering
memorandum. If such requirement is made, Teva Finance LLC can
elect to pay the repurchase price in cash or in Teva ADRs (the
number of Teva ADRs to be computed as set forth in the offering
memorandum), or any combination thereof. Since the issuance of
these debentures Teva has accreted the additional amounts
payable upon the holders&#146; requiring repurchase of the
debentures on October&nbsp;15, 2003. Such amounts have been
charged to interest expenses and at December&nbsp;31, 2002
amounted to $12.4&nbsp;million. As the holders of the debentures
are entitled to require redemption in 2003, the debentures, as
well as the additional amounts accreted as described above, are
included among current liabilities.
</FONT>

<P align="left">
<B><FONT size="2">Note 8&nbsp;&#151; Commitments and
Contingencies</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">a.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Commitments:</FONT></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 1)&nbsp;Operating leases</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
    of December&nbsp;31, 2002, minimum future rentals under
    operating leases of buildings, machinery and equipment for
    periods in excess of one year were as follows: 2003&nbsp;&#151;
    $13.1&nbsp;million; 2004&nbsp;&#151; $11.6&nbsp;million;
    2005&nbsp;&#151; $8.5&nbsp;million; 2006&nbsp;&#151;
    $6.8&nbsp;million; 2007 and thereafter&nbsp;&#151;
    $16.8&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    lease fees for each of the years ended December&nbsp;31, 2002,
    2001 and 2000 were $13.9&nbsp;million, $13.4&nbsp;million and
    $10.9&nbsp;million, respectively, of which $2.7&nbsp;million,
    $2.8&nbsp;million and $2.1 million to a related party in the
    years ended December&nbsp;31, 2002, 2001 and 2000, respectively.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><I><FONT size="2">2)&nbsp;</FONT></I></B></TD>
    <TD align="left">
    <B><I><FONT size="2">Royalty commitments</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;The
    Company is committed to pay royalties to owners of know-how and
    to parties that financed research and development, at rates
    ranging mainly from 0.5% to 10% of sales of certain products, as
    defined in the agreements. In some cases, the royalty period is
    not defined; in other cases, the royalties will be paid over
    various periods, not exceeding 20&nbsp;years, commencing on the
    date of the first royalty payment.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;The
    Company has also undertaken to pay royalties to the Government
    of Israel, at the rates of 2.0%&nbsp;&#150; 3.5% of sales
    relating to a product or a development resulting from the
    research funded by the Office of the Chief Scientist. The
    royalties due to the Government should not exceed the amount of
    participation, in dollar terms (in respect of research grants
    commencing 1999&nbsp;&#151; with the addition of dollar LIBOR
    interest). The maximum amount of the contingent liability in
    respect of royalties to the Government at December&nbsp;31, 2002
    amounts to $34.4&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;Royalty
    expense included in cost of sales for the years ended
    December&nbsp;31, 2002, 2001, and 2000 was $66.3&nbsp;million,
    $55.2&nbsp;million, and $35.1&nbsp;million, respectively.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contingent
liabilities:</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">1)&nbsp;Teva from time to time seeks to develop
    generic products for sale prior to patent expiration in various
    territories. In the United States, to obtain generic approval
    for a product prior to the expiration of the originator patent,
    Teva must challenge the patent under the procedures set forth in
    the Waxman-Hatch Act of 1984. To the extent that it seeks to
    utilize such patent challenge procedures, Teva is involved and
    expects to be involved in patent litigation regarding the
    validity or infringement of the originator&#146;s patent.
    Additionally, Teva may be involved in patent litigation
    involving the extent to which alternate manufacturing process
    techniques may infringe on originator or
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-25
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 8&nbsp;&#151; Commitments and
Contingencies (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">third party process patents. No provision has
    been included in the accounts in respect of pending matters at
    December&nbsp;31, 2002.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">2)&nbsp;Teva and its subsidiaries are from time
    to time subject to claims arising in the ordinary course of
    their business, including product liability claims. Teva
    believes that it has meritorious defenses to such claims and
    legal proceedings, pending as of December&nbsp;31, 2002, and
    that, in any event, it has adequate product liability insurance
    to cover material damages related to product liability claims,
    pending as of December&nbsp;31, 2002.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">3)&nbsp;Teva&#146;s business inherently exposes
    it to potential product liability claims. From time to time, the
    pharmaceutical industry has experienced difficulty in obtaining
    product liability insurance coverage for certain products or
    coverage in the desired amounts or with the desired deductibles.
    As a result, Teva sell and may continue to sell, pharmaceutical
    products that are not covered by insurance and may also be
    subject to product liability claims that are not covered by
    insurance or that exceed Teva&#146;s policy limits.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">4)&nbsp;In August 2001, Teva Pharmaceuticals USA
    (&#147;Teva USA&#148;) won a judgment in a patent infringement
    action in the U.S.&nbsp;Federal District Court in Boston,
    Massachusetts, brought against it by SmithKline Beecham Corp.
    and Beecham Group Plc (together, &#147;Beecham&#148;) regarding
    the U.S. patent covering nabumetone, the active ingredient in
    Relafen&#174;. The court ruled in Teva USA&#146;s favor.
    Following the district court&#146;s decision, Teva USA launched
    its nabumetone product. As the first applicant to challenge the
    listed patent for this drug, Teva USA had enjoyed a statutory
    180-day period of generic marketing exclusivity. In August 2002,
    the United States Court of Appeals for the Federal Circuit
    affirmed the district court&#146;s judgment that Beecham&#146;s
    patent was invalid, and did not disturb the district
    court&#146;s judgment that Beecham&#146;s patent was
    unenforceable due to inequitable conduct. On January&nbsp;14,
    2003, Beecham&#146;s time to file a petition of certiorari with
    the U.S. Supreme Court lapsed.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">5)&nbsp;Teva USA is a manufacturer of Adipex-P
    brand phentermine hydrochloride, and has been sued in both class
    actions and individual lawsuits relating to the alleged negative
    health effect of phentermine and fenfluramine. While neither
    drug had been indicated or approved for combination use by the
    FDA, physicians sometimes prescribed the two together in a
    combination treatment for weight control known as
    &#147;fen-phen&#148;. Plaintiffs have filed lawsuits from August
    1997 to the present in a variety of state and federal
    jurisdictions seeking monetary damages in unspecified amounts.
    The federal actions have been consolidated for pretrial purposes
    to the United States District Court for the Eastern District of
    Pennsylvania in a multidistrict litigation proceeding. Based
    upon the advice of counsel, Teva believes that it has adequate
    insurance to cover these claims and that the outcome of the
    remaining litigation in which Teva USA is involved will not have
    a material adverse effect on Teva&#146;s financial position. No
    provision for this matter has been included in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">6)&nbsp;Teva&#146;s Hungarian subsidiary, Biogal
    Pharmaceutical Works Ltd., was sued in July 1999 in the County
    Court of Debrecen, Hungary by a Hungarian institute
    (Gy&#243;gyszerkutat&#243; Int&#233;zet&nbsp;Kft) for additional
    royalties arising out of a series of contracts for the
    development of a pharmaceutical active ingredient. Although the
    plaintiff has not made any claims for a specific amount, the
    court, in an interim decision, ordered Biogal to submit an
    accounting on the contested terms. Biogal has appealed the
    decision and, based on the advice of counsel, expects to
    prevail. No provision for this matter has been included in the
    accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">7)&nbsp;On January&nbsp;13, 2002, a claim was
    filed in the Tel Aviv District Court by Paka Industries Ltd.
    against Teva, Teva Assets Ltd., an Israeli subsidiary of Teva,
    and a senior officer and a former senior officer of Teva Assets,
    in the amount of approximately $17&nbsp;million. The claim
    relates to a 1998
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-26
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 8&nbsp;&#151; Commitments and
Contingencies (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">agreement between Paka and Teva Assets, under
    which Teva Assets sold off the assets (excluding real property)
    of its plant to the plaintiff. Paka claims to have been deceived
    and consequently lost the entire investment in the acquired
    plant. Teva, based on the advice of counsel, believes that its
    chances of prevailing are good. Accordingly, no provision for
    this matter has been included in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">8)&nbsp;In August 2000, a claim was filed in the
    Tel Aviv District Court, and is now pending against Teva, with
    respect to damages caused to the plaintiff as a result of the
    use of a product containing the ingredient diethylstilbestrol
    (&#147;DES&#148;). In May and November 2001, 69&nbsp;plaintiffs
    filed an additional claim against Teva, in the District Court of
    Jerusalem, for damages caused by the use of two products
    containing DES. In July 2002, the plaintiffs amended their claim
    to include the Clalit Health Services (previously called General
    Health Fund) as a further defendant (in addition to the Ministry
    of Health). In December 2002, 9 women requested the District
    Court of Jerusalem to join the claim as plaintiffs, while
    4&nbsp;plaintiffs requested to withdraw from the proceedings.
    The court has not yet ruled on this matter. The aggregated
    amount of the two claims is approximately $10&nbsp;million, not
    including general damages. Teva is vigorously defending itself
    against these claims. Because the above claims are still in
    their early stages, no determination can be made of the
    likelihood of prevailing in the actions; however, based on the
    advice of counsel, Teva believes it has meritorious defenses. No
    provision for this matter has been included in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">9)&nbsp;On April&nbsp;5, 2001, a claim was filed
    against Teva in the Tel Aviv District Court with respect to the
    use of a pharmaceutical product known as &#147;Chorigon Ampoules
    5000&nbsp;Units&#148;. The plaintiffs allege that they were
    administered with allegedly defective ampoules of the product
    during the course of an in vitro fertilization treatment,
    resulting in the failure of the treatment and causing financial
    damages and mental anguish. The plaintiffs filed a petition to
    certify the claim as a class action. The plaintiffs have since
    filed a reply to Teva&#146;s response. Because the claim is
    still in its early stage, Teva&#146;s counsel is unable to
    express an opinion as to the merits of the claim. Nevertheless,
    based on information to date, Teva believes that this matter
    will not have a material adverse effect on its results of
    operations and financial condition and that provision for this
    matter in the accounts is not required.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">10)&nbsp;Teva USA, along with Elan Corporation,
    Elan Pharma Ltd. (collectively&nbsp;&#151; &#147;Elan&#148;) and
    Biovail Corporation International (&#147;Biovail&#148;), were
    defendants in a patent litigation brought by Bayer&nbsp;AG and
    Bayer Corporation (collectively&nbsp;&#151; &#147;Bayer&#148;)
    on May&nbsp;8, 2000 in the District of Delaware. On
    July&nbsp;17, 2000, the court transferred the case to the
    Northern District of Georgia. Bayer had alleged that Elan&#146;s
    Nifedipine Extended Release Tablets&nbsp;CC, 30&nbsp;mg, which
    is marketed by Teva USA, infringed a Bayer patent. On
    August&nbsp;16, 2002, Teva USA was dismissed from the case
    pursuant to a settlement agreement under which Teva USA did not
    pay any damages or provide any other consideration.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">11)&nbsp;Teva USA, along with Biovail, are
    defendants in two related patent litigations brought by
    Bayer&nbsp;AG, Bayer Corporation and, in one of the cases,
    Pfizer Inc. Both cases involve allegations against Teva USA of
    infringement of the same patent that had been at issue in the
    above discussed Georgia case and both cases are currently
    pending in the U.S.&nbsp;District Court for the District of
    Puerto Rico. The first case was commenced on February&nbsp;16,
    2001 by Bayer&nbsp;AG and Pfizer against Teva&nbsp;USA and
    Biovail for patent infringement relating to the sale of
    Biovail&#146;s Nifedipine Extended Release Tablets&nbsp;XL,
    60&nbsp;mg, which are marketed in the United States by Teva USA.
    The second case was commenced on February&nbsp;20, 2001 by Bayer
    Corporation against Biovail and Teva&nbsp;USA for patent
    infringement relating to the sale of Biovail&#146;s Nifedipine
    Extended Release Tablets&nbsp;CC, 60&nbsp;mg, which are also
    marketed in the United States by Teva USA. The plaintiffs in
    each of the two cases are seeking enhanced damages and
    attorneys&#146; fees in unspecified amounts, preliminary and
    permanent
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 8&nbsp;&#151; Commitments and
Contingencies (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">injunctions, and a recall of the products at
    issue. Each of these cases is in the pre-trial phase and no
    provision for these matters has been included in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">12)&nbsp;Teva USA is a named defendant, along
    with Biovail Corp. and Elan Corporation,&nbsp;plc, in two civil
    actions currently pending in the federal district courts in the
    District of Columbia and New York City. The Company is also
    named as a defendant in the case pending in New York City. The
    cases allege generally that arrangements between Biovail and
    Elan Corporation,&nbsp;plc relating to sales of Nifedipine
    Extended Release Tablets&nbsp;CC, in connection with which
    Teva&nbsp;USA acted as a distributor for Biovail, were unlawful
    under the federal antitrust laws. The challenged arrangements
    were previously the subject of a consent decree entered into by
    the U.S.&nbsp;Federal Trade Commission with Biovail and Elan
    Corporation,&nbsp;plc, to which the Company and Teva&nbsp;USA
    were not parties. The cases seek injunctive relief, unspecified
    monetary damages, attorneys fees, and costs. Each of the cases
    is brought on behalf of an alleged class of persons that
    purchased Nifedipine Extended Release Tablets&nbsp;CC made by
    Elan Corporation,&nbsp;plc or Biovail and sold in the United
    States by Teva&nbsp;USA. A motion is currently pending before
    the federal Judicial Panel on Multidistrict Litigation seeking
    consolidation of these cases with four other cases pending in
    the District of Columbia and two other cases pending in the
    Southern District of New York; the Company and Teva&nbsp;USA are
    not parties in those other cases. Teva&nbsp;USA and the Company
    (to the extent they remain a defendant in any of these cases)
    intend to defend vigorously against these claims. These cases
    are in a very preliminary stage, so it is not possible to assess
    the likelihood of an unfavorable outcome or the magnitude of any
    potential loss. No provision for these matters has been included
    in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">13)&nbsp;In May 2002, Teva&nbsp;USA won a
    judgment in the U.S.&nbsp;District Court in Norfolk, Virginia in
    a declaratory judgment action it brought against GlaxoSmithKline
    (&#147;GSK&#148;) regarding seven U.S. patents related to
    potassium clavulanate, an active ingredient in Augmentin&#174;
    (or, &#147;amoxiclav&#148;). The court ruled that all seven
    patents were invalid based on double patenting. GSK has appealed
    the judgment and oral argument is scheduled for March&nbsp;5,
    2003 on the appeal. Annual sales of the branded product in the
    U.S. were estimated to be in excess of $1&nbsp;billion.
    Following the district court decision, and subsequent
    FDA&nbsp;approval, Teva&nbsp;USA launched its amoxiclav product,
    which contains potassium clavulanate. Although Teva believes
    that the findings of fact and legal conclusions of the district
    court are well founded and that the decision will be upheld,
    were GSK to be successful in its appeal, Teva&nbsp;USA could be
    required to pay damages to GSK related to the sales of
    Teva&nbsp;USA&#146;s amoxiclav products and enjoined from
    selling its amoxiclav products. No provision for these matters
    has been included in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">14)&nbsp;In August 2002, GSK filed a complaint
    against Teva&nbsp;USA in the Pennsylvania Court of Common Pleas.
    Ranbaxy Pharmaceuticals, Inc. (&#147;Ranbaxy&#148;) is a
    defendant in the same case, though GSK does not allege any
    connection between Teva USA and Ranbaxy. The complaint alleges
    that Teva USA&#146;s amoxiclav products are derived from a
    strain of Streptomyces clavuligerus stolen from GSK. The
    Complaint asserts causes of action for alleged trade secret
    misappropriation, unfair competition, and conversion. The suit
    seeks equitable relief and imposition of a constructive trust
    related to Teva USA&#146;s amoxiclav products. The case is
    scheduled to be ready for trial in February 2004. Although Teva
    believes that the likelihood of GSK prevailing is low, if
    GSK&#146;s allegations were proven true, Teva USA could be
    required to pay damages to GSK related to the sales of Teva
    USA&#146;s amoxiclav products and enjoined from selling its
    amoxiclav products. No provision for these matters has been
    included in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">15)&nbsp;On August&nbsp;5, 2002, Lek
    Pharmaceuticals&nbsp;d.d. (&#147;Lek&#148;) filed a complaint
    against Teva&nbsp;USA in the United States District Court for
    the District of New Jersey. Lek has accused Teva&nbsp;USA of
    misappropriating Lek&#146;s trade secrets and proprietary
    information pertaining to formulations for
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 8&nbsp;&#151; Commitments and
Contingencies (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Teva&nbsp;USA&#146;s amoxiclav products. In its
    complaint, Lek seeks equitable relief and unspecified damages.
    Teva&nbsp;USA filed its answer on September&nbsp;24, 2002,
    denying all allegations of wrongdoing. The parties have agreed
    on a discovery plan and all fact and expert discovery is
    scheduled to be completed by December&nbsp;17, 2003. Although
    Teva believes that the likelihood of Lek prevailing is low, if
    Lek&#146;s allegations are proven true, Teva&nbsp;USA could be
    required to pay damages to Lek related to the sales of Teva
    USA&#146;s amoxiclav products and enjoined from selling its
    amoxiclav products. No provision for these matters has been
    included in the accounts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">16)&nbsp;Bayer and Bayer&#146;s marketing joint
    venturer GSK have been named in extensive litigation for
    personal injuries allegedly related to the use of the product
    Baycol&#174;, a blood lipid reducing agent, which Bayer withdrew
    from the market in August, 2001. Teva is the manufacturer of
    gemfibrozil, the generic version of Lopid&#174;, another blood
    lipid reducing drug, which was at times prescribed in
    combination with Baycol&#174;. In five cases where there
    allegedly was concomitant use of Baycol&#174; and gemfibrozil,
    Teva USA has been named as a codefendant of Bayer and GSK in the
    Court of Common Pleas of the Commonwealth of Pennsylvania,
    County of Philadelphia. The Complaints in each of these cases
    allege that plaintiff was injured as a result of exposure to
    gemfibrozil, either alone or in combination with Baycol&#174;.
    Because these claims are still in their early stages,
    Teva&#146;s counsel is unable to express an opinion as to their
    merits. Nevertheless, based upon currently available
    information, Teva believes that these cases will not have a
    material adverse effect on its results of operations and
    financial condition. No provision for these matters has been
    included in the accounts.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Note&nbsp;9&nbsp;&#151; Shareholders&#146;
Equity</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share
capital:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, there were
263.2&nbsp;million ordinary shares issued and outstanding,
(December&nbsp;31, 2001&nbsp;&#151; 256.2&nbsp;million). These
shares are traded on the Tel-Aviv Stock Exchange
(&#147;TASE&#148;) and, in the form of ADRs, each of which
represents one ordinary share, on the Nasdaq National Market in
the United States. In addition, as at December&nbsp;31, 2002,
there were 6.3&nbsp;million outstanding special shares
(December&nbsp;31, 2001&nbsp;&#151; 12.8&nbsp;million), issued
by a subsidiary, that are exchangeable into ordinary shares of
the Company at a 1:1 ratio, see note&nbsp;2a.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to ordinary shares held by
subsidiaries of the Company, as disclosed on the face of the
balance sheet, the Company issued to a certain subsidiary, a
total of 2.8&nbsp;million ordinary and
ordinary&nbsp;&#147;A&#148; shares, which do not confer on their
holder voting rights or rights to appoint directors (other
rights are identical to those of the ordinary shares) and are
not listed for trade.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><FONT size="2">In
December 2002, the Company distributed a 100% stock dividend to
all holders of ordinary shares. All shares, option and
convertible senior debentures information in the consolidated
financial statements has been retroactively restated to reflect
the effect of this distribution as if it had occurred at the
beginning of the earliest period presented.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee stock
option plans:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1992, the Company&#146;s Board of Directors
approved an employee stock option plan, under which options are
to be granted without consideration to the Company&#146;s senior
employees in Israel. The options may be exercised to purchase up
to 5&nbsp;million ordinary shares of the Company. Any options
not exercised before the expiration date will expire, unless
extended by the Board of Directors. Through December&nbsp;31,
2002, options exercisable to purchase 4.4&nbsp;million ordinary
shares were granted under the plan. The plan expired in 2002 and
the balance of the options not granted was cancelled.
</FONT>

<P align="center"><FONT size="2">F-29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 9&nbsp;&#151; Shareholders&#146; Equity
(continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the period from 1988 through 2002, certain
non-Israeli subsidiaries granted their employees options for the
purchase of the Company&#146;s ADRs. Any options not exercised
within the applicable exercise period will expire.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;6, 1997, September&nbsp;3, 1998
and September&nbsp;4, 2001, the Board of Directors resolved to
grant the Chief Executive Officer and President of the Company,
at no consideration, options exercisable in purchase of
1,000,000, 200,000 and 150,000 ordinary shares at the exercise
price of $9.88, $9.22 and $35.11, respectively. These
resolutions were approved by shareholders&#146; meetings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;14, 2002, the Board of Directors
resolved to grant, at no consideration, the following options,
each exercisable in purchase of one ordinary share: (i)&nbsp;to
the Chief Executive Officer and President of the Company,
1,400,000&nbsp;options, at an exercise price of $27.81, which
was determined based on the price of the Company&#146;s share on
the date the grant was approved by the shareholders&#146;
meeting; (ii)&nbsp;to the new Chief Executive Officer and
President of the Company, at no consideration, options
exercisable in purchase of 600,000 options at the exercise price
of $30.21; and (iii)&nbsp;to each of the chairman of the Board
of Directors and the chairman of its executive committee,
60,000&nbsp;options, at an exercise price of $27.81.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1999, the Company&#146;s Board of Directors
approved an additional option plan for employees of the Group,
under which senior employees in Israel, Europe and the United
States are to be granted options for up to 4&nbsp;million
ordinary shares of the Company, without consideration. Any
option not exercised by the end of the exercise period will
expire, unless the exercise period is extended by the Board of
Directors. Through December&nbsp;31, 2002, options exercisable
to purchase 2.2&nbsp;million ordinary shares were granted under
this plan. The balance of the options may be granted from time
to time, as determined by the Committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2000, the Company&#146;s Board of
Directors approved an option plan under which, over five years,
employees of the Group will be granted options for up to
13.1&nbsp;million ordinary shares of the Company, without
consideration. Through December&nbsp;31, 2002, the Board of
Directors approved the grant of options for up to
8.1&nbsp;million ordinary shares of which options to purchase
6.75&nbsp;million ordinary shares were granted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2001, the Company&#146;s Board of
Directors approved an option plan, under which options to
purchase 1,257,000 ordinary shares of the Company were granted,
at no consideration, to substantially all employees who were in
the employ of the Group prior to September&nbsp;1, 2000. Each
such employee was granted options to purchase 200&nbsp;ordinary
shares without consideration, at an exercise price of $27.77
(85% of the market value of the Company&#146;s ADR on date of
grant). Certain other employees were granted options under the
same plan, at no consideration, to purchase
170,000&nbsp;ordinary shares of the Company, at an exercise
price of $29.60. The Company accounts for this stock option plan
as a non-compensatory plan in accordance with the provisions of
APB&nbsp;25.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The grant of options to Israeli employees under
the plans described above is to be subject to the terms
stipulated by the Israeli Income Tax Ordinance. Inter alia, the
Ordinance provides that the Company will be allowed to claim as
an expense for tax purposes the amounts credited to the
employees as a benefit, when the related tax is payable by the
employee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The vesting period of the options granted is
generally 2 to 5&nbsp;years from the date of grant and the
rights of the ordinary shares obtained upon exercise of the
options will be identical to those of the other ordinary shares
of the Company. The exercise period of the options granted is
mainly 5 to 8&nbsp;years from the date of grant.
</FONT>

<P align="center"><FONT size="2">F-30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 9&nbsp;&#151; Shareholders&#146; Equity
(continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A summary of the status of the option plans as of
December&nbsp;31, 2002, 2001 and 2000, and changes during the
years ended on those dates, is presented below (the number of
options represents ordinary shares exercisable in respect
thereof):
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance outstanding at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,708,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,181,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,458,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes during the year:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,085,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,388,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,608,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(809,864</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(559,758</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,802,906</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Forfeited
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,354</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,928</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(83,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance outstanding at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,896,394</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,708,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,181,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance exercisable at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,721,748</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,112,668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,628,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The weighted average fair value of options
granted during the year, estimated by using the Black &#38;
Scholes option-pricing model, was $13.08, $16.72 and $11.6 for
the years ended December&nbsp;31, 2002, 2001 and 2000,
respectively. The fair value of the options was estimated on the
date of grant, based on the following weighted average
assumptions: dividend yield of: 2002&nbsp;&#151; 0.6%,
2001&nbsp;&#151; 0.5% and 2000&nbsp;&#151; 0.4%; expected
volatility of: 2002&nbsp;&#151; 33%, 2001&nbsp;&#151; 36% and
2000 &nbsp;&#151; 37%; risk-free interest rates (in dollar
terms) of: 2002&nbsp;&#151; 4%, 2001&nbsp;&#151; 5% and
2000&nbsp;&#151; 6%; and expected lives of: 2002&nbsp;&#151;
4.9&nbsp;years, 2001&nbsp;&#151; 5.2&nbsp;years and
2000&nbsp;&#151; 4.5&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The exercise price of options granted to
employees is, generally, equal to the market price of the
Company&#146;s ADR at the time of grant. In the years ended
December&nbsp;31, 2002, 2001 and 2000, 5,085,132, 3,030,960 and
4,608,700 such options were granted with fair values of
$66.5&nbsp;million, $45.4&nbsp;million and $53.5&nbsp;million,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001, 1,357,200 options were granted at prices
below the market price of the Company&#146;s ADR at the time of
grant. The fair value of such options was $26.9&nbsp;million.
</FONT>

<P align="center"><FONT size="2">F-31
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 9&nbsp;&#151; Shareholders&#146; Equity
(continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes information about
options outstanding at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Number of ordinary shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">issuable upon exercise of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Number of ordinary shares issuable upon exercise of options outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">options vested</FONT></B></TD>
</TR>

<TR>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Balance at</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Balance at</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Range of exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">contractual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">prices</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">8.20&nbsp;-&nbsp;$10.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,437,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,983,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">11.00&nbsp;-&nbsp;$19.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,996,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">718,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24.00&nbsp;-&nbsp;$24.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">700,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">27.00&nbsp;-&nbsp;$28.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,755,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">720,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">29.00&nbsp;-&nbsp;$30.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,865,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">31.00&nbsp;-&nbsp;$32.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,953,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">35.00&nbsp;-&nbsp;$36.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">187,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">8.20&nbsp;-&nbsp;$36.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,896,394</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,721,748</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">d.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Retained earnings:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1)&nbsp;Retained
earnings available for distribution as cash dividends at
December&nbsp;31, 2002, includes amounts, the distribution of
which would attract tax of approximately $100&nbsp;million (see
note&nbsp;10a).
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2)&nbsp;Dividends
are declared and paid in Israeli currency (&#147;NIS&#148;).
Dividends paid per ADR for the years ended December&nbsp;31,
2002, 2001 and 2000 were $0.13, $0.14 and $0.12, respectively.
Subsequent to December&nbsp;31, 2002, the Company declared an
additional dividend of NIS 0.33 per ADR ($0.07 per ADR as of
date of declaration) in respect of the year 2002.
</FONT>

<P align="left">
<B><FONT size="2">Note 10&nbsp;&#151; Income Taxes</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><FONT size="2">a.</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">The Company and its Israeli
    subsidiaries:</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Tax benefits under the Israeli Law for the
    Encouragement of Capital Investments, 1959 (the
    &#147;law&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Expansion projects of the Company and several of
its Israeli subsidiaries have been granted &#147;approved
enterprise&#148; status under the law. Income derived from these
enterprises during a period of 10&nbsp;years from the year in
which these enterprises first realize taxable income, provided
the maximum period to which it is restricted by the law has not
elapsed, is entitled to certain tax benefits&nbsp;&#151; tax
exemption for an initial period of 2 to 10&nbsp;years, having
regard to the benefit route the company had chosen and the area
in which the enterprises are located, and a reduced corporate
tax rate for the remainder of the period. Since the Company is
over 49% foreign-owned, it is entitled to reduced tax at the
rate of 20%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to certain expansions of several
Israeli subsidiaries, investment grants were received from the
State of Israel under the terms of the law (the &#147;government
grant route&#148;). As security for implementation of the
approved projects and compliance with the conditions of the
certificates of approval, floating charges have been registered
on the above companies&#146; assets in favor of the State of
Israel.
</FONT>

<P align="center"><FONT size="2">F-32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 10&nbsp;&#151; Income Taxes
(continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For certain other expansion projects, the Company
and certain Israeli subsidiaries elected to apply for
alternative tax benefits&nbsp;&#151; waiver of grants in return
for tax exemption (the &#147;alternative tax benefits
route&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The periods of tax benefits in respect of
approved enterprises entitled to the said benefits commenced in
1993&nbsp;&#151; 2002. Final approvals in respect of certain
expansion programs have not yet been received. In the event of
the distribution of dividends from the said tax-exempt income
(either under the government grants route or under the
alternative tax benefits route), the amount distributed will be
subject to a 20% tax (see also note&nbsp;1i).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The law also allows accelerated depreciation on
buildings, machinery and equipment used by the &#147;approved
enterprise&#148; during five tax years commencing in the first
year of operation of each asset.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The entitlement to the above benefits is
conditional upon the companies&#146; fulfilling the conditions
stipulated by the law, regulations published thereunder and the
certificates of approval for the specific investments in
approved enterprises. In the event of failure to comply with
these conditions, the benefits may be cancelled and the
companies may be required to refund the amount of the benefits,
in whole or in part, with the addition of interest and linkage
differences to the Israeli consumer price index (the
&#147;Israeli CPI&#148;).
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Measurement of results for tax
    purposes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Results for tax purposes are measured on a real
basis&nbsp;&#151; adjusted for the increase in the Israeli CPI.
As explained in note 1a, the financial statements are presented
in dollars. The difference between the change in the Israeli CPI
and the NIS-dollar exchange rate&nbsp;&#151; both on annual and
cumulative bases&nbsp;&#151; causes a difference between taxable
income and income reflected in these financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Paragraph&nbsp;9(f)&nbsp;of FAS 109,
&#147;Accounting for Income Taxes&#148;, prohibits the
recognition of deferred tax liabilities or assets that arise
from differences between the financial reporting and tax bases
of assets and liabilities that are measured from the local
currency into dollars using historical exchange rates, and that
result from changes in exchange rates or indexing for tax
purposes. Consequently, the abovementioned differences were not
reflected in the computation of deferred tax assets and
liabilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Tax benefits under the Israeli Law for the
    Encouragement of Industry (Taxes), 1969</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and certain of its Israeli
subsidiaries currently qualify as &#147;industrial
companies&#148; under the above law. In accordance with this law
such companies are entitled to certain benefits including
accelerated depreciation on industrial buildings and equipment,
a deduction of 12.5% per year of the purchase price of a
good-faith acquisition of patent and certain other intangible
property rights and the right to file consolidated tax returns.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Currently, the Company files consolidated tax
returns together with certain of its Israeli subsidiaries.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Tax rates in Israel applicable to income
    from other sources</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income not eligible for &#147;approved
enterprise&#148; benefits, mentioned above, is taxed at the
regular rate of 36%.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Recent Israeli Tax Reform
    Legislation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2002, the Israeli parliament approved a
law enacting extensive changes to Israel&#146;s tax law
generally effective January 1, 2003 (the &#147;Tax Reform
Legislation&#148;). Among the key provisions of the tax
</FONT>

<P align="center"><FONT size="2">F-33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 10&nbsp;&#151; Income Taxes
(continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">Reform Legislation as applicable to Teva is the
introduction of the &#147;controlled foreign corporation&#148;
concept according to which an Israeli company may become subject
to Israeli taxes on certain income of a non-Israeli subsidiary
if the subsidiary&#146;s primary source of income is passive
income (such as interest, dividends, royalties, rental income or
capital gains). An Israeli company that is subject to Israeli
taxes on the income of its non-Israeli subsidiaries will receive
a credit for income taxes paid by the subsidiary in its country
of residence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Israeli
subsidiaries:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Non-Israeli subsidiaries are taxed according to
the tax laws in their country of residence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income taxes:</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term deferred tax assets
    (liabilities)&nbsp;&#151; net:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Inventory reserve
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales allowance reserve
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provisions for employee related obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized income from intercompany sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss carryforward
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term deferred tax assets
    (liabilities)&nbsp;&#151; net:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant and equipment and intangible
    assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(51.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provisions for employee related obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Carryforward losses and deductions*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Valuation allowance&nbsp;&#151; in respect of
    carryforward losses and deductions that may not be utilized
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(65.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">This amount represents the tax effect of
    carryforward losses and deductions and expires as follows:
    2004-2006&nbsp;&#151; $27.4&nbsp;million; 2007-2012&nbsp;&#151;
    $26.7 million. The remaining balance&nbsp;&#151;
    $67.6&nbsp;million&nbsp;&#151; can be utilized with no
    expiration date.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-34
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 10&nbsp;&#151; Income Taxes
(continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The deferred income taxes are reflected in the
balance sheets among:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investments and other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">d.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before
income taxes is composed of the following:</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">The Company and its Israeli subsidiaries
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">282.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-Israeli subsidiaries
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">e.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The provision
for income taxes included the following components:</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">In Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outside Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">In Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outside Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 10&nbsp;&#151; Income Taxes
(continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A reconciliation of the theoretical tax expense,
assuming all income is taxed at the regular rate applicable to
income of companies in Israel (36%) and the actual tax expense,
is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before taxes on income, per consolidated
    statements of income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Theoretical tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease in tax arising from different statutory
    tax rates applicable to non-Israeli subsidiaries
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tax benefits arising from reduced tax rates<BR>
    under benefit programs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(81.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase (decrease) in taxes resulting from
    permanent differences:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tax exempt income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Disallowable deductions (in 2000&nbsp;&#151;
    mainly in respect of acquisition of research and development in
    process)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Difference between income reported for tax
    purposes and income for financial reporting purposes&nbsp;&#151;
    net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes in the consolidated statements of
    income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">f.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax
assessments:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has received final tax assessments
through tax year 1997. The subsidiaries have received final tax
assessments through tax years 1991-2001.
</FONT>

<P align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories:</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Raw and packaging materials
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Products in process
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">133.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Finished products
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchased products
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">774.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Materials in transit and payments on account
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">781.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">570.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-36
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information (continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term
credit:</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">Short-term credit was obtained mainly from banks
    at a weighted average interest rate of 4.36%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">As of December&nbsp;31, 2002, the Group had
    $408&nbsp;million available under unused lines of credit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
payable and accruals:</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">189.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales reserves and allowances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">172.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employees and employee related obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">785.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">531.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">d.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial
instruments and risks management:</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 1)&nbsp;Foreign exchange risk
    management</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Group enters into forward exchange contracts in foreign
    currencies and purchases and writes foreign currency options in
    order to hedge cash flows (mainly in dollars) resulting from
    existing assets and liabilities as well as anticipated
    transactions for the current year which are probable, in
    currencies other than the functional currency. In addition, the
    Group takes steps to reduce exposure by using
    &#147;natural&#148; hedging. The Company also acts to offset
    risks in opposite directions among the companies in the Group.
    The currency hedged items are usually denominated in the
    following currencies: European (mainly&nbsp;&#151; the Euro and
    Hungarian Forint), Israeli (NIS)&nbsp;and Canadian Dollars
    (CAD$). The writing of options is part of a comprehensive
    currency hedging strategy. These transactions do not qualify for
    hedge accounting under FAS&nbsp;133.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-37
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    notional amounts of foreign currency derivatives are as follows:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Currency options purchased for conversion of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EURO into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NIS into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CAD$ into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hungarian Forints (HUF)&nbsp;into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">HUF into EUR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">HUF into Great Britain Pounds (GBP)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Currency options written for conversion of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EURO into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NIS into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CAD$ into dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">HUF into dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">HUF into EUR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">HUF into GBP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Forward exchange contracts for conversion of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dollars into HUF
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">GBP into HUF
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EURO into HUF
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CAD$ into HUF
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NIS into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CAD into Dollars
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
    transactions are for periods of less than one year. As the
    counter parties to the derivatives are banks, the Company
    considers the inherent credit risks to be remote.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 2)&nbsp;Interest rate swaps</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
    2002, the Company entered into two interest rate swap agreements
    with respect to a portion of the debentures issued in a private
    placement during 1998 (see note 6a).
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    March 2002, the Company entered into a 6.5 year $75 million
    notional amount interest rate swap agreement, the effect of
    which is that, for the applicable notional amount, the Company
    pays interest at the rate of LIBOR +0.65% (2.1% at
    December&nbsp;31, 2002) and receives interest at the rate of
    6.9%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    September 2002, the Company entered into a 6 year $45 million
    notional amount interest rate swap agreement, the effect of
    which is that, for the applicable notional amount, the Company
    pays interest at the rate of 4.5% and receives interest at the
    rate of LIBOR +0.65%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
    the cash flows of interest payable and receivable under the two
    interest rate swap transactions are to take place on the same
    dates through the remaining life of these transactions, under
    FAS&nbsp;133, only the first interest rate swap transaction
    qualifies for hedge accounting and is accounted for as such, as
    more fully explained in note&nbsp;6a.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-38
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 3)&nbsp;Fair value of financial
    instruments</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    financial instruments of the Group consist mainly of cash and
    cash equivalents, marketable securities, current and non-current
    receivables, short-term credit, accounts payable and accruals,
    long-term loans and other long-term liabilities, convertible
    senior debentures and derivatives.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    fair value of the financial instruments included in working
    capital and non-current receivables of the Group is usually
    identical or close to their carrying value. The fair value of
    long-term bank loans also approximates their carrying value,
    since they bear interest at rates close to the prevailing market
    rates. The fair value of the convertible senior debentures and
    long-term debentures, based on quoted market values and
    prevailing market rates, amounted to $1,584&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    fair value and the carrying amounts of derivatives at
    December&nbsp;31, 2002, is an asset of $ 26.6&nbsp;million
    (December&nbsp;31, 2001&nbsp;&#151; $1.3&nbsp;million). The fair
    value of derivatives generally reflects the estimated amounts
    that Teva would receive or pay to terminate the contracts at the
    reporting dates.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2"> e.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
on operating segments:</FONT></B>

<P align="left">
<B><I><FONT size="2"> Operating segments</FONT></I></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> 1)&nbsp;General
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Group&#146;s reportable segments are strategic businesses
    differentiated by the nature of their products and customers.
    The segments are managed separately due to the differences in
    production technologies and marketing methods and can be
    described as follows:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pharmaceutical segment&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">development, production, marketing and
    distribution of medicines in various dosages and forms, in most
    areas of medicinal treatment and disposable hospital supplies.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Active Pharmaceutical Ingredients
    (&#147;A.P.I.&#148;) segment&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <BR>
    <FONT size="2">development, production, marketing and
    distribution of A.P.I. for the pharmaceutical industry including
    the Group&#146;s pharmaceutical segment.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><I><FONT size="2">2)&nbsp;</FONT></I></B></TD>
    <TD align="left">
    <B><I><FONT size="2">Information on revenues and assets of the
    reportable operating segments</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;Measurement
    of revenues and assets of the operating segments:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    measurement of revenues and assets of the reportable operating
    segments is based on the same accounting principles applied in
    these financial statements.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Segment
    profits reflect the income from operations of the segment and do
    not include net interest income or expense, minority interest
    and income tax expenses, since those items are not allocated to
    the segments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
    of the A.P.I. segment to the pharmaceutical segment are recorded
    at the market prices of sales of similar products to non-related
    customers.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;Financial
    data relating to reportable operating segments:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pharmaceuticals</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">A.P.I.</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December&nbsp;31, 2002:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net sales:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">To unaffiliated customers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,240.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">259.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,518.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intersegment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,240.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">464.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,725.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">426.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">622.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets (at end of year)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,986.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,512.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill (at end of year)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">534.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenditures for segment assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December&nbsp;31, 2001:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net sales:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">To unaffiliated customers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,838.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intersegment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,838.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">369.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,228.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">296.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">429.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets (at end of year)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,481.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">352.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,858.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill (at end of year)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">459.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">466.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenditures for segment assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December&nbsp;31, 2000:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net sales:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">To unaffiliated customers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,548.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">180.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,749.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intersegment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,548.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">315.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,885.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">326.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets (at end of year)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">316.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,681.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill (at end of year)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">474.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">482.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenditures for segment assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;Following
    is a reconciliation of the net sales, operating income and
    assets of the reportable segments to the data included in the
    consolidated financial statements:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net sales:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total sales of reportable segments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,705.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,207.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,863.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Elimination of intersegment sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(206.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(151.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total consolidated net sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,518.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,749.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating income:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total operating income of reportable segments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">427.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amounts not allocated to segments:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of research and development in process
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Profits not yet realized
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(38.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financial expenses&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets (at end of year):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets of reportable segments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,483.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,834.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,659.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total goodwill of reportable segments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">466.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">482.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Elimination of intersegment balances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Elimination of unrealized income from inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(50.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets not allocated to segments:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">956.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">561.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investments and other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">313.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt issuance costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated assets (at end of year)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,626.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,460.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,855.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information (continued)</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2"> 3)&nbsp;Geographical
    information</FONT></I></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
    sales by geographical areas:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">231.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">241.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,473.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,129.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">882.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Europe
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">599.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">456.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">223.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,518.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,749.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">The geographical sales information is classified
    by the geographical location of the customers.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Property, plant and equipment&nbsp;&#151; by
    geographical location:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Israel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">311.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">290.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hungary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Europe, excluding Hungary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Canada
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">675.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">554.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">f.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring
expenses:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated statement of income for the year
ended December&nbsp;31, 2001 includes restructuring expenses in
a total amount of $15.7&nbsp;million, including an impairment
charge of $9.7&nbsp;million relating to property, plant and
equipment. The remaining balance relates mainly to the closure
of plants of the Group and the moving of pharmaceutical
production lines between locations, according to exit plans,
which commenced in the fourth quarter of 2001. As a result of
the structural changes, the Group expects to terminate the
employment of 198&nbsp;employees (mainly management, production
and sales personnel), at a total cost of $2.3&nbsp;million.
Through December&nbsp;31, 2002, the employment of
76&nbsp;employees has been terminated at a cost of
$1.1&nbsp;million; other restructuring expenses paid through
December&nbsp;31, 2002, amounted to $2.5&nbsp;million.
Management expects to complete the restructuring plan during
2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">g.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition of
research and development in process:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amounts charged to income in the year ended
December&nbsp;31, 2000 relate mainly to in-process research and
development, identified at the time of acquisition of
Novopharm&nbsp;&#151; see note&nbsp;2a.
</FONT>

<P align="center"><FONT size="2">F-42
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2">Note 11&nbsp;&#151; Additional Financial
Statement Information (continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">h.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial
expenses&nbsp;&#151; net:</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exchange differences&nbsp;&#151; net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss (income)&nbsp;from securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">i.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings per
ADR:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The net income and the weighted average number of
ADRs used in computation of basic and diluted earnings per ADR
for the years ended December&nbsp;31, 2002, 2001 and 2000 are as
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(U.S. $ in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense on convertible senior debentures
    due 2005, and issuance costs, net of tax benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income used for the computation of diluted
    earnings per ADR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">426.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">286.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average number of ADRs used in the
    computation of basic earnings per ADR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional shares from the assumed exercise of
    employee stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average number of additional shares
    issued upon the assumed conversion of the convertible senior
    debentures due 2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average number of ADRs used in the
    computation of diluted earnings per ADR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the sake of clarity, the following table
details the number of ordinary shares and special shares less
ordinary shares held by subsidiaries as of each balance sheet
date.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Number of shares,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ordinary shares&nbsp;&#151; issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Special shares&nbsp;&#151; see note&nbsp;2a
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">269.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">269.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ordinary shares, held by subsidiaries
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-43
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">INDEPENDENT AUDITORS&#146; REPORT</FONT></B>

<P align="left">
<FONT size="2">To the shareholders of Biogal Pharmaceutical Co.
Ltd.:
</FONT>

<P align="left">
<FONT size="2">We have audited the statements of income and
comprehensive income, shareholders&#146; equity, and cash flows
for the year ended December&nbsp;31, 2000 of Biogal
Pharmaceutical Co. Ltd. (a company incorporated in Hungary).
These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
</FONT>

<P align="left">
<FONT size="2">We conducted our audit in accordance with
generally accepted auditing standards in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provide a reasonable basis for our opinion.
</FONT>

<P align="left">
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the results
of operations of Biogal Pharmaceutical Co. Ltd. and its cash
flows for the year ended December&nbsp;31, 2000, in conformity
with generally accepted accounting principles in the United
States of America.
</FONT>

<P align="left">
<FONT size="2">/s/ KPMG HUNG&#193;RIA KFT.
</FONT>

<P align="left">
<FONT size="2">Budapest, Hungary
</FONT>

<DIV align="left">
<FONT size="2">January&nbsp;22, 2001
</FONT>
</DIV>

<P align="center"><FONT size="2">F-44
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<IMG src="y84058y8405801.gif" alt="(EHRENKRANTZ STERLING &#38; CO LOGO-LETTERHEAD)">
</DIV>

<P align="center">
<B><FONT size="2">INDEPENDENT AUDITOR&#146;S REPORT</FONT></B>

<P align="left">
<FONT size="2">The Board of Directors and Shareholders
</FONT>

<DIV align="left">
<FONT size="2">Plantex-U.S.A., Inc.
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">Englewood Cliffs, New Jersey
</FONT>
</DIV>

<P align="left">
<FONT size="2">We have audited the accompanying balance sheet of
Plantex-U.S.A., Inc., as of December&nbsp;31, 2000 and the
related statements of income and comprehensive income, changes
in shareholders&#146; equity and cash flows for the year then
ended. These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
</FONT>

<P align="left">
<FONT size="2">We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
</FONT>

<P align="left">
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Plantex-U.S.A., Inc. as of December&nbsp;31, 2000
and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles
generally accepted in the United States of America.
</FONT>

<P align="left">
<FONT size="2">/s/ EHRENKRANTZ STERLING &#38; CO. L.L.C.
</FONT>

<DIV align="left">
<FONT size="2">Certified Public Accountants
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">January&nbsp;17, 2001
</FONT>
</DIV>

<P align="center">
<FONT size="2">Member Of
<IMG src="y84058y8405802.gif" alt="(DFK LOGO)"> International With
Offices In Principal Cities Throughout The World
</FONT>

<P align="center"><FONT size="2">F-45
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "<B>REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE</B>" -->
<DIV align="left"><A NAME="025"></A></DIV>

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT ACCOUNTANTS ON</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL STATEMENT SCHEDULE</FONT></B>
</DIV>

<P align="left">
<FONT size="2">To the Board of Directors of
</FONT>

<DIV align="left">
<FONT size="2">Teva Pharmaceutical Industries Limited
</FONT>
</DIV>

<P align="left">
<FONT size="2">Our audits of the consolidated financial
statements referred to in our report dated February&nbsp;17,
2003 appearing in the 2002 Annual Report to the Shareholders of
Teva Pharmaceutical Industries Limited also included an audit of
Financial Statement Schedule&nbsp;II&nbsp;&#151; Valuation and
Qualifying Accounts&nbsp;&#151; listed in Item&nbsp;18 of this
Form&nbsp;20-F. In our opinion, the schedule presents fairly, in
all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.
</FONT>

<P align="left">
<FONT size="2">/s/ KESSELMAN&nbsp;&#38; KESSELMAN
</FONT>

<DIV align="left">
<HR size="1" width="50%" align="left" noshade>
</DIV>

<DIV align="left">
<FONT size="2">Kesselman&nbsp;&#38; Kesselman
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">Certified Public Accountants (Isr.)
</FONT>
</DIV>

<P align="left">
<FONT size="2">Tel-Aviv, Israel
</FONT>

<DIV align="left">
<FONT size="2">February&nbsp;17, 2003
</FONT>
</DIV>

<P align="center"><FONT size="2">S-1
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "<B>TEVA PHARMACEUTICAL INDUSTRIES LIMITED SCHEDULEII&nbsp;&#151;&nbsp;VALUATION AND QUALIFYING ACCOUNTS</B>" -->
<DIV align="left"><A NAME="026"></A></DIV>

<P align="center">
<B><FONT size="2">TEVA PHARMACEUTICAL INDUSTRIES
LIMITED</FONT></B>

<P align="center">
<B><FONT size="2">SCHEDULE&nbsp;II&nbsp;&#151;&nbsp;VALUATION
AND QUALIFYING ACCOUNTS</FONT></B>

<DIV align="center">
<B><FONT size="2">Three Years Ended December&nbsp;31,
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(U.S. $ in millions)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Column A</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Column B</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Column C</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Column D</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Column E</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Balance at</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Charged to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Charged</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Balance</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">beginning</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">costs and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">at end of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">expenses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">accounts</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deductions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">period</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance for doubtful accounts:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December 31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December 31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December 31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance in respect of carryforward tax losses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December 31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December 31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year ended December 31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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FORM 20-F
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form 20-F
o
REGISTRATION STATEMENT PURSUANT TO
    SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
    1934
Or
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,
    2002
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
    from           to
Commission File number: 0-16174
Teva Pharmaceutical Industries
Limited
(Exact name of Registrant as specified in its
charter)
N/A
ISRAEL
(Translation of Registrant's
name into English)
(Jurisdiction of incorporation or
organization)
5 Basel Street
P.O. Box 3190
Petach Tikva 49131, Israel
(Address of principal executive
offices)
Securities registered or to be registered
pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
None
None
Securities registered or to be registered
pursuant to Section 12(g) of the Act:
American Depositary Shares (as evidenced by
American Depositary Receipts),
each representing one Ordinary Share
(Title of Class)
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.
258,648,290 Ordinary Shares
186,884,975 American Depositary Shares
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.
Yes
þ
No
o
Indicate by check mark which financial statement
item the registrant has elected to follow.
Item 17
o
Item 18
þ
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
PART I
ITEM 3: KEY INFORMATION
SELECTED FINANCIAL DATA
RISK FACTORS
ITEM 4: INFORMATION ON THE COMPANY
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
ITEM 8: FINANCIAL INFORMATION
ITEM 9: THE OFFER AND LISTING
ITEM 10: ADDITIONAL INFORMATION
MEMORANDUM AND ARTICLES OF ASSOCIATION
FOREIGN EXCHANGE REGULATIONS
U.S. FEDERAL INCOME TAX CONSIDERATIONS
ISRAELI TAXATION
DOCUMENTS ON DISPLAY
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II
ITEM 15: CONTROLS AND PROCEDURES
PART III
ITEM 18: FINANCIAL STATEMENTS
ITEM 19: EXHIBITS
SIGNATURES
CERTIFICATIONS
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
TEVA PHARMACEUTICAL INDUSTRIES LIMITED SCHEDULEII — VALUATION AND QUALIFYING ACCOUNTS
SUBSIDIARIES
CONSENT OF KESSELMAN & KESSELMAN
CONSENT OF KPMG HUNGARIA KFT
CONSENT OF EHRENKRANTZ STERLING & CO. LLC
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Table of Contents
TABLE OF CONTENTS
Page
Forward-Looking Statements
2
PART I
Item 1
Identity of Directors, Senior Management and
    Advisers
Not applicable
Item 2
Offer Statistics and Expected Timetable
Not applicable
Item 3
Key Information
3
Selected Financial Data
3
Risk Factors
6
Item 4
Information on the Company
11
Item 5
Operating and Financial Review and Prospects
28
Item 6
Directors, Senior Management and Employees
41
Item 7
Major Shareholders and Related Party Transactions
49
Item 8
Financial Information
50
Item 9
The Offer and Listing
54
Item 10
Additional Information
56
Memorandum and Articles of Association
56
Foreign Exchange Regulations
58
U.S. Federal Income Tax Considerations
58
Israeli Taxation
60
Documents on Display
62
Item 11
Quantitative and Qualitative Disclosures About
    Market Risk
63
Item 12
Description of Securities Other Than Equity
    Securities
Not applicable
PART II
Item 13
Defaults, Dividends Arrearages and Delinquencies
Not applicable
Item 14
Material Modifications to the Rights of Security
    Holders and Use of Proceeds
Not applicable
Item 15
Controls and Procedures
66
Item 16
[Reserved]
PART III
Item 17
Financial Statements
Not applicable
Item 18
Financial Statements
67
Item 19
Exhibits
68
Unless otherwise indicated, all references to the
"Company", "we", "our" or
"Teva" refer to Teva Pharmaceutical Industries Limited
and its subsidiaries.
1
Table of Contents
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this report
contain or incorporate by reference some forward-looking
statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to
historical or current facts. Such statements may include words
such as "anticipate", "estimate",
"expect", "project", "intend",
"plan", "believe" and other words and terms
of similar meaning in connection with any discussion of future
operating or financial performance. In particular, these
statements include, among other things, statements relating to:
•
our business strategy;
•
the development of our products;
•
our projected capital expenditures; and
•
our liquidity.
This report contains or incorporates by reference
forward-looking statements which express the beliefs and
expectations of management. Such statements are based on current
expectations and involve a number of known and unknown risks and
uncertainties that could cause our future results, performance
or achievements to differ significantly from the results,
performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause
or contribute to such differences include the impact of
pharmaceutical industry regulation, the difficulty of predicting
U.S. Food and Drug Administration ("FDA") and other
regulatory authority approvals, the regulatory environment and
changes in the health policies and structures of various
countries, acceptance and demand for new pharmaceutical products
and new therapies, the impact of competitive products and
pricing, uncertainties regarding market acceptance of innovative
products newly launched, currently being sold or in development,
the impact of restructuring of clients, reliance on strategic
alliances, reliance on a strategy of acquiring companies,
exposure to product liability claims, dependence on patent and
other protections for our innovative products, exposure to
potential patent liability damages for products sold "at
risk", i.e., prior to the final adjudication of patent
issues, fluctuations in currency, exchange and interest rates,
operating results and other factors that are discussed herein
and in our other filings made with the SEC.
We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new
information, future events or otherwise. You are advised,
however, to consult any additional disclosures we make in our
6-K reports to the SEC. Also note that we provide a cautionary
discussion of risks and uncertainties under "Risk
Factors" on page 6 of this report. These are factors
that we think could cause our actual results to differ
materially from expected results. Other factors besides those
listed here could also adversely affect us. This discussion is
provided as permitted by the Private Securities Litigation
Reform Act of 1995.
2
Table of Contents
PART I
ITEM 3:     KEY
INFORMATION
SELECTED FINANCIAL DATA
During 2000, the Israeli Securities Law was
amended to allow Israeli companies, such as Teva, whose
securities are listed both on the Tel Aviv Stock Exchange and on
certain stock exchanges in the United States (including Nasdaq),
to report exclusively under SEC rules and accounting principles
generally accepted in the United States
("US GAAP"). Accordingly, on December 18,
2000, Teva's shareholders approved a resolution under which
Teva's financial statements would be prepared under SEC
rules and US GAAP, rather than under Israeli Securities
Regulations and accounting principles generally accepted in
Israel ("Israeli GAAP"). All financial statements
included in this report and all financial information released
in Israel are now presented solely under US GAAP.
The following selected financial data for each of
the years in the three-year period ended December 31, 2002
and at December 31, 2002 and 2001 are derived from
Teva's audited consolidated financial statements set forth
elsewhere in this report, which have been prepared in accordance
with US GAAP.
The selected financial data for each of the years
in the two-year period ended December 31, 1999 and at
December 31, 2000 and 1999 are derived from other audited
financial statements not appearing in this report, which have
been prepared in accordance with US GAAP.
The selected financial data at December 31,
1998 are derived from other audited financial statements not
appearing in this report, which have been prepared in accordance
with Israeli GAAP. Such selected financial data have been
amended in accordance with US GAAP in connection with the
change of Teva's financial reporting from Israeli GAAP to
US GAAP.
The selected financial data should be read in
conjunction with the other financial statements, related notes
and other financial information included in this report.
The currency of the primary economic environment
in which the operations of Teva and its subsidiaries in Israel
and in the United States are conducted is the U.S. dollar.
The functional currency of Teva's other subsidiaries
(principally operating in Europe and Canada) is their respective
local currency.
3
Table of Contents
Operating Data
For the Year Ended December 31
2002
2001
2000
1999
1998
U.S. dollars in millions (except per ADR amounts)
Sales
2,518.6
2,077.4
1,749.9
1,282.4
1,115.9
Cost of sales
1,423.2
1,230.1
1,058.0
767.6
694.8
Gross profit
1,095.4
847.3
691.9
514.8
421.1
Research and development expenses:
Total expenses
192.6
168.6
132.3
91.6
75.6
Less participations and grants
27.6
61.4
27.7
9.8
7.5
Research and development — net
165.0
107.2
104.6
81.8
68.1
Selling, general and administrative expenses
406.4
358.1
301.0
223.2
199.1
Acquisition of research and development in process
35.7
17.7
13.5
Restructuring expenses
15.7
15.0
Operating income
524.0
366.3
250.6
192.1
125.4
Financial expenses — net
24.6
26.0
42.2
30.1
23.3
Losses from realization of assets and
    discontinuation of activities
3.3
Income before income taxes
499.4
340.3
208.4
162.0
98.8
Income taxes
84.8
63.6
59.6
45.4
28.9
414.6
276.7
148.8
116.6
69.9
Share in profits (losses) of associated companies
(2.7
)
0.8
0.4
(0.6
)
0.9
Minority interests in (profits) losses of
    subsidiaries
(1.6
)
0.7
(0.8
)
0.8
Net income
410.3
278.2
148.4
116.8
70.8
Earnings per ADR* — Basic ($)
1.55
1.05
0.58
0.48
0.29
Earnings per ADR* — Diluted ($)
1.52
1.02
0.57
0.48
0.29
Weighted average number of ADRs** (in millions):
Basic
264.5
264.5
257.9
245.2
245.2
Diluted
280.8
280.9
263.7
246.6
246.2
*
Historical figures have been adjusted to reflect
    the two for one stock splits effected in December 2002 and
    February 2000.
**
Each ADR represents one ordinary share.
4
Table of Contents
Balance Sheet Data
As at December 31
2002
2001
2000
1999
1998
U.S. dollars in millions
Working capital
1,377.2
1,439.8
825.1
373.5
241.0
Total assets
4,626.8
3,460.2
2,855.6
1,755.3
1,475.3
Short-term credit, including current maturities:
Convertible senior debentures (short-term)
562.4
—
—
—
—
Other
176.1
206.5
341.5
276.3
324.5
Total short-term debt
738.5
206.5
341.5
276.3
324.5
Long-term debt, net of current maturities:
Convertible senior debentures
810.0
912.0
550.0
—
—
Other
351.4
334.9
263.9
391.4
201.7
Total long-term debt
1,161.4
1,246.9
813.9
391.4
201.7
Minority interests
4.9
2.2
1.6
—
0.8
Shareholders' equity
1,829.4
1,380.7
1,151.3
747.2
664.8
Dividends
For over 30 years Teva has paid dividends,
and since 1987 it has paid dividends on a regular quarterly
basis. Future dividend policy will be reviewed by the Board of
Directors based upon conditions then existing, including
Teva's earnings, financial condition, capital requirements
and other factors. Dividends are declared and paid in New
Israeli Shekels. Dividends are converted into dollars and paid
by the depositary of the ADRs for the benefit of owners of ADRs.
Dividends paid by an Israeli company to
shareholders residing outside Israel are currently subject to
withholding of Israeli income tax at a rate of up to 25%. In
Teva's case, the applicable withholding tax rate will
depend on the particular Israeli production facilities that have
generated the earnings that are the source of the dividend and,
accordingly, the applicable rate will change from time to time.
The rate of tax withheld on the dividend declared for the fourth
quarter of 2002 was 19%.
The following table sets forth the amounts of the
dividends paid in respect of each period indicated prior to
deductions for applicable Israeli withholding taxes (in cents
per ADR). All the figures have been adjusted to reflect the 2:1
stock split in December 2002.
2002
2001
2000
1999
1998
1st interim
4.4
3.3
2.7
1.9
2.1
2nd interim
4.5
3.2
2.8
1.8
2.0
3rd interim
4.5
3.2
2.8
1.8
1.8
4th interim
6.7
*
4.7
3.3
2.8
1.9
*
Declared but not paid. Based on the rate of
    exchange on the announcement date.
5
Table of Contents
RISK FACTORS
Risks Associated with Teva and the
Pharmaceutical Industry
Our success depends on our ability to
    successfully develop and commercialize additional pharmaceutical
    products.
Our future results of operations depend, to a
significant degree, upon our ability to successfully
commercialize additional generic and/or innovative branded
pharmaceutical products. We must develop, test and manufacture
generic products as well as prove that our generic products are
the bio-equivalent of their branded counterparts. All of our
products must meet regulatory standards and receive regulatory
approvals. The development and commercialization process,
particularly with respect to innovative products, is both time
consuming and costly and involves a high degree of business
risk. Our products currently under development, if and when
fully developed and tested, may not perform as we expect,
necessary regulatory approvals may not be obtained in a timely
manner, if at all, and such products may not be able to be
successfully and profitably produced and marketed. Delays in any
part of the process or our inability to obtain regulatory
approval of our products (including the products filed by IMPAX
Laboratories Inc. and Biovail Corporation for which we have
exclusive marketing rights in the U.S.) could adversely affect
our operating results by restricting our introduction of new
products. The continuous introduction of new generic products is
critical to our business.
Our revenues and profits from any
    particular generic pharmaceutical products decline as our
    competitors introduce their own generic
    equivalents.
Selling prices of generic drugs typically
decline, sometimes dramatically, as additional companies receive
approvals for a given product and competition intensifies. To
the extent that we succeed in being the first to market a
generic version of a significant product, our sales and
profitability can be substantially increased in the period
following the introduction of such product and prior to a
competitor's introduction of the equivalent product. Our
ability to sustain our sales and profitability on any product
over time is dependent on both the number of new competitors for
such product and the timing of their approvals. Our overall
profitability depends on our ability to continuously and timely
introduce new products.
Our generic pharmaceutical products face
    intense competition from brand-name companies that sell their
    own generic products or successfully extend their market
    exclusivity period.
Competition in the U.S. generic pharmaceutical
market continues to intensify as the pharmaceutical industry
adjusts to increased pressures to contain health care costs.
Brand-name companies continue to sell their products into the
generic market directly by acquiring or forming strategic
alliances with generic pharmaceutical companies. No regulatory
approvals are required for a brand-name manufacturer to sell
directly or through a third party to the generic market.
Brand-name manufacturers do not face any other significant
barriers to entry into such market. In addition, such companies
continually seek new ways to defeat generic competition, such as
filing new patents on drugs whose original patent protection is
about to expire, developing patented controlled-release
products, changing product claims and product labeling or
developing and marketing as over-the-counter products those
branded products which are about to face generic competition.
Recent changes in the regulatory
    environment may prevent us from exploiting the exclusivity
    periods that are critical to the success of our generic
    products.
The FDA's policy regarding the award of
180-days market exclusivity to generic manufacturers who
challenge patents relating to specific products continues to be
the subject of much litigation in the United States. The
FDA's current interpretation of the Waxman-Hatch Act is to
award 180 days of exclusivity to the first generic
manufacturer who files a Paragraph IV certification under
the Act challenging the patent of the branded product,
regardless of whether the manufacturer was sued for patent
infringement. Although the FDA's interpretation may benefit
some of the products in our pipeline, it may adversely affect
others.
6
Table of Contents
The Waxman-Hatch Act provides that the period of
180-day exclusivity is triggered by the earlier of a court
decision finding the patent at issue invalid or not infringed or
the commercial marketing of the product. Under certain
circumstances, we may not be able to exploit our 180-day
exclusivity period completely since it may be triggered prior to
our being able to market the product.
For example, recent court decisions have
interpreted the 180-day exclusivity period as starting from an
initial ruling by a federal district court (instead of a final,
unappealable ruling) regarding the validity or infringement of a
patent. If we choose to bring a product to market prior to
receiving a final ruling and an appellate court overturns the
initial ruling, we could face significant infringement damages.
These recent court decisions may cause us to take on patent
risks that we were not exposed to prior to those decisions in
order to benefit from the 180-day exclusivity period, or,
conversely, we may choose not to take advantage of the 180-day
exclusivity period rather than risk an adverse ruling in an
appellate court. In addition to these issues, our patent
challenges may be unsuccessful, which may result in a bar to the
FDA granting market approval until the relevant patent expires.
Another recent FDA ruling allows for joint 180-day exclusivity
under certain circumstances. As a result, there may be certain
circumstances in which we may share our exclusivity with one or
more companies.
If we elect to sell a generic product prior
    to the completion of all appellate level patent litigation, we
    could be subject to liabilities for damages if a lower court
    judgment upon which we are relying is reversed.
At times we seek approval to market generic
products before the expiration of patents for those products,
based upon our belief that such patents are invalid,
unenforceable, or would not be infringed by Teva's
products. As a result, we often face significant patent
litigation. Depending upon a complex analysis of a variety of
legal and commercial factors, if we win a lower court decision
in such patent litigation, we may, in certain circumstances,
elect to market a generic product even though an appeal of the
lower court decision is pending. Should we elect to proceed in
this manner, we could face substantial patent liability damages
were a higher court to overturn the trial court's decision.
Our sales of Copaxone® could be
    adversely affected by competition.
Copaxone®, is our leading innovative
product, from which we derive substantial revenues and profits.
To date, we and our marketing partners have been successful in
our efforts to establish Copaxone® as a leading therapy for
multiple sclerosis and have increased our global market share
among the four currently available major therapies for multiple
sclerosis. However, Copaxone® faces intense competition,
including as a result of the recent entry of Serono SA's
beta-interferon product, Rebif®, into the U.S. market and
the role that Pfizer Inc. has recently assumed as a co-marketer
with Serono of this product in the United States.
We are subject to government regulation
    that increases our costs and could prevent us from marketing or
    selling our products.
We are subject to extensive pharmaceutical
industry regulations in Israel, the United States, England,
Hungary, the Netherlands, Canada, France, Italy and other
jurisdictions. We cannot predict the extent to which we may be
affected by legislative and other regulatory developments
concerning our products.
We are dependent on obtaining timely approvals
before marketing most of our products. In the United States, any
manufacturer failing to comply with FDA or other applicable
regulatory agency requirements may be unable to obtain approvals
for the introduction of new products and, even after approval,
initial product shipments may be delayed. The FDA also has the
authority to revoke drug approvals previously granted and remove
from the market previously approved drug products containing
ingredients no longer approved by the FDA. Our major facilities,
both in the United States and outside the United States, and
products are periodically inspected by the FDA, which has
extensive enforcement
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powers over the activities of pharmaceutical
manufacturers, including the power to seize, force to recall and
prohibit the sale or import of non-complying products, and halt
operations of and criminally prosecute non-complying
manufacturers.
In Europe and Israel, the manufacture and sale of
pharmaceutical products is regulated in a manner substantially
similar to that in the United States. Legal requirements
generally prohibit the handling, manufacture, marketing and
importation of any pharmaceutical product unless it is properly
registered in accordance with applicable law. The registration
file relating to any particular product must contain medical
data related to product efficacy and safety, including results
of clinical testing and references to medical publications as
well as detailed information regarding production methods and
quality control. Health ministries are authorized to cancel the
registration of a product if it is found to be harmful or
ineffective or manufactured and marketed other than in
accordance with registration conditions.
We may not be able to successfully
    identify, consummate and integrate recent and future
    acquisitions.
In the past, we have grown, in part, through a
number of significant acquisitions. We plan to remain frequently
engaged in various stages of evaluating or pursuing potential
acquisitions and may in the future acquire other pharmaceutical
and active pharmaceutical ingredients businesses and seek to
integrate them into our own operations. The recent and future
acquisitions of additional companies involve risks that could
adversely affect our future revenues and operating results. For
example:
•
We may not be able to identify suitable
    acquisition candidates or to acquire companies on favorable
    terms.
•
We compete with others to acquire companies. We
    believe that this competition will increase and may result in
    decreased availability or increased prices for suitable
    acquisition candidates.
•
We may not be able to obtain the necessary
    financing, on favorable terms or at all, to finance any of our
    potential acquisitions.
•
We may not be able to obtain the necessary
    regulatory approvals, including the approval of anti-competition
    regulatory bodies, in any countries in which we may seek to
    consummate potential acquisitions.
•
We may ultimately fail to close an acquisition
    even if we announce that we plan to acquire a company.
•
We may fail to integrate successfully our
    acquisitions in accordance with our business strategy.
•
We may choose to acquire a company that is not
    profitable.
•
Potential acquisitions may divert
    management's attention away from our primary product
    offerings, result in the loss of key customers and/or personnel
    and expose us to unanticipated liabilities.
•
We may not be able to retain the skilled
    employees and experienced management that may be necessary to
    operate the businesses we may acquire and, if we cannot retain
    such personnel, we may not be able to locate or hire new skilled
    employees and experienced management to replace them.
•
We may purchase a company that has contingent
    liabilities that include, among others, known or unknown patent
    or product liability claims.
As a pharmaceutical company, we are
    susceptible to product liability claims that may not be covered
    by insurance.
Our business inherently exposes us to potential
product liability claims. From time to time, the pharmaceutical
industry has experienced difficulty in obtaining product
liability insurance coverage for certain products or coverage in
the desired amounts or with the desired deductibles. As a
result, we sell,
8
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and may continue to sell, generic products that
are not covered by insurance and may also be subject to product
liability claims that are not covered by insurance or that
exceed our policy limits.
Additionally, changes in the insurance markets
subsequent to the September 11, 2001 terrorist attacks have made
it more difficult for us to obtain certain types of coverage. We
cannot assure you that we will be able to obtain the levels or
types of insurance we would otherwise have obtained prior to
these market changes or that the insurance coverage we do obtain
will not contain large deductibles or fail to cover certain
liabilities or that it will otherwise cover all potential losses.
Reforms in the health care industry and the
    uncertainty associated with pharmaceutical pricing,
    reimbursement and related matters could adversely affect the
    marketing, pricing and demand for our products.
Increasing expenditures for health care have been
the subject of considerable public attention in Israel, North
America and many European countries. Both private and
governmental entities are seeking ways to reduce or contain
health care costs. In many countries in which we currently
operate, including Israel, pharmaceutical prices are subject to
regulation. In the United States, numerous proposals that would
effect changes in the United States health care system have been
introduced or proposed in Congress and in some state
legislatures. Similar activities are taking place throughout
Europe. We cannot predict the nature of the measures that may be
adopted or their impact on the marketing, pricing and demand for
our products.
As a result of governmental budgetary
constraints, the Israel Ministry of Health and the major Israeli
health funds have sought to further reduce health care costs by,
among other things, applying continuous pressure to reduce
pharmaceutical prices and reducing inventory levels. The Israeli
government has adopted regulations that permit the parallel
importation of pharmaceutical products and set a maximum price
on certain pharmaceutical products. Although such legislation is
predominantly aimed at reducing prices of imported products, as
opposed to locally manufactured products such as ours, it could
have a secondary effect on us by increasing price competition
within the Israeli pharmaceutical market.
The success of our innovative products
    depends on the effectiveness of our patents and confidentiality
    agreements to defend our intellectual property
    rights.
Our success with our innovative products depends,
in part, on our ability to protect our current and future
innovative products and to defend our intellectual property
rights. If we fail to adequately protect our intellectual
property, competitors may manufacture and market products
similar to ours. We have been issued numerous patents covering
our innovative products, and have filed, and expect to continue
to file, patent applications seeking to protect newly developed
technologies and products in various countries, including the
United States. Any existing or future patents issued to or
licensed by us may not provide us with any competitive
advantages for our products or may even be challenged,
invalidated or circumvented by competitors. In addition, such
patent rights may not prevent our competitors from developing,
using or commercializing products that are similar or
functionally equivalent to our products.
We also rely on trade secrets, unpatented
proprietary know-how and continuing technological innovation
that we seek to protect, in part, by confidentiality agreements
with licensees, suppliers, employees and consultants. It is
possible that these agreements will be breached and we will not
have adequate remedies for any such breach. Disputes may arise
concerning the ownership of intellectual property or the
applicability of confidentiality agreements. Furthermore, our
trade secrets and proprietary technology may otherwise become
known or be independently developed by our competitors or, if
patents are not issued with respect to products arising from
research, we may not be able to maintain the confidentiality of
information relating to such products.
9
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We have significant operations outside of
    the United States, including in Israel, that may be adversely
    affected by acts of terrorism or major
    hostilities.
Significant portions of our operations are
conducted outside of the United States. We may, therefore, be
directly affected by economic, political and military conditions
in the countries in which our businesses are located, as well as
by currency exchange rate fluctuations and the exchange control
regulations of such countries. Our executive offices and a
substantial number of our manufacturing facilities are located
in the State of Israel. Teva's Israeli operations are
dependent upon materials imported from outside of Israel. We
also export significant amounts of products from Israel.
Accordingly, our operations could be materially and adversely
affected by acts of terrorism or if major hostilities should
occur in the Middle East or trade between Israel and its present
trading partners should be curtailed, including as a result of
acts of terrorism in the United States. Any such effects may not
be covered by insurance.
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ITEM 4:
INFORMATION ON THE COMPANY
Teva Pharmaceutical Industries Limited is a
global pharmaceutical company producing drugs in all major
treatment categories. Teva is one of the world's largest
generic drug companies and has a leading position in the U.S.
generic market. Teva has successfully utilized its production
and research capabilities to establish a global pharmaceutical
business focused on the growing demand for generic drugs and on
the opportunities for proprietary branded products for specific
niche categories. Teva's active pharmaceutical ingredients
business provides both significant revenues and profits from
sales to third party generic manufacturers and strategic
benefits to Teva's own pharmaceutical production through
its cost-effective and timely delivery of significant raw
materials.
Teva's operations are conducted directly and
through subsidiaries in Israel, Europe, North America and
several other countries. During 2002, Teva generated
approximately 64% of its revenue in North America, 24% in Europe
and 12% in the rest of the world, predominantly in Israel. For a
breakdown of Teva's sales by business segment and by
geographic market for the past three years, see
"Item 5: Operating and Financial Review and
Prospects — Results of Operations —
Sales — General."
Teva was incorporated in Israel on
February 13, 1944 and is the successor to a number of
Israeli corporations, the oldest of which was established in
1901. Its executive offices are located at 5 Basel Street, P.O.
Box 3190, Petach Tikva 49131 Israel, telephone number
972-3-926-7267.
Pharmaceutical Products
Generic Products
Teva is one of the largest generic drug companies
in the world. Generic drugs are the chemical and therapeutic
equivalents of brand-name drugs, typically sold under their
generic chemical names at prices below those of their brand-name
equivalents. These drugs are required to meet similar
governmental standards as their brand-name equivalents and must
receive regulatory approval prior to their sale in any given
country. Generic drugs may be manufactured and marketed only if
relevant patents on their brand-name equivalents (and any
additional government-mandated market exclusivity periods) have
expired, been challenged and invalidated, or otherwise validly
circumvented.
Generic pharmaceutical sales have increased
significantly in recent years, due in part to an increased
awareness and acceptance among consumers, physicians and
pharmacists that generic drugs are the equivalents of brand-name
drugs. Among the factors contributing to this increased
awareness are the passage of legislation permitting or
encouraging substitution and the publication by regulatory
authorities of lists of equivalent drugs, which provide
physicians and pharmacists with generic drug alternatives. In
addition, various government agencies and many private managed
care or insurance programs encourage the substitution of generic
drugs for brand-name pharmaceuticals as a cost-savings measure
in the purchase of, or reimbursement for, prescription drugs.
Teva believes that these factors, together with the large volume
of branded products losing patent protection over the coming
years, should lead to continued expansion of the generic
pharmaceuticals market.
Through the coordinated efforts of research and
development staff in Israel, Europe and North America, Teva
seeks to constantly expand its range of generic products.
Teva's product development strategy emphasizes not only
introducing its generic products upon the patent expiration date
of the equivalent brand-name pharmaceutical but also the goal of
market introduction at the earliest possible date, which may
involve attempting to invalidate or otherwise validly circumvent
such patents.
Teva is able to differentiate itself from its
competitors in its major markets by offering a range of
capabilities that it believes ultimately adds value for its
customers and enhances Teva's business:
•
global research and development facilities that
    have provided Teva with both the largest product line and one of
    the deepest generic pipelines in the industry;
•
FDA-inspected manufacturing facilities in a
    variety of countries around the world, which provide Teva with a
    broad array of production technologies and with the ability to
    concentrate production to achieve economies of scale; and
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•
its own active pharmaceutical ingredient business
    that offers stability of supply as well as vertical integration
    efficiencies.
North
America
Teva Pharmaceuticals USA, Inc., Teva's
principal subsidiary, is one of the leading generic drug
companies in the United States. Teva USA markets approximately
140 generic products representing more than 400 dosage strengths
and packaging sizes, which are distributed and sold in the
United States. Teva believes that a broad line of products has
been and will continue to be of strategic significance as the
generics industry continues to grow and as it experiences the
effects of consolidation among buying groups, including managed
care providers, large pharmacy chains and wholesaling
organizations.
Products.
Teva USA
manufactures generic pharmaceutical products in a variety of
dosage forms, including tablets, capsules, ointments, creams and
liquids. During 2002, Teva sold a significant number of generic
products in the United States that were not sold during 2001,
including sales of the generic equivalents of the following
products (listed in the order of their launch during the year):
Glucophage®, Prozac® tablets and capsules,
Buspar®, Demadex®, Ultram®, Zestril/
Prinvil®, Zestoretic/ Prinzide®, Zanaflex®,
Adalat®CC, Ceclor®CD, Axid®, Augmentin® and
Permax®.
During 2002, in the United States Teva received
18 final generic drug approvals, six tentative approvals and two
approvables, including one of Biovail's and two of
Impax's. Both "tentative approval" and
"approvable" letters indicate that the FDA has
completed its review of an application. A tentative approval is
issued in cases where the file is acceptable but there is a
patent or exclusivity prohibiting the FDA from granting final
approval. An approvable letter is issued by the FDA in cases
where the application substantially meets the requirements and
it is believed that the application may be approved provided
certain product labeling or other technical issues are resolved.
The 18 final approvals include the products launched during the
year as described above, together with generic forms of
Tricor®, Daypro®, Luvox® and Amoxil®.
The potential for revenue growth of generic
products in the United States is closely related to a
company's pipeline of pending abbreviated new drug
applications ("ANDAs") with the FDA, as well as
tentative approvals already granted. As of February 21,
2003, Teva had 61 product registrations awaiting FDA approval
(one from Biovail and five from Impax), including ten tentative
approvals and two approvables. Collectively, the brand-name
versions of these products had corresponding U.S. annual sales,
as of December 31, 2002, exceeding $42 billion.
Several of these pending products may enjoy a 180-day marketing
exclusivity period, as Teva was the first to file a patent
challenge as part of the ANDA for such products. Teva does not
include in these product registrations its four registrations
relating to the generic version of Claritin®, which became
available as an over-the-counter product in 2002. Teva presently
has no direct distribution to the over-the-counter market.
Branded product market size is a commonly used
measurement of the relative significance of a potential generic
product. Generic equivalents of any given product are typically
sold at prices substantially below the branded price, and in
those instances where there are multiple generic producers of
the same product, dramatically below the branded price. In most
instances, FDA approval is granted on the expiration of the
underlying patents; however, companies are rewarded by marketing
exclusivities, as provided by law, by challenging or
circumventing these patents. Aside from the financial benefits
of marketing exclusivities, Teva believes that these activities
improve healthcare by allowing consumers faster access to more
affordable medications.
Teva actively reviews pharmaceutical patents and
seeks opportunities to challenge those patents where Teva
believes that such patents are either invalid or not infringed.
As of February 21, 2003, Teva's product registrations
included 41 applications filed with the FDA which were
"Paragraph IV" applications — i.e.,
applications which challenge patents of branded products. Of
these applications, 32 applications are pending FDA approval and
nine have been tentatively approved.
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Acquisitions.
In
September 1999, Teva completed its acquisition of Copley
Pharmaceutical, Inc. a Massachusetts-based generic
pharmaceutical company. The transaction was accounted for as a
purchase. This acquisition significantly broadened the product
offerings of Teva USA, as only a few of Copley's products
overlapped with the existing product line of Teva USA. In
addition, this acquisition considerably fortified Teva's
pipeline of ANDAs pending before the FDA. After the acquisition,
Copley was merged into Teva USA.
In April 2000, Teva completed the acquisition of
Novopharm Limited. The Novopharm acquisition was also accounted
for as a purchase. Novopharm is Canada's second largest
generic drug company, with significant operations in the United
States and Hungary as well. Novopharm, a privately owned
Canadian corporation, commenced producing generic
pharmaceuticals in 1965. The core operations of Novopharm
include the manufacture and marketing of generic prescription
drugs.
Strategic Alliances.
In December 1997, Teva and Biovail
Corporation International entered, through subsidiaries, into a
marketing and product development agreement which provided Teva
with exclusive U.S. marketing rights for Biovail's pipeline
of eight controlled-release generic versions of successful
brands. These products included generic versions of
Cardizem®SR, Cardizem®CD, Trental®,
Verelan®, Adalat®CC, Procardia XL®,
Dilacor®XR and Voltaren®XR. Biovail was responsible
for the regulatory filing and approval process and the
manufacturing of the products. In addition to amounts paid to
Biovail for products purchased by Teva under this agreement,
Teva paid Biovail $34.5 million pursuant to the agreement.
In September 1999, Teva entered into a strategic
alliance with Bio-Technology General Corp. for the development
and worldwide commercialization of generic equivalents of
biotechnology products. In addition to granting Teva U.S.
exclusive marketing rights for Bio-Technology General's
human growth hormone, Bio-Technology General will develop and
produce bio-generics which will be sold by Teva. The agreement
provides for each of the two companies to capitalize on its
particular strengths — Bio-Technology General's
primary role will be to develop and manufacture the products,
and Teva will have exclusive marketing rights. Teva had intended
to launch Bio-Technology General's human growth hormone
product in 2002. However, just prior to launch, Novo Nordisk
Pharmaceuticals, Inc. and Novo Nordisk A/ S sued Teva USA and
Bio-Technology General for patent infringement and obtained a
preliminary injunction, which prevented the launch of the
product. Ultimately, the Court of Appeals for the Federal
Circuit reversed the preliminary injunction. The patent
infringement case is expected to go to trial in the summer of
2003.
In June 2001, Teva entered into a strategic
alliance agreement for twelve controlled release generic
pharmaceutical products with Impax. The agreement grants Teva
exclusive U.S. marketing rights and an option to acquire
exclusive marketing rights in the rest of North America, South
America, the European Union and Israel. Prior to its expiration,
Teva exercised its option with respect to the marketing rights
of certain products in Canada. Two products have received
tentative approval and three are pending ANDAs, not including
the three products related to the generic version of
Claritin®. An additional four products have been identified
for development by Impax. As part of the transaction, Impax
received a loan of $22 million, portions of which may be
forgiven upon the attainment of certain milestones. Of this
loan, $2.4 million was forgiven in 2002 upon achievement of
a certain milestone. In addition, Teva has invested
$15 million in exchange for Impax shares according to a
fixed schedule through June 2002.
Marketing and Sales.
The marketing of generic
pharmaceutical products in the United States is conducted
through Teva USA. Teva USA's sales were made to the
following types of customers:
2002
2001
2000
1999
Drug store chains
54
%
53
%
45
%
48
%
Drug wholesalers
21
%
21
%
28
%
21
%
Generic distributors
9
%
8
%
8
%
11
%
Hospitals, government and managed care
    institutions
16
%
18
%
19
%
20
%
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Teva USA has a sales force that actively markets
Teva USA's products. Key account representatives for
generic products call on purchasing agents for chain drug
stores, drug wholesalers, health maintenance organizations,
pharmacy buying groups and nursing homes. Teva USA also contacts
its retail customers and supports its wholesale selling effort
with telemarketing as well as professional journal advertising
and exhibitions at key medical and pharmaceutical conventions.
From time to time, Teva USA bids for government tendered
contracts.
Through its acquisition of Novopharm, Teva
acquired a sales force in Canada, which markets Novopharm's
products to over 6,300 pharmacies. Novopharm also uses a
hospital sales division, which covers approximately 900
hospitals throughout Canada.
Europe
Teva believes that the evolving European generics
market has the potential to provide it with opportunities for
substantial growth in its sales. The European generics market
varies considerably from country to country. The Netherlands and
the United Kingdom have well-established markets for generic
drugs sold under their chemical name. In other European
countries, there is a market for branded generics, but not for
products sold under this chemical name. In France, generics have
begun to take a firmer hold on the pharmaceutical market, while
in Italy legislation that permits generic substitution has only
recently come into effect. Similarly, in July 2002, a law became
effective in Germany which for the first time allows generic
substitution by pharmacists under certain prescribed
circumstances.
Teva currently produces for sale in Europe
approximately 300 generic products representing over 1,700
dosage strengths and packaging sizes. Among the products
launched by Teva in Europe during 2002 were the generic versions
of Zirtek®, Carace/ Zestril® and Claritin®. In
the past four years, Teva received over 310 generic approvals,
corresponding to 101 compounds of 187 formulations. In addition,
as of December 31, 2002, 98 compounds representing 199
formulations of over 320 marketing authorization applications
are pending approval, with over 140 additional compounds under
development. Teva believes that this pipeline of approvals and
applications will generate significant internal growth in the
next several years. For example, in 2003, Teva expects to launch
a number of significant products in the U.K. and Holland upon
anticipated patent expirations.
Teva's rapid growth in Europe over the last
few years was generated by a combination of acquisitions in the
United Kingdom, Holland, Hungary and most recently in France,
and the parallel development of existing businesses. Teva will
seek to establish itself as a leader in the European market for
generic products by leveraging a number of Teva's strengths
including its leadership in the more mature generic markets, its
ownership of an active pharmaceutical ingredients business,
which facilitates both vertical integration and the possibility
of achieving economies of scale, and its ability to utilize the
broad range of products already existing in its generic product
portfolio. Furthermore, Teva not only operates in the mature
generic markets of Europe, such as the United Kingdom and The
Netherlands, where the pharmacist can decide whether to replace
a branded product with a generic equivalent, but Teva has also
been able to make selective inroads in other emerging markets in
which the doctor may control not only the decision of whether or
not a generic is dispensed, but even which generic product is
chosen. To date, however, because of the fragmented nature of
the European generic markets, Teva's European cost
structure is higher than that which it experiences in the United
States.
Acquisitions.
Biogal, acquired by Teva in 1995, is
one of the largest pharmaceutical companies in Hungary. Biogal
develops and produces both finished dosage pharmaceutical
products and active pharmaceutical ingredients for use in making
pharmaceutical products. Biogal produces both for its own local
market needs and for other Teva units in Europe and in Israel,
as well as third party producers of pharmaceutical products.
Biogal's products include pharmaceuticals in all major
treatment categories, and its production capabilities include
solid forms, tablets, coated pellets, soft and hard gelatin
capsules, liquid and other semi-solid forms, as well as sterile
products. The sale of finished dosage pharmaceutical products
represents approximately 48% of Biogal's sales, with the
balance coming from sales of active pharmaceutical ingredients.
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Teva also operates in Hungary through Biogal Teva
Pharma ("BTP"), Human Trade, Humanpharma Kft. and
Human Pharmaceutical Manufacturing Co. Ltd. Human Pharmaceutical
is a Hungarian company that produces blood and sterile products
for both the Hungarian market and for export markets.
Approved Prescription Services Limited
("APS/ Berk"), acquired in July 1996, is one of the
largest generic drug companies in the United Kingdom. APS/
Berk's products include pharmaceuticals in all major
treatment categories. As part of Teva's global
rationalization program, APS/ Berk's production activities
were transferred during 1999 to Biogal in Hungary. APS/ Berk
continues to operate as a packaging and quality control center.
Pharmachemie B.V., acquired in July 1998, is the
leading company in the generic market in The Netherlands.
Following the acquisition, Teva implemented a rationalization
program that generated savings and synergies, most notably in
its generic oncology products. During 2002, the tableting
production of Pharmachemie's products was moved from
facilities in The Netherlands to Biogal in Hungary.
In July 2002, Teva acquired Bayer Classics, the
third largest generic pharmaceutical company in France, from
Bayer Pharma S.A. Bayer Classics included both marketing and
manufacturing activities. Following the acquisition, Bayer
Classics was renamed Teva Classics.
Teva has several small operations in other
European markets and is constantly looking for ways to expand
them and to enter other markets. In Italy, Teva started its own
generic operations and acquired a portfolio of products from
Bayer. Other small operations are located in Germany, Belgium
and the Czech Republic. Sales from these various smaller
operations totaled approximately $48 million in 2002 and
constituted almost 10% of total European pharmaceutical sales.
Rest
of the World
Teva's pharmaceutical sales outside of North
America and Europe reached $275 million in 2002. The
Israeli market represented approximately 80% of these sales.
Israel:
Teva is the
largest supplier of pharmaceutical products in Israel. In the
domestic market, Teva is involved in the marketing, promotion,
selling and distribution of a wide range of health care
specialty products. These include marketing and promotion of
innovative pharmaceutical products, generics, over-the-counter
and consumer products, hospital supplies, dialysis equipment and
disposables, diagnostics and home care services.
In Israel, Teva has aligned all of its products
and services with the needs of its main customers, namely health
funds, hospitals, private pharmacies and pharmacy chains. It has
built its Israeli product portfolio through licensing
arrangements, as well as its own product development. Teva
intends to introduce new products into the Israeli market and
maintains ongoing close contact with other pharmaceutical,
biotechnology and health care companies around the world.
Marketing and Sales.
Teva estimates that in 2002 the
Israeli market for pharmaceuticals was approximately
$700 million based on manufacturers' selling prices,
comprised of three market categories: health care plans, private
pharmacies and chains and governmental hospitals. Teva is a
significant medical supplier to each of these market categories.
Substantially all of Teva's pharmaceutical and hospital
supplies sales in Israel are made through its own distribution
company, Salomon, Levin and Elstein Ltd., Israel's largest
drug wholesaler, which sells directly to institutional
customers, as well as to all of the pharmacies and chains.
Pricing.
Several
issues affected Teva's pricing policy in Israel in 2002.
The national health budget was only marginally increased during
2002, which caused government-sponsored health funds to
institute cost saving measures restricting expenditures for
pharmaceutical products. Furthermore, Teva's prices were
affected by pricing regulations that mandate that the retail
prices of pharmaceuticals in Israel may not exceed the average
of prices in four European markets (the U.K., Germany, France
and Belgium) (the so-called "Dutch Model"). Lastly,
and to a lesser degree, the Israeli health care funds utilized
parallel
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importing to a limited extent, primarily to
pressure Teva and other Israeli producers into granting price
reductions.
Other countries:
Teva's International
Pharmaceutical Division oversees Teva's various activities
in the rest of the world. Its focus is on pharmaceuticals,
mainly Copaxone®, Alpha D3 (Teva's bone metabolism
product) and a line of oncology products. Sales include direct
exports from Israel and sales from Teva's other
manufacturing sites. Sales are made through affiliated
companies, local representatives and distributors in the
different markets.
Due to the volatile financial conditions in a
variety of countries in which the division operates, Teva
actively sought to limit its financial risk, which resulted in a
corresponding reduction of sales in these countries.
Proprietary
Products
Teva's strategy with regard to its
proprietary products is to leverage its access to Israeli-based
research in order to develop innovative compounds for use in
selected therapeutic markets. Teva's proprietary research
and development pipeline is currently focused on two specialty
areas: neurological disorders and autoimmune diseases.
In conducting its research and development, Teva
seeks to manage its resources conservatively and to limit its
risk exposure. At the drug discovery phase, Teva leverages its
relationship with the Israeli academic community to gain early
access to potential projects. Once these projects progress into
the more costly clinical study phase, Teva's strategy is to
explore corporate partnering options through which it can share
the risks associated with each project.
Copaxone®
Copaxone®, Teva's leading product and
its first innovative drug, is used for the reduction in
frequency of relapses in patients with relapsing-remitting
multiple sclerosis ("MS"). To date, Copaxone®has
been approved for marketing in 42 countries worldwide, including
the United States, Israel, Canada, 15 European Union countries,
Switzerland, Australia, Russia, Brazil and Argentina.
Copaxone® was first launched in Israel in December 1996,
and the United States launch followed in March 1997. In 2002,
in-market global sales of Copaxone® amounted to $539
million, of which $411 million was in the United States.
Global sales of Copaxone® in 2002 grew by 48% over those of
2001, a rate of growth that was more than double the growth of
the global market of MS products and making Copaxone® the
fastest growing MS therapy worldwide.
In April 2002, Teva launched the sale in the
United States of Copaxone® in ready-to-use pre-filled
syringes, which significantly improve patients' ease of use
of the product. The previous injectable MS therapies required
mixing and preparation time. During 2002, the Copaxone®
pre-filled syringe was also approved and launched in Canada. By
the end of 2002, the pre-filled syringe accounted for
approximately 95% of U.S. prescriptions of Copaxone®. In
response to user input, and as part of Teva's continuing
efforts to improve patient ease of use, Teva recently introduced
a more sophisticated needle to the pre-filled syringe. Teva is
continuing to work on a second generation auto-inject device.
Following the successful completion of the
European Mutual Recognition Procedure ("MRP") in 2001,
Teva, together with Aventis, began its launch of Copaxone®
in various European countries. One of the first launches, during
the last quarter of 2001, was in Germany, the country with the
largest population of MS patients in Europe. By the end of 2002,
Copaxone® had an estimated 20% market share in Germany. In
addition, Copaxone® was launched at the end of 2001 in
Austria and the Nordic countries and in 2002, in Italy, Spain,
The Netherlands, Greece, Ireland and Belgium.
As a first-line therapy, Copaxone® offers
patients with MS a new treatment option. Copaxone® is a new
class of modifying therapy that has been shown in controlled
clinical trials to be effective and generally well-tolerated.
Copaxone® has also clearly shown important reductions in
relapse rates and significant effects on magnetic resonance
imaging ("MRI") monitored activity and burden of
disease.
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Copaxone® has demonstrated continued
efficacy over eight years. In clinical trials, as well as
post-marketing experience, treatment with Copaxone® is
well-tolerated and in addition is not associated with the
development of neutralizing antibodies. Furthermore,
Copaxone® is the only drug available for patients who do
not benefit from or cannot tolerate beta-interferon.
A study published in the August 2001 issue of
Neurology
showed that Copaxone® reduced by 50% the
number of permanent "black holes" that developed in
patients with relapsing-remitting multiple sclerosis. Black
holes are permanent MS lesions in the brain, and represent areas
where the most severe and irreversible brain tissue damage has
occurred. More recently, an article in the November issue of
Brain
showed that Copaxone® may have neuroprotective
properties by encouraging the release of a factor that helps
protect the brain from axonal loss.
In the last three years, Teva conducted two large
trials: CORAL, to determine the safety and efficacy of an oral
formulation of Copaxone® in relapsing-remitting MS, and
PROMISE, to determine Copaxone®'s efficacy in primary
progressive MS. Although the CORAL trial provided important
information on MS, the analyses of the trial in late 2001 showed
a trend in favor of treatment which did not reach statistical
significance. Teva and H. Lundbeck A/ S, a Denmark-based,
publicly traded pharmaceutical company and Teva's strategic
partner in the development of oral Copaxone®, are
continuing their collaboration on this project and conducting
experiments to determine how and whether to proceed with the
development of an oral formulation. In November 2002, Teva
announced that an interim analysis of its clinical trial on
primary progressive multiple sclerosis (PROMISE) showed
that it was improbable that the results of the study, in its
current protocol, would reach statistical significance, and
accordingly the trial was terminated. The scheduled interim
analysis by the study's data safety monitoring committee
came two years into the three-year study. There were no safety
concerns about treatment with Copaxone®. Primary
progressive multiple sclerosis is different from
relapsing-remitting multiple sclerosis, affecting less than 10%
of multiple sclerosis patients worldwide.
In North America, Copaxone® is distributed
by Aventis. Teva manufactures the product and supplies it to
Aventis through Teva USA. Teva Neuroscience Inc., a wholly owned
subsidiary of Teva, succeeded to the business of Teva Marion
Partners, which had been formed in 1995 as an equally owned
marketing partnership between Teva and Aventis. Teva
Neuroscience actively markets and promotes the product in the
United States and Canada through doctor detailing, educational
seminars, websites and patient support programs, such as Shared
Solutions™ and MS Watch™.
Teva and the German parent company of Aventis
also have a collaborative arrangement for the marketing of
Copaxone® in Europe and other markets. Under the terms of
this arrangement, following approval in these markets,
Copaxone® is co-promoted in certain European countries, and
in other countries Aventis is the sole marketer. The product is
manufactured by Teva, and Aventis purchases it from Teva and
sells and distributes it in Europe and in other markets.
Other
Projects
Following Copaxone®, Teva's most
advanced proprietary drug research projects are treatments for
Parkinson's disease.
In November 1999, Teva entered into a strategic
alliance with Lundbeck for the co-development and marketing in
Europe of rasagiline and etilevodopa, two Teva products for the
treatment of Parkinson's disease. Lundbeck has been
providing a substantial financial contribution to these
projects, which has enabled Teva to pursue development efforts,
while maintaining the resources allocated to Teva's generic
drug development and the expansion of its proprietary pipeline.
Under the terms of the agreement, Teva and Lundbeck will share
the marketing of these products in Europe, and Teva will retain
exclusive marketing rights in the rest of the world, including
North America.
Rasagiline has demonstrated efficacy in a
Phase III trial (TEMPO), when used as monotherapy in
early-stage patients. This study was completed in early 2000,
showing a highly statistically significant effect
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on the primary endpoint-progression of
Parkinsonian symptoms. Furthermore, rasagiline was
well-tolerated in this patient population.
During 2000, two Phase III studies with
rasagiline as adjunctive therapy to levodopa in more advanced
patients were initiated in Europe and North America with results
expected by the second quarter of 2003. If these results prove
successful, a subsequent new drug application for the treatment
of Parkinson's disease is expected to be filed during 2003.
The second product, etilevodopa, underwent two
Phase III clinical studies in Europe and North America,
which were completed by the end of 2002. In these studies,
etilevodopa was found to be well-tolerated and as effective as
levodopa. However, on the primary endpoint, shortening the time
to onset of clinical effect, etilevodopa did not demonstrate
statistically significant superiority over standard levodopa.
In addition, Teva has innovative research
projects in the earlier clinical stages, in the areas of
Alzheimer's disease, epilepsy, strokes and SLE (Systemic
Lupus Erythematosus), as well as several projects in the
pre-clinical stage.
Intellectual
Property and Other Protections
Teva relies on a combination of intellectual
property protections and regulatory exclusivities to protect its
innovative products. Teva seeks to obtain, where possible,
product, process and use patents on its innovative products.
Teva also relies on trade secrets, unpatented proprietary
know-how and confidentiality agreements, as well as trademark
and copyright protection, for its innovative products. In the
United States, law and FDA regulations provide five years of
marketing exclusivity for new chemical entities and seven years
of marketing exclusivity for orphan drugs, such as
Copaxone®. Similar governmental grants of marketing
exclusivity exist in Europe as well.
Active Pharmaceutical Ingredients
In addition to its production and sale of
pharmaceutical products, Teva manufactures and sells active
pharmaceutical ingredients. With a leading global market share
in the production of many major chemicals for generic
pharmaceuticals, Teva's active pharmaceutical ingredients
business facilitates Teva's entry into new drug markets and
offers a high quality and cost-effective source of raw
materials. The active pharmaceutical ingredients business is run
independently from Teva's finished pharmaceutical product
businesses and sells products to third parties in a competitive
market for generic products, as well as to other Teva units on
an arm's-length basis, for their generic and proprietary
manufacturing needs. This strategy has resulted in Teva becoming
a low-cost producer of active pharmaceutical ingredients.
Teva produces more than 80 different active
pharmaceutical ingredients, using synthetic, semi-synthetic and
fermentation technologies, for use in pharmaceuticals. These
products are sold, subject to the patent position, to
formulators of pharmaceutical products in the United States,
Europe, the Far East and Latin America. These products include
Allopurinol, Amoxicillin, Atenolol, Carbidopa, Cephalexin,
Diltiazem, Doxepin, Etoposide, Furosemide, Gemfibrozil,
Gabapentin Mirtazapine, Metoprolol, Trimethoprim and
fermentation products such as Lovastatine, Simvastatin,
Pravastatin and Tobromycin. Teva believes it is among the
world's principal suppliers of many of these chemicals.
Through the establishment of joint ventures, Teva has taken
initial steps towards supplying various peptides such as
Calcitonin, Octreotide and others to its customers.
In order for chemicals to be approved for use as
active pharmaceutical ingredients sold in the United States, the
facilities and production procedures utilized at such facilities
must meet FDA standards. Teva's chemical plants meet such
standards and are regularly inspected by the FDA. Teva's
chemical plants located in Israel, Hungary, Italy and the U.S.
operate on a continuous multiple shift basis. Most of the
products are produced in dedicated computer-controlled automated
facilities.
The research and development group within the
active pharmaceutical ingredient division contributes to Teva by
creating intellectual property, providing research to
continuously reduce the cost of production of Teva's
chemical products, and developing over ten new chemical products
per year. In addition to
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contributing to profitability, these efforts
enable Teva to remain a supplier of key products long after
other competitors cease to be able to produce these products,
which is one of the strategies promoted by Teva's active
pharmaceutical ingredient division.
Teva's active pharmaceutical ingredient
division supplies Teva's various pharmaceutical units on
arm's-length terms, competing with other vendors in price,
quality and reliability. During 2002, these sales were
approximately 44% of the division's total sales. During
2002, Teva's pharmaceutical units purchased 31% of their
total requirements for active pharmaceutical ingredients from
Teva's active pharmaceutical ingredient division. Teva
believes that its ability to produce these chemicals is a
strategic advantage for its production of finished
pharmaceuticals.
Marketing and Sales.
Teva has been actively involved in the
marketing of active pharmaceutical ingredients in the United
States for over 20 years. Sales consist principally of the
chemically active ingredients used in specific generic
pharmaceuticals. Most of Teva's active pharmaceutical
ingredient sales are conducted through a U.S. marketing
subsidiary.
Active pharmaceutical ingredients are sold in
Europe through Teva's European subsidiaries, which are in
direct contact with Teva's major customers throughout
Europe. In Latin America, Africa and the Far East, chemical
products are sold through Teva's local subsidiaries as well
as through local distributors.
Production.
Teva produces active pharmaceutical
ingredients worldwide through ten plants located in the United
States, Israel, Hungary and Italy. The plants manufacture active
pharmaceutical ingredients through synthetic and fermentation
technology.
Acquisitions.
During 2002, Teva acquired Honeywell
PFC (subsequently renamed Teva PFC), an active pharmaceutical
ingredients manufacturer, with two facilities in Italy. These
facilities, which are in close proximity to Teva's existing
two chemical plants in the area of Milan, Italy, have
strengthened Teva's competitive position, primarily in the
U.S. generic pharmaceutical market.
Research and Development
Teva's research and development activities
can be categorized into several categories which roughly
parallel the activities of its major business units. A
significant portion of Teva's R&D activities is
directed at the development of product formulations, process
validation, bioequivalency testing and other data needed to
prepare a growing list of generic drug registration files in the
U.S., Europe and elsewhere in the world. Researchers in
Teva's active pharmaceutical ingredients division
concentrate on the development of chemical processes for
improving chemical syntheses of active ingredients of interest
to the generic drug industry. Teva's innovative R&D
researchers conduct product development and clinical testing for
Teva's pipeline of proprietary products, as well as
collaborate with Israel's major universities, medical
institutions and research institutes in order to derive the
benefits of extensive research activities conducted in Israel.
This access to ongoing research in Israeli institutions is an
important part of Teva's innovative research and
development strategy.
Teva's research and development expenses
were as follows:
2002
2001
2000
U.S. dollars in millions
Gross R&D expenses
193
169
132
Participations and grants
28
61
28
Net R&D expenses
165
108
104
The participations and grants during the three
years shown above represented principally the participation of
Lundbeck and Aventis in the innovative R&D costs of Teva,
and, to a lesser extent, grants from Israel's Office of the
Chief Scientist.
In addition to the substantial support that
innovative research and development projects receive from third
parties such as Lundbeck and Aventis, Teva avails itself of
government funding for research
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conducted in Israel. The Israeli government
offers grants, which are repayable as royalties from the sale of
products resulting from funded research, with the aggregate
amount of such royalties limited to the amount of the original
grant (and, in respect of grants since 1999, with the addition
of LIBOR interest). The royalties are at rates between 2% and
3.5% (depending on the number of years elapsed since the
commencement of the royalty payments) of sales relating to a
product or a development resulting from the funded research. The
maximum amount of the contingent liability in respect of
royalties to the Israeli government at December 31, 2002
amounts to $34.4 million.
Competition
In the United States, Teva is subject to intense
competition in the generic drug market from other generic drug
product manufacturers, brand-name pharmaceutical companies that
manufacture generic drug products, manufacturers of branded drug
products that continue to produce those products after patent
expirations and manufacturers of therapeutically similar drugs.
Teva believes that the primary competitive factors affecting it
in the United States are the ability to continually introduce
the generic equivalents for brand-name drug products in
sufficient volume soon after their relevant patents expire, as
well as price, product quality, prompt delivery, breadth of
product line, customer service and reputation.
Although significant profits can be realized from
a product that is the first generic version to be marketed,
price competition from additional generic versions of the same
product as well as potential price competition from the original
branded product could result over time in significant reductions
in sales and profit margins. Teva's competitors may develop
their products more rapidly or complete the regulatory approval
process sooner, and therefore market their products earlier. New
drugs and future developments in alternative drug delivery
technologies or other therapeutic techniques may provide
therapeutic or cost advantages to competing products. Some
brand-name competitors try to prevent, discourage or delay the
use of generic equivalents through regulatory processes, patent
extension, litigation and negative public relations campaigns.
Teva is witnessing a consolidation of its
customers, as chain drug stores and wholesalers merge or
consolidate. In addition, a number of its customers have
instituted source programs that limit the number of suppliers of
generic pharmaceutical products carried by that customer. As a
result of these developments, there is heightened competition
among generic drug producers for the business of this smaller
and more selective customer base.
In The Netherlands, Pharmachemie competes with
other generic drug product manufacturers, brand-name
pharmaceutical companies that manufacture generic drug products,
original manufacturers of branded drug products that continue to
produce those products after patent expirations and
manufacturers of therapeutically similar drugs. As in the United
States, the generic market in The Netherlands is very
competitive, with the main competitive factor being price, but
competition is also based on name, reputation and customer
service.
In the United Kingdom, APS/ Berk competes with
other generic drug manufacturers, brand-name pharmaceutical
companies that manufacture generic drug products, manufacturers
of branded drug products that continue to produce those products
after patent expirations and manufacturers of therapeutically
similar drugs. APS/ Berk's main competitor is a
multinational pharmaceutical company, which in the past has
invested heavily in new product development, giving it a
competitive edge in bringing new generic products to market on a
timely basis. As in the United States, the United Kingdom
generic market is very competitive with the main competitive
factor being price, but competition is also based on name,
reputation and customer service.
In Hungary, the Teva companies compete with local
Hungarian manufacturers as well as face increasing competition
from multi-national pharmaceutical companies. In recent years,
the Hungarian pharmaceutical industry has been substantially
privatized, resulting in foreign ownership of most major
Hungarian pharmaceutical manufacturers. In addition, many
multinational pharmaceutical companies have established
Hungarian marketing companies for their products, further
intensifying the competition. Teva's acquisition of Human
Pharmaceutical strengthened Teva's position and presence in
Hungary, while
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creating a more diversified products and service
portfolio, including wholesaling services through Human Trade.
In Canada, Novopharm is the second largest of
five major generic drug manufacturers, three of which are
subsidiaries or divisions of other global manufacturers, and two
of which are privately owned. Novopharm, together with these
competitors, satisfies most of the Canadian demand for generic
pharmaceuticals.
The Canadian regulatory and customer landscape
for generic manufacturers continues to evolve. During the last
year several federal and provincial commissions were appointed
to study and make recommendations for improvement to
Canada's publicly funded Medicare system. Many of these
commissions highlighted the need to limit brand patent
extensions, and speed the approval process for generic drugs.
While a positive step, branded pharmaceutical companies continue
to lobby against such changes which would enhance generic drug
sales at the expense of the brands.
The customer base for Novopharm continues to
change as the number of independent community pharmacies shrinks
at the expense of chain drug and banner aligned store groups,
which have begun to work closely with selected suppliers for
specific products. This trend is expected to continue, resulting
in increased competition for generic drug manufacturers at the
chain and banner buying offices. These larger customers look to
generic suppliers to launch generic products immediately upon
patent expiry, maintain high levels of product availability and
provide increased levels of overall customer value and service.
In Israel, Teva accounts for approximately
one-quarter of the pharmaceutical market and is the largest
supplier of health care products. Teva's largest competitor
in Israel has sales of approximately half of those of Teva.
Competition is based primarily on the ability to market and
properly position products within the medical community to
create demand and the ability of a company to provide its
clients with both a broad line of products and prompt service.
Teva's products compete with those of other local
manufacturers as well as with imported products. Generic
competition has increased in recent years in Israel and the
trend is expected to continue, with additional price pressure
coming from the health care funds and other institutional
purchasers.
Copaxone® competes with other therapies for
the treatment of multiple sclerosis, principally the three
products that are forms of beta-interferon: Biogen Inc.'s
Avonex®, Schering AG/ Berlex Laboratories'
Betaseron® and Serono SA's Rebif®. In 2002,
Serono announced that it has entered into a co-marketing
agreement with Pfizer Inc. to market Rebif® in the United
States. In addition, there are other products in various stages
of clinical development for the treatment of multiple sclerosis,
most notably Antegren® being developed jointly by Elan
Corporation and Biogen.
In the sale of active pharmaceutical ingredients,
Teva competes in all of its markets with specialty chemical
producers who are mainly located in Europe and the Far East,
particularly in Italy and Spain. Teva competes based on price,
quality, timely delivery and its ability to meet the stringent
FDA requirements for approved suppliers of raw materials. Many
of its competitors are smaller than Teva's active
pharmaceutical ingredients division in terms of sales. Teva
believes that its extensive portfolio (one of the broadest
available in the industry), combined with the breadth of its
operations and its financial resources, make Teva's active
pharmaceutical ingredients division a leader in the industry.
Regulation
United States.
All
pharmaceutical manufacturers which sell products in the United
States are subject to extensive regulation by the U.S. federal
government, principally by the FDA and the Drug Enforcement
Agency, and, to a lesser extent, by state and local governments.
The Federal Food, Drug and Cosmetic Act, the Controlled
Substance Act and other federal statutes and regulations govern
or influence the manufacture, testing, safety, efficacy,
labeling, approval, storage, distribution, record keeping,
advertising, promotion and sale of Teva's products.
Teva's major facilities and products are periodically
inspected by the FDA, which has extensive enforcement powers
over the activities of pharmaceutical manufacturers.
Non-compliance with applicable requirements can result in fines,
criminal penalties, civil
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injunction against shipment of products, recall
and seizure of products, total or partial suspension of
production, sale or import of products, refusal of the
government to enter into supply contracts or to approve new drug
applications and criminal prosecution. Changes in FDA procedures
have increased the time and expense involved in obtaining ANDA
approvals and in complying with current good manufacturing
practice (cGMP) standards. The ANDA generic drug development
process and the approval process now take from two to five
years. At the same time, the Prescription Drug User Fee Act
provides the FDA with additional resources to reduce approval
times for new drugs, which are funded through user fees. The FDA
also has the authority to deny or revoke approvals of drug
active ingredients and dosage forms and the power to halt the
operations of non-complying manufacturers. Any failure by Teva
to comply with applicable FDA policies and regulations could
have a material adverse effect on the operations of Teva.
FDA approval is required before each dosage form
of any new drug can be marketed. Applications for FDA approval
must contain information relating to bioequivalency (for
generics), safety and toxicity (for new drugs), product
formulation, raw material suppliers, stability, manufacturing
processes, packaging, labeling and quality control. FDA
procedures require commercial manufacturing equipment to be used
to produce test batches for FDA approval. Validation of
manufacturing processes is required by the FDA before a company
can market new products. The FDA conducts pre-approval and
post-approval reviews and plant inspections to implement these
requirements.
The Waxman-Hatch Act of 1984 established the
abbreviated application procedure for obtaining FDA approval for
generic forms of brand-name drugs. This act also provides a
market exclusivity provision which could delay the submission or
the approval of a competing ANDA. One such provision allows a
five-year market exclusivity period for new drug applications
("NDAs") involving new chemical compounds and a
three-year market exclusivity period for NDAs (including
different dosage forms) containing new clinical investigations
essential to the approval of the application. The market
exclusivity provisions apply equally to patented and
non-patented drug products. Another provision may extend patents
for up to five years as compensation for reduction of effective
life of the patent as a result of time spent by the FDA
reviewing a drug application.
Additionally, the Act provides for a potential
180-day period of generic exclusivity whereby the first company
to submit an ANDA challenging a brand product patent may trigger
a regulatory process whereby the FDA is required to delay the
final approval of the ANDAs of subsequent filers. Additionally,
submission of an ANDA challenging a brand patent may result in
patent litigation. If this occurs, the FDA may not approve the
ANDA until the earlier of thirty months or the resolution of the
litigation. Based on recent court rulings, the FDA has modified
and re-evaluated its regulations with regard to the 180-day
exclusivity period. This may result in the delay of entry to
market for many generic products, and may result in co-sharing
of the exclusivity period.
Brand-name manufacturers have devised numerous
strategies to delay competition from lower cost generic versions
of their products. One of these strategies is the development of
an optically pure version of a drug or the development of its
metabolite just prior to the expiration of its patents. A shift
in market preference to the "new" product protects the
branded market. Hence, considerable resources expended by
generic manufacturers in drug development, application
submission and approval of the original generic versions may
produce reduced revenues for generic drug companies.
In November 1997, the Food and Drug Modernization
Act was passed. One of the provisions of the Modernization Act
mandated the FDA to devise a program whereby brand sponsors may
be awarded a six-month extension to any active patents and
exclusivity for all formulations of an active ingredient if they
perform and submit adequate pediatric studies on any one dosage
form. The details of the FDA's implementation of this
provision is a subject of much debate in industry and in
government circles as well, but the effect has been to delay the
launch of numerous generic products by an additional six months.
The Generic Drug Enforcement Act of 1992
established penalties for wrongdoing in connection with the
development or submission of an ANDA by authorizing the FDA to
permanently or temporarily debar companies or individuals from
submitting or assisting in the submission of an ANDA, and to
temporarily
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deny approval and suspend applications to market
multi-source drugs. The FDA may suspend the distribution of all
drugs approved or developed in connection with wrongful conduct
and also has authority to withdraw approval of an ANDA under
certain circumstances. The FDA can also significantly delay the
approval of a pending NDA or ANDA under its "Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities
Policy." Manufacturers of drugs must also comply with the
FDA's cGMP standards or risk sanctions such as the
suspension of manufacturing or the seizure of drug products and
the FDA's refusal to approve additional ANDAs.
Products marketed outside the United States that
are manufactured in the United States are subject to various
export statutes and regulations, as well as regulation by the
country in which the products are to be sold.
The Centers for Medicare & Medicaid Services,
formerly known as the Health Care Financing Administration, is
responsible for the implementation of legislation enacted by
Congress in November 1990 that delineates requirements for
rebate agreements between the federal government and a
pharmaceutical manufacturer. Drug manufacturers' agreements
with the Centers for Medicare & Medicaid Services provide
that the drug manufacturer will remit to each state Medicaid
agency, on a quarterly basis, the following rebates: For generic
drugs marketed under ANDAs covered by the state Medicaid
program, manufacturers are required to rebate 11 percent of
the average manufacturer price (net of cash discounts and
certain other reductions). For products marketed under NDAs,
manufacturers are required to rebate the greater of
15.1 percent of average manufacturer price (net of cash
discounts and certain other reductions) or the difference
between such average manufacturer price and the best price
during a specified period. An additional rebate for products
marketed under NDAs is payable if the average manufacturer price
increases at a rate higher than inflation. Teva USA has such a
rebate agreement in effect with the federal government. Teva
believes that the federal and/or state governments may continue
to enact measures in the future aimed at reducing the cost of
drugs to the public. Teva cannot predict the nature of such
measures or their impact on its profitability.
Canada.
In Canada,
the federal and provincial governments determine the
availability and financial reimbursement of therapeutic products.
The Canadian federal government, under the Food
and Drug Act and the Narcotic Control Act, regulates what
therapeutic products can be sold in Canada and what level of
control applies. The Therapeutic Products Programme is the
national authority that evaluates and monitors the safety,
effectiveness and quality of drugs, medical devices and other
therapeutic products.
The approval of the Therapeutic Products
Programme, through the issuance of a Notice of Compliance, is
required before each dosage form of any drug can be marketed.
Pharmaceutical manufacturers must provide information on product
formulation, raw material suppliers, stability of both the
active drug substances and the finished drug products,
manufacturing processes, packaging, labeling, quality control
and safety and efficacy. The manufacturers are also subject to
regular inspections and must have valid establishment licenses.
All generic drug products are approved on the
basis of a comparative safety and efficacy review and a
chemistry and manufacturing review. The Therapeutic Products
Programme has issued three separate guidances on how to
establish and conduct bioavailability studies for generic drug
products with conventional, modified release formulation and
complicated or variable pharmacokinetics. Bioequivalent products
receive a "Declaration of Bioequivalence" to the
corresponding products.
The issuance of a Notice of Compliance for
generic drug products is also subject to the Patented Medicines
(Notice of Compliance) Regulations. The Therapeutic Products
Programme will not issue the Notice of Compliance if the patent
is still registered with the Health Canada Patent Registrar.
Generic pharmaceutical manufacturers can either wait for the
patent to expire or file a patent allegation. Filing of a patent
allegation often results in patent litigation with the brand
company. A Notice of Compliance will not be issued until the
earlier of the expiration of a twenty-four months stay or
resolution of the litigation. Brand-name manufacturers under
certain circumstances are permitted to add new patents to the
Health
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Canada Patent Register, which, if asserted, could
re-start the twenty-four month stay. This makes it difficult for
the generic pharmaceutical manufacturers to receive a Notice of
Compliance.
The provincial governments control expenditures
on therapeutic products by establishing interchangeability
formularies and benefit lists. The provincial governments
regulate the pricing of the products and will only reimburse
products that are listed in the Formularies and Benefit Lists.
The Provincial Ministries of Health, through their own review
processes, determine the eligibility of the products by
evaluating the drug quality, bioequivalence data, drug
therapeutics, and utilization of drug and pharmacoeconomic
issues.
Brand-name manufacturers may file challenges
against the interchangeability status of the generic drug
products with the Provincial Ministries of Health to block or
delay the listing of the generic products in the formularies and
benefit lists.
Israel.
Israel, like
other countries with an advanced pharmaceutical industry,
requires pharmaceutical companies to conform to international
developments and standards. To this end and in order to meet the
three basic criteria for drug registration, namely quality,
safety and efficacy, regulatory requirements are constantly
changing in accordance with scientific advances as well as
social and ethical values. Legal requirements prohibit the
manufacture, importation and marketing of any medicinal product,
unless it is duly approved in accordance with these requirements.
Manufacturers of pharmaceuticals, both local and
foreign, must comply with the requirements of Good Manufacturing
Practices, in order to ensure that products marketed in Israel
are of high quality. The content of an application for
registration depends on the type of product to be registered and
whether it is a new drug entity product, a generic product or a
cosmetic product.
As a result of the 1998 amendments to the patent
law, certain pharmaceutical patents may be extended.
Additionally the Israeli government is considering introducing
data exclusivity provisions, which may prevent the marketing of
a generic product for a period of time after the initial
registration of the innovator product.
Europe.
A directive
of the European Union requires that medicinal products must have
a marketing authorization before they are placed on the market
in the European Union. The criteria upon which grant of an
authorization is assessed are quality, safety and efficacy. In
order to control expenditures on pharmaceuticals, most member
states in the European Union regulate the pricing of such
products and in some cases limit the range of different forms of
a drug available for prescription by national health services.
These controls can result in considerable price differences
between member states.
Certain pharmaceutical patents may be extended in
Europe by up to five years in order to extend effective patent
life to fifteen years. Some older French and Italian patents
were extended up to eight and eighteen years respectively.
Additionally, data exclusivity provisions in Europe may prevent
launch of a generic product by six or ten years from the date of
the first market authorization in the European Union.
Legislation is being considered which may shorten or lengthen
this exclusivity period.
During the course of 2002, Teva continued to
register its products in Europe. As part of the mutual
recognition procedure established by the European Union, an
attempt was made to simplify registration, although centralized
registration for generic products is, as yet, not possible in
Europe. Teva has significantly increased its registration
efforts in a number of main countries: Hungary, the United
Kingdom, France and Germany.
Hungary.
Only
registered drugs can be marketed in Hungary. OGYI (the National
Pharmaceutical Institution), an agency of the Ministry of
Health, examines and approves the documents filed for health
registration. The standards of approval correspond substantially
to European Union standards. On granting the marketing
authorization, the price and amount of the National Health
Authority subsidy are published in the official Health Gazette
of the Ministry. A pharmaceutical product can only be placed on
the Hungarian market after such price and subsidy amounts have
been published.
On January 1, 2003, Hungary joined the
European Patent Convention and simultaneously amended its own
patent act to conform to this convention. On the whole, the new
patent act retained most provisions
24
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of the previous act, including the permission to
carry out clinical trials and tests and apply for and obtain
registration of generics even prior to the expiration of the
original patent. This new act, however, considers the
maintenance of an inventory of such generics prior to the
expiration of the patent to be an infringement of the patent,
while the maintenance of such an inventory was not considered an
infringement under the previous act.
General.
Teva is
also governed by federal, state and local laws of general
applicability, such as laws regulating working conditions. In
addition, Teva is subject, as are manufacturers generally, to
various federal, state and local environmental protection laws
and regulations, including those governing the discharge of
material into the environment. Compliance with such
environmental provisions is not expected to have a material
effect on the operations of Teva in the foreseeable future.
Data Exclusivity.
Data exclusivity provisions exist in
many countries worldwide, although their application is not
uniform. In general, the exclusivity prevents the submission of
generic drug applications to the health authorities for a fixed
period of time following the first approval of the brand name
product in that country. The fixed period of time ranges from
five to ten years. Additional countries, including Israel, may
introduce data exclusivity provisions in the future. This may
prevent the submission of generic drug applications for some
products even after the patent protection has expired.
In particular, European data exclusivity
provisions prevent the submission of generic drug applications
to the health authorities for a period of six to ten years
following the first approval of the brand name product in the
European Union. Most EU countries have a ten year rule, and it
is likely that EU countries with a six year exclusivity period
will extend their data exclusivity period to ten years. The data
exclusivity provisions in most countries are independent of
patent exclusivity. This may prevent the submission of generic
product applications for some products even after the patent
protection has expired.
Pharmaceutical Production
Teva operates 18 finished dosage pharmaceutical
plants in North America, Europe and Israel. The plants
manufacture solid dosage forms, injectables, liquids and
semi-solids. During 2002, Teva's plants produced
approximately 18 billion tablets and capsules.
Of Teva's approximately $160 million in
capital expenditures during 2002, approximately one-third was
spent on the improvement and expansion of existing
pharmaceutical plants. Teva's recent global rationalization
projects, whereby most of the plants were designated as
technological centers of expertise, enhanced Teva's ability
to gain from economies of scale and to continuously improve its
performance.
Teva's North American facilities manufacture
solids, liquids and semi-solids, including dedicated facilities
for penicillins and cephalosporins products. Its European
facilities manufacture solids, liquids and semi-solids
(including soft gelatin caps), and sterile products (including
plasma fractionation products). Its Israeli facilities
manufacture solids, liquids and semi-solids and sterile
products. Teva's main technology — the
manufacture of tablets and capsules — is available in
all the three geographical areas. Teva USA derives most of its
sales from products manufactured outside of the United States.
Teva's plants in the United States and
Canada, the Kfar Sava plant in Israel and the Haarlem plant in
The Netherlands are FDA-inspected. Achieving and maintaining
quality standards in compliance with the current good
manufacturing practice (cGMP) regulations, as established by the
FDA and other regulatory agencies worldwide, requires sustained
efforts and expenditures. Teva has spent, and will continue to
spend, significant funds and dedicate substantial resources to
seek to ensure that standards are continuously met.
Raw Materials for Pharmaceutical
Production
Teva has successfully deployed a global approach
to deal with its main suppliers of raw materials. As for
packaging materials, only a few suppliers are global and
consequently the majority of the purchases are made locally.
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Most of the raw materials used in Teva's
plants in Israel, Europe and Canada, and which are not
manufactured by Teva's active pharmaceutical ingredients
(API) division, are purchased from European, U.S. and Far East
API manufacturers. Teva USA has traditionally acquired the
majority of its raw materials from U.S.-based suppliers and
agents.
Approximately one-third of the raw materials were
purchased from Teva's API division, and an additional third
from Teva's top 25 suppliers.
In general, Teva has succeeded in obtaining the
raw materials needed for its production requirements. To protect
itself from supply interruptions in some of those cases in which
it currently has only one supplier, Teva has built up
inventories or signed supply agreements with current suppliers
and is looking to qualify additional suppliers.
In the United States, Teva USA utilizes
controlled substances in certain of its products and therefore
must meet the requirements of the Controlled Substances Act and
the regulations issued pursuant thereto and administered by the
U.S. Drug Enforcement Administration. These regulations include
quotas on procurement of controlled substances and stringent
requirements for manufacturing controls and security to prevent
pilferage of or unauthorized access to the drugs in each stage
of the production and distribution process. Teva benefits from
holding the appropriate licenses to handle such materials, which
allow it to produce products with limited market competition. On
the other hand, quotas for controlled substances may from time
to time limit the ability of Teva USA to meet demand for these
products.
Organizational Structure
The following table sets forth alphabetically, by
geographic area, as of March 1, 2003, the name and
jurisdiction of Teva's principal operating subsidiaries.
Except as otherwise indicated, Teva owns 100% of the ownership
and voting interest in such subsidiaries.
North America:
Novopharm Limited (Canada)
Teva Neuroscience, Inc. (United States)
Teva Pharmaceuticals USA, Inc. (United States)
Europe:
Approved Prescription Services Limited (United
    Kingdom)
Biogal Pharmaceutical Works Ltd.
    (Hungary) — 99.3% owned
Gry Pharma GmbH (Germany)
Human Pharmaceutical Works Co.
    Ltd.(Hungary) — 99.0% owned
Pharmachemie Group (The Netherlands)
Prosintex Industrie Chimiche Italiane S.r.l.
    (Italy)
Teva Classics S.A. (France)
Teva Santé SAS (France)
Teva Pharmaceutical Fine Chemicals s.r.l. (Italy)
Teva Pharmaceuticals Europe B.V. (The Netherlands)
Teva Pharma Italia S.r.l. (Italy)
Israel:
Abic Ltd.
Assia Chemical Industries Ltd.
B.L.T. — Biological Laboratories Teva
    Ltd.
Plantex Ltd.
Salomon, Levin and Elstein Ltd.
Teva Medical Ltd.
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Properties and Facilities
Listed below are Teva's major facilities as
of March 1, 2003:
Plant Location
Square Footage
Main Function
Kfar Sava, Israel
311,400
Pharmaceutical manufacturing, research
    laboratories
Netanya, Israel
205,500
Chemical production, research laboratories
Jerusalem, Israel
158,700
Pharmaceutical manufacturing, research
    laboratories
Petach Tikva, Israel
115,000
Chemical production, research laboratories and
    warehousing
Netanya, Israel
105,000
Chemical production
Ashdod, Israel
68,500
Hospital supplies production
Ramat Hovav, Israel
152,100
Chemical production
Petach Tikva, Israel
59,100
Corporate headquarters
Sellersville, Pennsylvania
165,500
Pharmaceutical manufacturing, research
    laboratories
Mexico, Missouri
125,000
Chemical production
North Wales, Pennsylvania
335,000
Pharmaceutical warehousing, distribution center,
    offices
Fairfield, New Jersey
43,900
Pharmaceutical production
Elmwood Park, New Jersey
27,700
Pharmaceutical production
Eastbourne, England
35,000
Pharmaceutical packaging
Milan, Italy
34,500
Chemical production and warehousing
Pavia, Italy
32,300
Chemical production and warehousing
Debrecen, Hungary
1,200,000
Pharmaceutical manufacturing, chemical
    production, warehousing and research laboratories
Gödöllõ, Hungary
105,900
Pharmaceutical manufacturing, hospital supplies
    production, research laboratories
Haarlem, The Netherlands
218,700
Pharmaceutical manufacturing, warehousing,
    administration
Mijdrecht, The Netherlands
27,000
Offices and warehousing
Toronto Area, Canada (six sites)
585,000
Pharmaceutical manufacturing, research
    laboratories
Sens, France
186,400
Pharmaceutical manufacturing and warehousing
Puteaux, France
21,000
Offices
Lecco, Italy
81,000
Chemical plant, warehousing and research
    laboratories
Varese, Italy
15,000
Chemical plant and warehousing
Teva leases certain of its facilities. The Kfar
Sava plant, the Jerusalem pharmaceutical plant, the Netanya
chemical plant and the Ramat Hovav plant are in buildings owned
by Teva on land leased from the Israel Lands Administration. The
leases with respect to the Kfar Sava plant extend until 2032 and
2034, respectively, with an option to renew until 2081 and 2083,
respectively. The leases with respect to the Netanya chemical
plant extend until 2018 and 2022, with an option to renew each
of the leases until 2067 and 2071, respectively. The lease with
respect to the Ramat Hovav plant extends until 2043, with an
option to renew until 2092. The lease with respect to the
Jerusalem pharmaceutical plant extends until 2021, with an
option to renew until 2070. All of the above lease payments
(other than the options) have been prepaid. The corporate
headquarters in Petach Tikva are leased in part, until May 2003,
with an option to renew for five years. Novopharm presently
leases six facilities under leases which expire between 2003 and
2025. Teva owns all of its other facilities.
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Table of Contents
ITEM 5:     OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
Introduction
Teva's operations are affected by
demographic trends and budgetary constraints of governments and
health care organizations. Each market in which Teva operates
has its own pressures, although there are common trends that
affect them all. In light of these trends and in order to
maintain and increase its competitive position, Teva is
constantly seeking additional ways of rationalizing its
operations, as well as improving its customer service. In the
generic pharmaceutical marketplace, a broad range of products
and economies of scale in both manufacturing and sales are key
competitive factors. In order to enhance its growth, Teva has
also continued to pursue an aggressive acquisition strategy, as
well as various forms of strategic alliances.
Economic Environment
Since Teva's results are reported in U.S.
dollars, changes in the rates of exchange between the
U.S. dollar and the local currencies in the major markets
in which it operates affect Teva's results. In 2002, the
European currencies increased in value relative to the dollar,
with the Euro being revalued during the year by 18%, the
Hungarian Forint by 19% and the Pound Sterling by 10%. In
Israel, the New Israel Shekel ("NIS") was devalued by
7% during 2002.
Highlights
In 2002, Teva achieved significant growth in its
revenues, passing the $2.5 billion mark for the first time,
and even greater growth in its net income. Among the more
significant factors affecting the years under review, which may
also have a bearing on future results of operations, are:
•
Substantially higher US generic pharmaceutical
    sales as a result of the introduction of several significant new
    generic products, the most important being the generic version
    of Augmentin®, which was launched in the fourth quarter of
    2002, together with their combined positive impact on gross
    margins.
•
The continued success of Copaxone® both in
    North America, where the pre-filled syringe was successfully
    introduced and now represents 95% of all Copaxone®
    prescriptions, and the strong entry of Copaxone® into the
    European market, particularly in Germany.
•
Higher generic pharmaceutical sales in Europe as
    a result of new product launches, the consolidation of Teva
    Classics for the first time, and the strengthening of European
    currencies.
•
The inclusion of Teva Classics and Teva
    Pharmaceutical Fine Chemicals Srl in the second half of 2002.
    These newly acquired companies contributed approximately
    $28 million to Teva's 2002 sales.
•
Significantly increased net R&D expenditures,
    resulting both from higher gross R&D expenditures and a
    lower rate of third party participation in Teva's R&D.
    In 2002, Teva substantially increased its research efforts to
    enhance the development of its generic pipeline, which research
    involves no third party participation. These higher generic
    R&D expenditures combined with a lower level of
    participation by Aventis and Lundbeck in Teva's innovative
    R&D expenditures, which in turn resulted from the completion
    or termination in 2002 of clinical trials that were ongoing in
    2001.
•
A further reduction in Teva's effective tax
    rate, reflecting a favorable mix in the sources of its income.
In 2002, Teva experienced the following
Phase III clinical trial results:
•
The PROMISE trial, which was conducted to
    determine Copaxone®'s efficacy in primary progressive
    multiple sclerosis, did not reach statistical significance.
•
Although the Etilevodopa trial for the treatment
    of Parkinson's disease found the drug to be well-tolerated
    and as effective as Levodopa, Etilevodopa did not demonstrate
    significant superiority to Levodopa in shortening the time to
    clinical effect.
*****
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Results of Operations
The following table sets forth, for the periods
indicated, certain financial data presented as percentages of
net sales and the increase/decrease by item as a percentage of
the amount for the previous year.
In the years ended December 31, 2000 and
2001, Teva recorded non-recurring charges as follows: in 2000
for the acquisition of research and development in process and
in 2001 for restructuring activities. These charges are detailed
in the discussions below under the heading "Other Income
Statement Line Items — One-Time Charges." In
order to facilitate analyses of these years in comparable terms,
both the table of percentage changes which accompanies this
analysis and the textual descriptions below, analyze results
before, as well as after, giving effect to such charges.
Percentage of Net Sales
Percentage Change
Year Ended December 31
Comparison
2002
2001
2000
2001 – 2002
2000 – 2001
%
%
%
%
%
Net Sales
100.0
100.0
100.0
21.2
18.7
Gross Profit
43.5
40.8
39.5
29.3
22.5
Research & Development Expenses
7.7
8.1
7.6
14.2
27.4
Less Participations and Grants
(1.1
)
(3.0
)
(1.6
)
(55.1
)
121.7
Research & Development — Net
6.6
5.1
6.0
53.9
2.5
Selling, General and Administrative Expenses*
16.1
17.2
17.2
13.5
19.0
Operating Income
20.8
17.7
14.3
43.1
46.2
Financial Expenses — Net*
1.0
1.3
2.4
(5.4
)
(38.4
)
Income Before Income Taxes
19.8
16.4
11.9
46.8
63.3
Net Income
16.3
13.4
8.5
47.5
87.5
Data Before One-Time Charges
Operating Income
20.8
18.5
16.3
37.2
33.4
Income before Income Taxes
19.8
17.1
13.9
40.3
45.8
Net Income
16.3
13.9
10.5
42.5
56.4
*
Other Income has been reclassified principally to
    Selling, General and Administrative Expenses and, to a much
    lesser extent, to Financial Expenses — Net.
Sales — General
Consolidated sales by geographic areas and
business segments were as follows:
Sales by Geographical Areas
Percent
Change
2002
2001
% of
% of
from
from
Sales for the Period
2002
2001
2000
2002
2001
2001
2000
U.S. dollars in millions
North America
1,611
1,288
1,031
64
%
62
%
25
%
25
%
Europe
600
457
399
24
%
22
%
31
%
15
%
Rest of the World
308
332
320
12
%
16
%
(7
)%
4
%
Total
2,519
2,077
1,750
100
%
100
%
21
%
19
%
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Sales by Business Segments
Percent
Change
2002
2001
% of
% of
from
from
Sales for the Period
2002
2001
2000
2002
2001
2001
2000
U.S. dollars in millions
Pharmaceuticals
2,241
1,838
1,548
89
%
88
%
22
%
19
%
API*
259
219
181
10
%
11
%
18
%
21
%
Other
19
20
21
1
%
1
%
(5
)%
(4
)%
Total
2,519
2,077
1,750
100
%
100
%
21
%
19
%
*
Third party only.
Although this year Teva acquired two new
businesses, Teva Classics and Teva Pharmaceutical Fine
Chemicals, the sales growth was driven mainly by the organic
growth of both the pharmaceutical and the API business segments.
Approximately 6% of the growth in sales in 2002 was due to the
first time consolidation, during the second half of 2002, of
these two new businesses.
Pharmaceutical Sales
North America
In 2002, pharmaceutical sales in North America
amounted to $1,456 million, representing an increase of 26%
over 2001. The increase in sales was attributable to
(i) several significant launches of new generic products in
2002, the most significant being the generic form of
Augmentin® in the fourth quarter of 2002, as well as 14
other new generic product launches, and (ii) continued
growth in sales of Copaxone® resulting in part from the
successful introduction in 2002 of the pre-filled syringe,
which, as of the end of 2002, accounted for approximately 95% of
U.S. prescriptions of Copaxone®. Unlike several recent
years in which growth was impacted by acquisitions,
substantially all of the increase in sales in 2002 compared to
2001 represents organic growth, reflecting the benefits of
Teva's focus on the development of a strong generic product
pipeline. As of February 21, 2003, Teva's
U.S. generic pipeline included 61 ANDAs (one from
Biovail and five from Impax), including ten tentative approvals
and two approvables. Total annual branded sales of this pipeline
exceeds $42 billion.
During 2002, Teva USA fully implemented a
state-of-the-art computer-controlled distribution center in its
Pennsylvania facilities. This system has increased Teva
USA's capacity to handle the significantly increased
volumes of products that it sells and over 400 stock keeping
units ("SKU"s) which presently comprise its product
line, and is expected to contribute significantly to Teva's
ongoing effort to maintain high levels of customer service.
In 2001, pharmaceutical sales in North America
amounted to $1,158 million, representing an increase of 24%
over 2000. The increase in sales was attributable to
(i) several significant launches of new generic products in
2001, including nabumetone, calcitriol and fluoxetine,
(ii) substantially higher sales of products that were
launched towards the end of 2000 and (iii) continued growth
in sales of Copaxone®.
While the former operations of Novopharm made a
notable contribution to U.S. sales in 2001 and 2002, 2001
was a year in which the operations for the Canadian market had
to be redirected. Novopharm's previous focus on growth
through export activities, primarily to the United States,
resulted in the lack of sufficient development of generic
products for the Canadian market. During 2002, Teva
substantially augmented a program, initiated subsequent to
Novopharm's acquisition, to significantly expand the
Canadian product pipeline. In addition, plant restructurings and
capital investments were made to enable Novopharm to become a
"center of excellence" for the production of certain
products for the American market.
In both 2002 and 2001, the pricing environment
for generic products in the United States was relatively stable.
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Table of Contents
Europe
Pharmaceutical sales in Europe in 2002 amounted
to $509 million, an increase of 34% (28% in Euro terms)
compared to 2001. Increased sales in Europe reflected both
organic growth resulting from the strong penetration of
Copaxone® in Europe and new generic product launches,
mainly in The Netherlands and the U.K., including omeprazole, as
well as external growth resulting from the acquisition of Teva
Classics in France. In addition, the revaluation of European
currencies against the U.S. dollar had a positive impact on
the U.S. dollar value of European sales. In Hungary, higher
sales were recorded both of third party distributed products and
of manufactured products.
In 2001, the increase in sales was due to the
inclusion of Human Serum and Pharmaceutical Manufacturing Co.
Ltd., the Hungarian company acquired as part of the Novopharm
acquisition, for the whole year, as compared to only nine months
in 2000, as well as to the lifting of governmental restrictions
on both pricing and product introductions in Hungary. In the
U.K., price erosion on generic products continued in 2001,
although it softened, compared to 2000, towards the end of the
year, and was partially offset by increased unit sales.
During the course of 2002, Teva continued to
register its generic products in Europe. Although European Union
regulatory harmonization efforts have simplified some
pharmaceutical product registrations, centralized registration
for generic products is, as yet, not possible in Europe because
most countries still have their own distinct regulatory
requirements. Teva has significantly increased its registration
efforts principally in Hungary, the United Kingdom, France and
Germany
.
Rest of the World
Israel
Pharmaceutical sales in Israel, which amounted to
$220 million in 2002, decreased by 4% compared to 2001.
However, net of the impact of decreased exchange rates between
the NIS and the U.S. dollar, sales would have increased by
9%. This increased NIS sales was achieved by new product
launches as well as new distribution agreements. Teva continues
to face adverse trends in the Israeli market. These trends
included: budgetary constraints of Israel's principal
healthcare providers, the ongoing "genericization" of
the Israeli market (although Teva participates in both the
generic and branded markets), new regulations that seek to
harmonize private market prices with those of Western Europe
and, to a lesser extent, regulations that permit the parallel
importation of pharmaceutical products.
Other Countries
Teva's pharmaceutical sales to markets
outside of North America, Europe and Israel amounted to
$55 million, a decrease of 24%, mainly due to a management
decision to reduce sales to countries where financial conditions
are unstable, such as Latin America and the CIS.
Copaxone®
In-market global sales of Copaxone® in 2002
amounted to $539 million, an increase of 48% over 2001.
According to IMS data, Copaxone®, Teva's largest
product, continued to increase its high market share in the U.S.
for multiple sclerosis treatments at a level of approximately
27.8% in December 2002.(1) The pre-filled syringe launched in
the United States in April 2002 has rapidly replaced the
original vial presentation of Copaxone® and as of the end
of the year accounted for approximately 95% of
U.S. prescriptions. Teva is continually responding to
market feedback and evaluating improved ways to deliver
Copaxone®and enhance its ease of use.
U.S. Copaxone® sales represented 76% of total global
sales
(1) At the beginning of 2002, IMS, the prime
source for the monitoring of pharmaceutical prescription data,
changed its sampling methodology for a variety of pharmaceutical
products, including the principal MS drugs. This change may
result in inconsistencies between historical and future period
reported market share data.
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in 2002. In Europe, Copaxone® sales
increased dramatically as a result of the fast penetration in
several countries, the most significant being Germany, Austria,
The Netherlands and the Nordic countries. In October 2002,
Copaxone® received approval in 16 European countries
for seven days storage at room temperature.
In 2001, in-market global sales of Copaxone®
amounted to $363 million, an increase of 47% over the previous
year. U.S. sales in 2001 accounted for 81% of global sales of
Copaxone®.
In November 2002, Teva announced that an interim
analysis of its clinical trial on primary progressive multiple
sclerosis (the PROMISE trial) showed that it was improbable that
the study, in its current protocol, would reach statistical
significance. The scheduled interim analysis by the study's
data safety monitoring committee came two years into the
three-year study. There were no safety concerns about treatment
with Copaxone®. Primary progressive multiple sclerosis is
different from relapsing-remitting multiple sclerosis, affecting
less than 10% of multiple sclerosis patients worldwide.
Active Pharmaceutical Ingredients
Sales
Sales in 2002 of active pharmaceutical
ingredients to third parties increased by 18% amounting to
$259 million. At the same time, inter-company sales of
active pharmaceutical ingredients during 2002 increased 37% and
amounted to $206 million. These sales represent 31% of
total raw material consumption of Teva's pharmaceutical
business. The increase in sales to third parties is the result
of higher sales of lovastatin in the U.S. and increased demand
for API products worldwide, as well as the contribution of six
months of sales for Teva PFC. The higher proportion of
inter-company sales reflected the strategic importance of
vertical integration. Total sales of the API division in 2002,
including inter-company sales, increased by 26% to
$465 million.
The increase in API sales to third parties in
2001 reflected increased sales in the United States. In
addition, the API division sold $150 million of raw
materials to Teva's pharmaceutical divisions during 2001,
representing 30% of their total raw material consumption.
Other Income Statement Line Items
Gross Profit
Gross profit margins reached 43.5% in 2002,
compared with 40.8% in 2001 and 39.5% in 2000, reflecting an
improved product mix resulting from higher sales of newly
launched products, as well as Copaxone®. Gross margins also
improved due to the favorable currency fluctuations and
synergies achieved throughout Teva.
The majority of the factors that affected the
2002 increased gross profitability also impacted the 2001
improved margins, though to a lesser extent.
Due to the depth of its generic pipeline and
Teva's anticipated product mix, Teva believes that the
gross margin levels achieved in 2002 are more likely to be
representative of the gross margins to be achieved during 2003
than were the gross margin levels of the prior three to five
years.
Research and Development (R&D)
    Expenses
Gross R&D expenses increased in 2002 in
absolute terms by 14% as a result of increased spending on
generic R&D, reflecting the increased efforts of Teva in
generic research.
The net R&D expenses increased by a more
substantial percentage resulting both from higher gross R&D
expenditures and a lower rate of third party participation in
Teva's innovative R&D. In 2002, Teva substantially
increased its research efforts to enhance the development of its
generic pipeline, which research involves no third party
participation.
Generic R&D expenses, which accounted for 50%
of Gross R&D expenses, increased by approximately 41% due to
increased R&D activity for North America, including R&D
efforts for
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Novopharm, as well as generic R&D efforts for
Europe. Innovative R&D expenses, which amounted to
approximately 40% of Gross R&D expenses for 2002, decreased
by 9%, due to lower expenditures resulting mainly from the
termination of the two Copaxone® clinical trials. The
balance of 10% was dedicated to the development of other
products, principally in the area of API.
In January 2003, Teva announced that although the
Etilevodopa trial for the treatment of Parkinson's disease
found the drug to be well-tolerated and as effective as
Levodopa, Etilevodopa did not demonstrate significant
superiority to Levodopa in shortening the time to clinical
effect.
Selling, General and Administrative
    Expenses
SG&A expenses in 2002 increased in absolute
terms by 13.5%, but decreased as a percentage of sales to 16.1%
from 17.2%. Conflicting trends affected this line item. Higher
legal costs resulting from patent challenge litigation in
connection with Paragraph IV applications in the U.S.,
rising insurance premiums, the continued launching activities of
Copaxone® in Europe and provisions for doubtful debt in
Argentina ($5 million) were more than offset by the impact
of the exclusion of the amortization of goodwill due to the
application of FAS 142, since January 1, 2002 and
related benefits from economies of scale resulting from higher
sales volume.
In 2002, Teva reclassified an income statement
line item captioned "Other Income — Net" to
conform with industry reporting practices, principally to
SG&A, and to a lesser extent to Financial
Expenses — Net, and simultaneously made a
corresponding reclassification to prior years. Since the amounts
of this former line item were approximately the same in both
2002 and 2001, this reclassification did not result in any
meaningful change in the period-to-period comparisons.
SG&A expenses in 2001 remained unchanged as a
percentage of sales when compared to 2000. The primary
contributors to the absolute increase were initial launching
activities of Copaxone® in Europe and provisions for
doubtful debts in Argentina due to the uncertain economic
environment in that country.
Operating Income
Operating income increased as a result of the
combined impact of the factors described above.
Financial Expenses
The 5% decrease in financial expenses
(net) for 2002 over 2001 principally reflected the lower
interest rates achieved through the two convertible debenture
issuances in November 2002 and August 2001, as well as general
decreases in global interest rates. In addition to decreased
interest charges on its short term credit, Teva took advantage
of these lower interest rates by entering into certain interest
rate swap transactions. In 2001 financial expenses decreased by
38% as a result of the combined impact of Teva's August
2001 and October 2000 convertible debt offerings and a decrease
in short term borrowing levels resulting from the application of
increased cash generated by operations.
Taxes
Taxes as a percentage of pre-tax income amounted
to 17% in 2002, as compared with 20% in 2001 and 24% in 2000.
The rate of tax fluctuates with the source of
taxable income. The statutory Israeli corporate tax rate is 36%.
However, Teva's effective consolidated tax rates are
considerably lower, since a major portion of Teva's income
in Israel is derived from "approved enterprises" and
part of its income is derived in countries whose tax rate is
lower than 36% or benefited from other tax incentives.
Expansion projects of Teva and certain of its
subsidiaries in Israel have been granted "approved
enterprise" status. Such status confers tax benefits,
including complete tax exemption for the income generated by
such projects, for periods of time ranging from two to ten years
from the first year in which the approved enterprise first
realized taxable income, and depending upon the region of Israel
in which
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Table of Contents
such enterprises are located. For the period from
the end of the tax exemption until the tenth year in which the
approved enterprise first realized taxable income, such
enterprises enjoy a reduced corporate tax rate of 20% subject to
certain limitations. Teva's current tax rates in Israel are
positively affected by such exemptions that, as they relate to
projects of Teva, have terms expiring between 2002 and 2010.
Following the launch in the fourth quarter of
2002 of the generic version of Augmentin®, which is
manufactured in the U.S. where the applicable tax rate is
substantially higher relative to the average tax rate applicable
to Teva, the overall tax rate for the fourth quarter and for the
entire year increased, although the latter was still lower than
in previous years.
The income that Teva derives from Copaxone®
has benefited from Israeli tax holidays, which are designed to
encourage investment in Israeli manufactured products. A
significant portion of this tax benefit expired at the end of
2002. Therefore, Teva does not anticipate being able to sustain
the overall rate of tax that it enjoyed during 2002. Subject to
the shifts in the geographical mix of the sources of its income,
Teva currently estimates a tax rate for 2003 in the range of
20% - 23%. However, as a result of building a second
production facility for Copaxone® in the south of Israel in
a tax-advantaged zone, Teva expects to gradually begin to
realize a new tax benefit on incremental Copaxone® sales
beginning in 2004.
Net Income
Net income totaled $410 million in 2002, an
increase of 48% as compared with $278 million in 2001.
Fully diluted earnings per ADR in 2002 amounted to $1.52, an
increase of 49% over 2001. Before deducting one-time charges
from the 2001 net income, the increase in net income and the
fully diluted earning per share would each be 43% respectively,
as compared with 2001.
Net income, including one-time charges in both
years 2001 and 2000, increased by 88%. Net income before
deducting one-time charges reached $288 million in 2001, an
increase of 56% as compared with 2000. Fully diluted earnings
per ADR in 2001 amounted to $1.02 and before deducting the
one-time charge, amounted to $1.06, up 79% and 50%, respectively.
At the end of 2002, Teva announced a
2:1 stock split. The comparable earnings per ADR figures
have been adjusted to reflect the impact of the stock split.
One-Time Charges
The following table details one-time charges for
the years indicated and their respective effect on earnings per
share:
One-Time Charges
(after taxes)
U.S. dollars
U.S. dollars
Year
in millions
per ADR(*)
Details
2001
9.7
0.04
Restructuring expenses resulting mainly from the
    closure and sale of facilities in connection with Teva's
    rationalization program.
2000
35.7
0.14
Acquisition of rights, mainly in respect of
    Novopharm's in process R&D.
(*)
After giving retroactive effect to the
    distribution of a 100% stock dividend in December 2002.
Impact of Currency Fluctuations and
Inflation
Because Teva's results are reported in
U.S. dollars, changes in the rate of exchange between the
U.S. dollar and the local currencies in the markets in
which Teva operates — mainly the NIS, Euro, Canadian
dollar, Pound Sterling and Hungarian Forint — affect
Teva's results. During 2002, the European currencies
revalued against the dollar. The Euro's exchange rate
relative to the dollar reached $1.05 at December 31, 2002,
representing an 18% year-end to year-end revaluation. However,
the difference
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between the average exchange rates in 2002 and in
2001 was lower, amounting to 6%. The Hungarian Forint and Pound
Sterling revalued by approximately 10% and 3%, respectively
(when comparing average to average). While sales in Europe
benefited significantly from the strengthening Euro, the impact
on net income was mitigated by the fact that most products sold
in Europe were produced in Europe, where costs in dollar terms
were higher as a result of the stronger currencies. This was
further mitigated by purchases of European raw materials for use
in non-European production, the dollar value of which increased.
During 2002, the NIS continued its devaluation
relative to the U.S. dollar, this year by a rate of 13%
(when comparing average to average). While this devaluation had
the effect of decreasing the dollar value of Israeli sales, its
net effect on the 2002 consolidated results was positive because
Teva experienced an excess of NIS denominated expenses over NIS
denominated income resulting principally from the high level of
Israeli exports.
Such European currency revaluations and
devaluation of the NIS during 2002 had the net effect of
increasing sales by approximately $16 million, but had a
less significant positive impact on net income in 2002.
In terms of the Israeli Consumer Price Index
(CPI), 2002 was a year in which the CPI increased by 6.5%,
substantially higher than the previous three years, resulting
primarily from the devaluation of the NIS against the
U.S. dollar.
Historically, the NIS has been devalued in
relation to the U.S. dollar and other major currencies
principally to reflect the extent to which inflation in Israel
exceeds average inflation rates in Western economies. Such
devaluations in any particular fiscal period are never
completely synchronized with the rate of inflation and therefore
may lag behind or exceed the underlying inflation rate.
The table below sets forth the annual rate of
inflation, the annual rate of devaluation of the NIS against the
U.S. dollar and the gap between them.
Year Ended December 31,
2002
2001
2000
1999
1998
Inflation (CPI)
6.5
%
1.4
%
0
%
1.3
%
8.6
%
Devaluation/(Revaluation)
7.3
%
9.3
%
(2.7
)%
(0.2
)%
17.6
%
Inflation/devaluation gap
(0.8
)%
(7.9
)%
2.7
%
1.5
%
(9.0
)%
Critical Accounting Policies
The preparation of Teva's consolidated
financial statements in conformity with accounting principles
generally accepted in the United States requires management to
make estimates and assumptions in certain circumstances that
affect amounts reported in the accompanying consolidated
financial statements and related footnotes. Actual results may
differ from these estimates. To facilitate the understanding of
Teva's business activities, described below are certain
Teva accounting policies that are relatively more important to
the portrayal of its financial condition and results of
operations and that require management's subjective
judgments. Teva bases its judgments on its experience and
various other assumptions that it believes to be reasonable
under the circumstances. Please refer to Note 1 to
Teva's consolidated financial statements included in this
Annual Report on Form 20-F for the year ended
December 31, 2002 for a summary of all of Teva's
significant accounting policies.
Revenue Recognition and Sales Reserves and
    Allowances
Revenue is recognized generally when title and
risk of loss for the products is transferred to the customer.
Provisions for estimated returns, customer volume rebates,
chargebacks, discounts and shelf-stock adjustments are
established concurrently with the recognition of revenue.
Accordingly, reported Net Sales is net of these allowances. The
following briefly describes the nature of each provision and how
such provisions are estimated.
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Teva has arrangements with certain parties
establishing prices for its products for which they
independently select a wholesaler from which to purchase. A
chargeback represents the difference between the invoice price
to the wholesaler and the indirect customer's contract
price. Provisions for estimating chargebacks are calculated
using historical chargebacks experience and wholesaler inventory.
Under certain conditions the customer is able to
return its purchases to Teva. Teva records a reserve for
estimated sales returns in accordance with the provision of SFAS
No 48, "Revenue Recognition When Right of Return
Exists." Returns reserves are estimated by applying a
historical relationship of customer returns to amounts invoiced.
Applying historical data the company determines the amount of
returned product that is scrapped (destroyed) versus
product that is returned to stock (placed back in inventory to
be resold).
Customer volume rebates are offered to key
customers to promote loyalty. These rebate programs provide
that, upon the attainment of pre-established volumes or the
attainment of revenue milestones for a specified period, the
customer receives a rebate. Since rebates are contractually
agreed upon, rebates are estimated based on the specific terms
in each agreement.
Cash discounts are offered to most customers to
encourage prompt payment. Discounts are estimated based on
historical discounts taken in relation to sales.
The custom in the pharmaceutical industry is
generally to grant customers shelf-stock adjustments based on
the customers' existing inventory following decreases in
the market price of the related product. Provisions for
shelf-stock adjustments are determined at the time of the price
decline and based on estimated inventory levels.
Historical data has been adjusted, where
applicable, in order to give effect to subsequent events,
including primarily, the effect of increased turnover on such
provisions.
Income Taxes
The provision for income tax is calculated based
on Teva's assumptions as to its entitlement to various
benefits under the applicable tax laws in the jurisdictions in
which it operates. The entitlement to such benefits depends upon
Teva's compliance with the terms and conditions set out in
these laws.
Deferred taxes are determined utilizing the asset
and liability method based on the estimated future tax effects
of differences between the financial accounting and tax bases of
assets and liabilities under the applicable tax laws. Valuation
allowances are provided if, based upon the weight of available
evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. Taxes, which would
apply in the event of disposal of investments in subsidiaries,
have not been taken into account in computing deferred taxes, as
it is Teva's intention to hold these investments, rather
than realize them.
Teva intends to permanently reinvest the amounts
of tax-exempt income and does not intend to cause dividend
distribution from such income. Therefore, no deferred taxes have
been provided in respect of such tax-exempt income.
Teva may incur additional taxes if dividends are
distributed out of the income of its non-Israeli subsidiaries.
Such additional tax liability has not been provided for as Teva
does not expect these companies to distribute dividends in the
foreseeable future.
Contingencies
Teva is from time to time subject to claims
arising in the ordinary course of its business, including
patent, product liability and other litigation. In determining
whether liabilities should be recorded for pending litigation
claims, Teva assesses the allegations made and the likelihood
that it will successfully defend itself. When Teva believes that
it is probable that it will not prevail in a particular matter,
it then estimates the amount of the liability based in part on
advice of outside legal counsel.
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Inventories
Inventories are stated at the lower of cost or
market. Cost is determined as follows: Raw and packaging
materials and purchased products — mainly on the
"first-in, first-out" basis. Finished products and
products in process: raw material and packaging
component — mainly on the "first-in,
first-out" basis; labor and overhead — on the
average basis over the production period.
Valuation of Intangible Assets, Marketable
    Securities and Long-Lived Assets
Intangible assets:
Goodwill reflects the excess of the purchase
price of subsidiaries acquired over the fair value of net assets
acquired. As from January 1, 2002, pursuant to
FAS 142, "Goodwill and Other Intangible Assets,"
goodwill is no longer amortized but rather is tested for
impairment annually. Teva has completed the transitional
impairment review of goodwill on January 1, 2002, as
required by FAS 142: the various reporting units, for which
separately identifiable cash flow information is available, were
identified and the fair values of such reporting units were
determined using expected future discounted cash flows.
Consequently, Teva has determined that there is no indication of
impairment with respect to goodwill as of January 1, 2002.
Teva has selected December 31 as the date on which it will
perform its annual impairment test for indefinite life
intangible assets. As of December 31, 2002, no impairment
was required.
Intangible assets consist mainly of marketing and
other rights relating to products in respect of which an
approval for marketing was provided by the FDA or an equivalent
agency. In 2002, in accordance with FAS 142, a review was
performed of the remaining estimated useful lives for all
recorded intangible assets. As a result of this review, one
intangible asset, relating to tradename, was determined to have
an indefinite life. Accordingly, as from January 1, 2002,
this intangible asset is no longer amortized, but rather tested
for impairment at least annually. Other intangible assets are
amortized using the straight-line method over their estimated
period of useful life. Teva has selected December 31 as the
date on which it will perform its annual impairment test for
indefinite life intangible assets. As of December 31, 2002,
no impairment was required.
Marketable securities:
Marketable securities consist of held-to-maturity
securities, which are debt securities in which Teva has invested
with the intention of holding until the maturity dates of the
securities, and of equity investments classified as
available-for-sale securities which are carried at market value,
with unrealized gains and losses, net of taxes, reported as a
separate component of accumulated other comprehensive income
(loss). If it is determined, based on valuations, that a decline
in the fair value of any of the investments is other than
temporary, an impairment loss is recorded and included in the
consolidated statements of income as financial expenses.
Long-lived assets:
On January 1, 2002, Teva adopted
FAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." FAS 144 requires that long-lived
assets, to be held and used by an entity, be reviewed for
impairment and, if necessary, written down to the estimated fair
values, whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable
through undiscounted future cash flows.
Allowance for doubtful accounts
Teva performs ongoing credit evaluations of its
customers for the purpose of determining the appropriate
allowance for doubtful accounts and generally does not require
collateral. Allowance is made for specific debts doubtful of
collection.
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Recently Issued Accounting
Pronouncements
FAS 143
In August 2001, the FASB issued FAS No. 143,
"Accounting for Obligations Associated with the Retirement
of Long-Lived Assets." FAS 143 addresses accounting
and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs, including, but not limited to, clean-up costs, etc.
FAS 143 is effective for financial statements issued for
fiscal years beginning after June 15, 2002. Teva does not
expect the adoption of FAS 143 to have a material effect on
its consolidated financial statements.
FAS 146
In June 2002, the FASB issued FAS No. 146,
"Accounting for Costs Associated with Exit or Disposal
Activities." FAS 146 requires that a liability for
costs associated with an exit or disposal activity be
recognized, at fair value, when the liability is incurred.
Previously, a liability for an exit cost was recognized at the
date of the commitment to an exit plan. FAS 146 is to be
applied prospectively to exit or disposal activities initiated
after December 31, 2002.
FIN 45
In November 2002, the FASB issued FIN
No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires the guarantor
to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing such
guarantee and to provide certain disclosures. The recognition
provisions of FIN 45 are applicable on a prospective basis
to guarantees issued or modified after December 31, 2002.
Teva does not expect the adoption of FIN 45 to have a
material effect on its consolidated financial statements.
FIN 46
In January 2003, the FASB issued FIN No. 46,
"Consolidation of Variable Interest Entities."
FIN 46 classifies entities into two groups: (1) those
for which voting interests are used to determine consolidation;
and (2) those for which other interests (variable
interests) are used to determine consolidation. FIN 46
deals with the identification of Variable Interest Entities and
the business enterprise which should include the assets,
liabilities, non-controlling interests and results of activities
of a Variable Interest Entity in its consolidated financial
statements. FIN 46 would become effective during 2003. At
this stage, Teva is evaluating the effect of this pronouncement
on its consolidated financial statements.
Liquidity and Capital Resources
On December 31, 2002, Teva's working
capital was $1.4 billion, close to the level reported as of
December 31, 2001. Several conflicting trends affected this
item. Working capital increased as a result of an increase in
cash and cash equivalents and short-term investment, reflecting
proceeds of the $450 million convertible senior debenture
offering in November 2002, as well as the cash generated from
operations during 2002. In addition, substantially higher
accounts receivable were recorded in December 2002, as a result
of the high sales level of the generic version of
Augmentin® towards the end of the year. Serving to lower
the working capital figure, $550 million of convertible
debt, which was previously included as long term debt and is
currently presented as short term debt due to the
debenture's "put option" effective October 2003,
which may be exercised in exchange for cash or Teva shares. The
exercise of the put option in October 2003 at 103% of stated
value by bondholders is dependent upon Teva's stock price,
among other factors.
In this context it should also be noted that
inventories have been built up in connection with the planned
rationalization program, and in order to maintain inventories
closer to their markets, which Teva
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Table of Contents
believes to be a cost effective measure in light
of present geopolitical circumstances (as further discussed
below) and the low interest rate environment.
Cash generated by operations for 2002 amounted to
$354 million, as compared with $273 million in 2001.
Purchase of fixed assets in 2002 amounted to $160 million,
as compared with $115 million in the previous year. In
addition, Teva used $156 million of the cash generated to
finance the two acquisitions of Teva Classics and Teva
Pharmaceutical Fine Chemicals in mid-2002.
Among the more significant capital expenditures
during 2002 were the expansion of Teva's existing
pharmaceutical plants, including the expansion of its existing
Copaxone® manufacturing facility to produce Copaxone®
pre-filled syringes, expansion of its state-of-the-art API
facility in southern Israel and its API plant in Hungary; and
the deployment of modernized information systems, including Teva
USA's new Enterprise Resource Planning and warehouse
management systems.
In November 2002, Teva raised $450 million
by issuing twenty-year convertible senior debentures. Interest
on the debentures is payable at 0.375% per annum. The debentures
are convertible into Teva ADRs at a conversion price of $42.89
per ADR. Holders of the debentures may require Teva to
repurchase the debentures at their principal amount in November
2007, 2012, 2017 and 2022 or upon a change of control or a
termination of trading of the Teva shares. The funds from the
debentures have been invested in short-term interest-bearing
investments.
In addition to Teva's financing obligations
as reflected by short term debt and long term loans, its major
contractual obligations and commercial commitments include
leases, royalty payments and participation in joint ventures
associated with research and development activities.
As of December 31, 2002, minimum future
rentals under operating leases of buildings, machinery and
equipment for periods in excess of one year were as follows:
2003 — $13.1 million; 2004 —
$11.6 million; 2005 — $8.5 million;
2006 — $6.8 million; 2007 and
thereafter — $16.8 million.
Teva is committed to pay royalties to owners of
know-how and to parties that financed research and development,
at rates ranging mainly from 0.5% to 10% of sales of certain
products, as defined in the agreements. In some cases, the
royalty period is not defined; in other cases, the royalties
will be paid over various periods, not exceeding 20 years,
commencing on the date of the first royalty payment. Teva has
also undertaken to pay royalties to the Government of Israel, at
the rates of 2.0% — 3.5% of sales relating to a
product or a development resulting from the research funded by
the Office of the Chief Scientist. The royalties due to the
Government should not exceed the amount of participation, in
dollar terms (in respect of research grants commencing
1999 — with the addition of dollar LIBOR interest).
The maximum amount of the contingent liability in respect of
royalties to the Government at December 31, 2002 amounts to
$34.4 million.
Teva entered into joint venture agreements during
2002, with two companies pursuant to which it is to participate
in the funding of research and development conducted by these
companies in a total amount of $20 million, payable upon
achievement of certain milestones. As of December 31, 2002,
an amount of $4.3 million was paid by Teva.
In 2001, Teva entered into agreements with two
other companies pursuant to which it is to participate in the
funding of research and development conducted by these companies
in a total amount of $20 million, payable upon achievement
of certain milestones. In addition, Teva has acquired shares in
these companies for a total amount of approximately
$10 million which are carried at cost and included under
investments and other assets.
Certain of Teva's loan agreements and
debentures contain restrictive covenants, mainly the requirement
to maintain certain financial ratios. Teva currently meets all
applicable financial ratios.
Teva's principal sources of short-term
liquidity are its existing cash and internally generated funds,
which Teva believes are sufficient to meet its operating needs
and anticipated capital expenditures over the near term.
Teva's existing cash is generally invested in short-term
investments that bear fixed and floating interest rates.
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Table of Contents
Teva continues to review additional opportunities
to acquire companies in the generic industry and to acquire
complementary technologies or product rights. To the extent that
any such acquisitions involve cash payments, rather than the
issuance of shares, they may require Teva to draw upon credit
lines available to Teva from Israeli and other banks, or may
involve raising additional funds from debt or equity markets.
******
Geopolitical
Considerations.
As security has become
a global issue in the period since September 11, 2001, Teva
is committed to taking security seriously on all levels of its
management and operations. In the past, Teva has had to operate
during regional conflicts. During all of these difficult
periods, Teva has always continued to serve its customers and
operate in an uninterrupted manner without the market noticing.
In order to reinforce its operations and service to its
customers during the upcoming anticipated U.S. military action
against Iraq, Teva has implemented measures at its corporate
headquarters and key operating facilities designed to provide
continuity of normal operations and supply during a crisis.
Furthermore, Teva has increased inventories to record levels,
expanded its supply logistics to include redundant alternatives
and enhanced its ability to shift production facilities if
necessary.
40
Table of Contents
ITEM 6:
DIRECTORS, SENIOR MANAGEMENT AND
    EMPLOYEES
The following table sets forth information as to
the executive officers and directors of Teva as of March 1,
2003:
Executive Officers
Officer
Name
Age
Since
Position
Israel Makov
63
1995
President and Chief Executive Officer
Haim Benjamini
63
1988
Vice President — Human Resources
William A. Fletcher
55
1983
Group Vice President — North America,
    and President and CEO — Teva North America
Chaim Hurvitz(1)
42
1995
Group Vice President International
Meron Mann
51
1989
Group Vice President — Europe, and
    President and CEO Teva Pharmaceuticals Europe B.V.
Eli Shohet
46
1999
Vice President — Business Development
Dan S. Suesskind
59
1978
Chief Financial Officer
Dr. Ben-Zion Weiner
59
1986
Group Vice President — Global Products
Aharon Agmon
58
1989
Vice President — International
    Pharmaceutical Sales
Yehuda Arad
56
2003
Vice President — Safety and Ecology
George S. Barrett
47
1999
President & CEO — Teva
    Pharmaceuticals USA, Inc.
Rodney Kasan
61
1999
Vice President and Chief Technology Officer
Moshe Manor
47
1995
Vice President — Global Products
    Division
Michael Netz
41
2002
Vice President — Israel Pharmaceutical
    Sales
Christopher Pelloni
52
2002
Vice President — Global Generic R&D
Dr. Irit Pinchasi
51
2002
Vice President — Innovative R&D
Dr. David Reisman
56
1999
Vice President — Israel Pharmaceutical
    Operations
Dr. Aharon Schwartz
61
1985
Vice President — Strategic Business
    Planning and New Ventures
Jacob Winter
52
1991
Vice President — Global Operations
Aharon Yaari
51
2002
Vice President — API Division
Ron Grupel
52
1993
Internal Auditor
Uzi Karniel
60
1979
General Counsel and Company Secretary
(1)
Eli Hurvitz and Chaim Hurvitz are father and son.
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Table of Contents
Directors
Director
Name
Age
Since
Eli Hurvitz — Chairman(l)(2)(3)
70
1968
Ruth Cheshin(2)(3)
66
1989
Abraham E. Cohen(4)
66
1992
Leslie Dan(4)
73
2001
Amir Elstein(5)
47
1995
Prof. Meir Heth(4)
70
1977
Prof. Moshe Many(4)
74
1987
Dr. Leora Meridor(6)
56
2002
Dr. Max Reis(5)
75
2001
Prof. Michael Sela(3)
79
1987
Dov Shafir(4)
71
1969
Ory Slonim(7)
60
1998
Harold Snyder(3)
81
1996
(1)
Eli Hurvitz and Chaim Hurvitz are father and son.
(2)
Ruth Cheshin and Eli Hurvitz are sister- and
    brother-in-law.
(3)
Term ends in 2005.
(4)
Term ends in 2004.
(5)
Term ends in 2003.
(6)
Independent director elected in accordance with
    the Israeli Companies Law for a three-year term.
(7)
Independent director appointed pursuant to the
    former Israeli Companies Law for a five-year term.
Executive Officers
Israel Makov
has
been the President and Chief Executive Officer of Teva since
April 2002. Previously he served as Teva's Chief Operating
Officer from January 1, 2001, Executive Vice President from
1999 and Vice President for Business Development from 1995-1999.
Prior to joining Teva, Mr. Makov was Chief Executive
Officer of Gottex from 1993-1995, Chief Executive Officer of
Yachin Hakal Ltd. from 1991-1993 and Chairman of Axiom Ltd. from
1987-1991. Mr. Makov has also been a director of Bank
Hapoalim Ltd. since October 2002. He received his B.Sc. in
Agriculture from Hebrew University in 1963 and his M.Sc. in
Economics from Hebrew University in 1965.
Haim Benjamini
,
Brigadier General (retired) of the Israel Defense Forces, has
been with Teva since 1988 as the Vice President —
Human Resources. Before joining Teva, Mr. Benjamini was
Vice President of Human Resources & Organization at Scitex
Corp. Ltd., Israel, from February 1982 through May 1988. He
received his B.A. in Social Sciences (Sociology and Political
Science) from Hebrew University in 1964 and his M.A. in
Organizational Behavior from the University of Chicago in 1980.
William A. Fletcher
has served as Group Vice
President — North America since April 2002 and as
President and Chief Executive Officer of Teva North America
since April 2000. He previously served as President and Chief
Executive Officer of Teva USA from 1983 through March 2000.
Mr. Fletcher has also served as Vice President-North
American Pharmaceutical Sales since 1995. Prior to joining Teva
USA, he was Business Development Manager and International
Marketing Manager of Synthelabo, a subsidiary of L'Oreal in
Paris. He graduated in International Marketing from Woolwich
Polytechnic, London (now Greenwich University) in 1969.
Chaim Hurvitz
has
served as Group Vice President International since April 2002.
He served as Vice President — Israeli Pharmaceutical
Sales from January 2002 until April 2002 and was the President
of Teva Pharma B.V. and Vice President — European
Pharmaceutical Sales from 1995 to 1999. From 1993 to 1994, he
served as the General Manager of Teva's European Office in
The Netherlands and from 1990 to 1993 as the head of the
pharmaceutical and OTC departments of Abic Ltd., a Teva
subsidiary. He received his B.A in Political Science and
Economics from Tel Aviv University in 1985.
Meron Mann
has been
with Teva since 1978, where he has served as Group Vice
President — Europe since 2002 and has been the
President and CEO of Teva Pharmaceutical Europe B.V. since 2002.
From
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1990 to 2002, he served as President of
Teva's Active Pharmaceuticals Ingredients division. He
received his M.Sc. in Industrial Engineering from the Haifa
Technion-The Israel Institute of Technology in 1978 and his
B.Sc. from Tel Aviv University in 1976.
Eli Shohet
has been
with Teva since 1986. Since 1999, he has served as Vice
President Business Development. He previously served as Chief
Economist and assistant to Teva's CEO (1989-1993),
president of Plantex USA (1993-1996) and director of Business
Development for Teva's API division (1996-1999). He
received his B.A. in Economics from Bar-Ilan University in 1986.
Dan S. Suesskind
has
been with Teva since 1976 and has been Chief Financial Officer
since 1978. From 1970 until 1976, he was a consultant and
securities analyst with International Consultants Ltd. He
received his B.A. in Economics and Political Science from the
Hebrew University in 1965 and an M.B.A. from the University of
Massachusetts in 1969. He served as a director of Teva until
2001. Until 1998, Mr. Suesskind was a director of Lanoptics
Ltd. and until 1999 a director of ESC Medical Systems Ltd. He is
currently a member of the Jerusalem Foundation, Investment
Advisory Committee, Board of Trustees of Hebrew University,
Board member of the First International Bank and a board member
of Migdal Insurance Company Ltd.
Dr. Ben-Zion Weiner
has been with Teva since 1975 and has
been the Group Vice President — Global Products since
April 2002. Previously, he served as Vice President —
Research & Development from 1986 to 2002. In 1975, he
received a Ph.D. in Chemistry from Hebrew University, where he
also earned B.Sc. and M.Sc. degrees. He did post-doctorate
research at Schering-Plough Corporation in the United States.
Aharon Agmon
has
been Vice President — International Pharmaceutical
Sales since 1995. During 1994 he served as Vice
President — Israel Pharmaceutical Sales. He served as
the Managing Director of Teva Medical from 1984 to 1993. He
received his B.A. in Economics and Political Sciences from
Hebrew University in 1968 and his M.B.A. from Tel Aviv
University in 1971.
Yehuda Arad
has
served as Teva's Vice President — Safety and
Ecology since January 2003. Before joining Teva, Mr. Arad
was Senior Vice President of Rotem Amfert Negev Ltd. from
January 2001 through December 2002 and Technical Vice
President — Dead Sea Bromine Group from January 1995
through December 2001. He received his B.Sc. in Mechanical
Engineering from Polytechnic Institute of New York in 1979 and
his M.B.A. from Ben Gurion University in 1998.
George S. Barrett
has served as President and CEO of
Teva USA since March 1999. Prior to joining Teva in 1999,
Mr. Barrett was President and CEO of Diad Research, a
technology start-up based at the Johns Hopkins School of
Medicine. From 1991 to 1997, Mr. Barrett was with Alpharma
Inc. He began his tenure as President of its subsidiary Barre
National, and was appointed President of Alpharma's
U.S. Pharmaceutical group in 1994. From 1981 to 1991,
Mr. Barrett held various positions with NMC Laboratories,
serving as President from 1988 through its acquisition by
Alpharma Inc. Mr. Barrett received his Bachelor's
Degree from Brown University in 1977 and his M.B.A. from New
York University in 1988. Mr. Barrett serves as Chairman of
the Board of Directors for the Generic Pharmaceutical Industry
Association and is a director of The American Foundation for
Pharmaceutical Education and The University of Maryland School
of Pharmacy.
Rodney Kasan
has
been with Teva since 1980. He currently serves as Vice President
and Chief Technology Officer prior to that he was Vice President
Global Product Development — Generic Pharmaceuticals.
He served as Head of Pharmaceutical Research and Development
until 1995 and subsequently as Director of Pharmaceutical
Research and Development for the Operations Division. He
received his degree in Pharmacy in Pretoria, South Africa.
Moshe Manor
has been
the Vice President — Global Products Division since
2002. Previously, he served as Vice President of Strategic
Product planning from 2000 to 2002, and as Vice President Israel
Pharmaceutical Sales from 1995 to 2000. He served as the General
Manager of Teva-labeled products in Israel from 1993 to 1994 and
as the Marketing Director of the Israeli Pharmaceutical Division
from 1989
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to 1993. He received his B.A. in Economics from
the Hebrew University in 1982 and his M.B.A. from Tel Aviv
University in 1985.
Michael Netz
has
been with Teva since 1989, when he started as an economist in
the Economic and Planning Department. From 1992 to 1998, he was
responsible for pharmaceuticals sales to private and
institutional pharmacies and was Counterpart Operational Manager
of Hungary's Biogal and in charge of the Branded Generic
Business Unit in Israel. From 1998 to 2002, he was General
Manager of the Teva-Abic Pharma division. Mr. Netz is now
Vice President — Israel Pharmaceutical Sales. He
received his B.A. in Economics and Business Administration in
1989 and his M.B.A. in Marketing and International Management in
1993 from Tel Aviv University.
Christopher Pelloni
has been with Teva since November
1997. He is currently Vice President of Global Generic Research
and Development (GR&D) . Previously, he was Vice President
of GR&D for Teva USA from June 2000 to May 2002 and Senior
Director of Pharmaceutical GR&D from November 1997 to June
2000. Prior to that, he served in various management positions
with Geneva Pharmaceuticals Inc. during 28 years of
service. He received a BS in Business Administration in 1986 and
an MBA in 1989 from Regis College (now Regis University), in
Denver, Colorado.
Dr. Irit Pinchasi
has been with Teva since 1986, serving
in different positions within the Global Innovative R&D
Division, and has served as Vice President for the Global
Innovative R&D Division since May 2002. Dr. Pinchasi
received her Ph.D. in Neurobiochemistry from Tel-Aviv University
in 1984, where she also earned her B.Sc. and M.Sc. degrees. She
did her post-doctorate research at the Weizmann Institute of
Science, Rehovot, Israel.
Dr. David Reisman
has been with Teva since 1980. Since
1999, he has served as Vice President — Israel
Pharmaceutical Operations. From 1996 to 1999, he served as
quality assurance director of the Chemical Division. He received
his Ph.D. in Chemistry from Bar Ilan University in 1985.
Dr. Aharon Schwartz
has been with Teva since 1975 and has
served as Vice President Strategic Business Planning and New
Ventures since April 2002. He previously served as Vice
President — Global Products Division since 1999 and
Vice President of the Copaxone® Division from 1995-1999.
From 1993 to 1995, he served as Vice President Business
Development/ Export Division and served as head of the
Pharmaceutical Division from 1989 to 1993. He received his Ph.D.
in Chemistry from the Weizmann Institute in 1975
.
Jacob Winter
has
been with Teva since 1986 and has served as Vice
President — Global Pharmaceutical Operations since
March 1999. Previously, he served as Vice President/ Manager of
the Israeli Pharmaceutical Operations Division from 1991 through
1998. He served as the Manager of Teva's Jerusalem
pharmaceutical plants from 1986 through 1991. He received his
B.Sc. in Industrial Engineering and Management from Tel Aviv
University in 1976.
Aharon (Arik) Yaari
has served as Vice
President — API Division since 2002. He joined Teva in
1981. Among his various assignments in Teva was the Vice
President — Marketing and Sales of Teva API and
President of Plantex USA. He received his B.A. and M.A. in
Economics from Hebrew University in 1981 and 1988.
Ron Grupel
has been
the Internal Auditor of Teva since 1993. He received his B.A. in
Economics and Accounting in 1975 and his M.B.A. in 1979 from Tel
Aviv University.
Uzi Karniel
is
serving as General Counsel and Company Secretary. He has been
with Teva since 1971. He received his L.L.B. from Hebrew
University in 1969. He is a member of the European advisory
board of FM Insurance Company Ltd. and a member of the Executive
Committee of the Israeli Association of Publicly Traded
Companies.
Directors
Eli Hurvitz
has
served as Chairman of the Board of Teva since April 2002.
Previously, he was Teva's President and Chief Executive
Officer for over 25 years and has been employed at Teva for
over 40 years.
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He serves as Chairman of the Board of The Israel
Democracy Institute (IDI), Chairman of the Board of
NeuroSurvival Technologies Ltd. (NST) (a private company),
Member of the Belfer Center for Science and International
Affairs at John F. Kennedy School of Government at Harvard
University, and a director of Vishay Intertechnology and of Koor
Industries Ltd. He served as the President of the Israel
Manufacturers Association from 1981 through 1986. He received
his B.A. in Economics and Business Administration from Hebrew
University in 1957.
Ruth Cheshin
is the
President of the Jerusalem Foundation, a multi-national
organization which raises funds around the world for the
creation of social, educational and cultural projects for all
the citizens of Jerusalem. Ms. Cheshin is also an active
member in many of the city's most important boards.
Abraham E. Cohen
served as Senior Vice President of
Merck & Co. and from 1977 to 1988 as President of the
Merck Sharp & Dohme International Division. Since his
retirement in January 1992, Mr. Cohen has been active as an
international business consultant. He is presently a director of
Akzo Novel Nv., Chugai Pharmaceutical Co. USA, Pharmaceutical
Product Development, Smith Barney World Funds and Vasomedical,
Inc.
Leslie Dan
is the
Chairman of Novopharm, which he founded and managed until its
acquisition by Teva in 2000. Mr. Dan serves on several
hospital boards in Canada and is a director of Draxis
Pharmaceutical Company and Viventia Biotech.
Amir Elstein
is the
Co-General Manager of Intel Electronics Ltd. Jerusalem and has
been employed by Intel Corp. since 1982. He received his B.Sc.
in Physics and Mathematics from Hebrew University in 1980 and
his M.Sc. in the Solid State Physics Department of Applied
Physics, Hebrew University in 1982. In 1992, he received his
diploma of Senior Business Management from Hebrew University.
Prof. Meir Heth
is a Professor at the Law School of
the College of Management. He has served in the past as the
Chairman of the Board of Teva and Chairman of Teva's
Executive Committee. He served as Chairman of the Board of Bank
Leumi Le'Israel Ltd. and as Chairman of Bank Leumi Trust
Company of New York from 1987 to 1988. From 1978 to 1986, he was
the Chairman of the Tel Aviv Stock Exchange. Prof. Heth serves
as a director at Ofek Securities & Investments and Nilit Ltd.
Prof. Moshe Many, M.D., Ph.D.
has served as president of the
Ashqelon Academic College since January 2002. He previously
served as the President of the Tisom International School of
Management. He is a former President of Tel Aviv University, the
former Medical Director of the Ramat Marpeh Hospital and the
former Deputy Chairman of Maccabi Health Care Fund. He has been
a Department Head at Tel Hashomer Hospital since 1976. He serves
as a director at Elbit Medical Imaging since 1997 and Israel
Laser Industries between 1994 to 1998. He received his M.D.
degree from Geneva University in 1952 and his Ph.D. in Surgery
from Tufts University in 1969.
Dr. Leora (Rubin) Meridor
has been a director of TEVA since
December 2002. She has been the Chairman of the Board of Bezeq
International, Poalim Capital Markets and Walla since 2001. From
1996 to 2000, Dr. Meridor served as Senior Vice President
and Head of the Credit and Risk Management Division of the First
International Bank of Israel. Between 1983 and 1996,
Dr. Meridor held various positions in the Bank of Israel,
the last of which was Head of the Research Department.
Dr. Meridor has held various teaching positions with Hebrew
University and holds a Bachelor's degree in mathematics and
physics, a Master's degree in Mathematics and a Ph.D. in
Economics from Hebrew University, Jerusalem. She serves on
several boards of directors (NICE Systems Ltd, Isrolet Ltd.,
Vitalgo Textile Works Ltd., Weizmann Institute of Science and
the New Israeli Opera) and qualifies as an independent director
under Israeli law.
Dr. Max Reis
served as the President of Technion
Israel Institute of Technology from 1986 until his retirement in
1990. He has a Ph.D. in chemical engineering from the Imperial
College . He is a director of Degem Systems Ltd., the Union Bank
of Israel and various private companies.
Prof. Michael Sela
is a Professor of Immunology. He was
the President of the Weizmann Institute of Science from 1975
through 1985 and has served as a Deputy Chairman of the Board of
Governors of the
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Weizmann Institute of Science since 1985. He
received his Ph.D. degree in Biochemistry from Hebrew University
in 1954.
Dov Shafir
, Colonel
(retired) of the Israel Defense Forces, serves as a director of
Ofer Technologies Ltd.
Ory Slonim
,
Advocate, has been an attorney in private practice since 1970.
He currently serves as a special consultant to the Israeli
defense minister. Mr. Slonim is a director of Migdal
Insurance Co., The First International Bank, Investment and
Underwriting Ltd. and U. Dori Engineering Construction,
Ltd., President of "Variety Club" in Israel and Senior
Vice President of Variety International.
Harold Snyder
was
Senior Vice President of Teva USA and the former President of
Biocraft Laboratories, Inc. Mr. Snyder founded Biocraft
Laboratories in 1964. He had previously served as President of
Stoneham Laboratories Inc. He received his B.S. in Science from
New York University in 1948 and his M.A. in Natural Science from
Columbia University in 1950.
Board of Directors
Pursuant to Teva's new Articles of
Association, which came into effect on January 1, 2002,
Teva's Board of Directors is comprised of 16 directors, of
whom 15 shall be elected to the terms described below, in
addition to the number of independent directors appointed
pursuant to Israeli law as described below (currently two).
The directors are elected by the shareholders at
general meetings of Teva in three classes, each class consisting
of up to one-third of the number of directors elected (currently
five) and having terms of three years. The directors of only one
class are elected at each annual meeting so that the regular
term of only one class of directors expires annually and any
particular director stands for election only once in each
three-year period. The Board of Directors may, by 75%
supermajority and not less than nine directors, from time to
time change the number of directors of Teva to be so elected by
the shareholders at general meetings of Teva in multiples of
three, provided that the total number of directors so elected is
at least 15.
The Board of Directors may appoint a director to
fill a vacancy on the Board, and such director shall serve for
the remainder of the term of the replaced director. All board
and committee resolutions must be adopted by a majority of their
respective members voting on such resolutions, unless a
different majority is provided in Teva's Articles of
Association.
Teva's Articles of Association allow for the
indemnification, exemption and insurance of its directors and
senior officers against certain liabilities that they may incur
in connection with the performance of their duties.
Independent Directors
Under Israeli law, publicly held Israeli
companies such as Teva are required to appoint two independent
directors. Such independent directors are appointed by the
general meetings by special majority and must meet certain
non-affiliation criteria — all as provided under
Israeli law. An independent director is appointed for an initial
term of three consecutive years, and may be reappointed for one
additional three-year term. Regulations promulgated under
Israeli law set the minimum and maximum compensation that may be
paid to independent directors. At present, Mr. Ori Slonim
and Dr. Leora Meridor serve in this capacity.
All directors are entitled to review Teva's
documentation and examine Teva's assets, as required to
perform their duties as directors and to receive assistance, in
special cases, from outside experts at the expense of Teva
(subject to approval by the Board or by court).
Committees of the Board
Teva's Articles of Association provide that
the Board of Directors may delegate its powers to one or more
committees of the Board as it deems appropriate to the extent
such delegation is permitted under the
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Israel Companies Law. Each committee must include
at least one independent director. The Board has appointed
audit, remuneration, finance, science and technology, and
community affairs committees.
Israel's Companies Law mandates the
appointment of an audit committee comprised of at least three
directors. The audit committee must include both independent
directors and may not include certain members of the Board.
Under the Israeli Companies Law, the audit committee is
responsible for overseeing the business management practices of
the company in consultation with the company's internal
auditor and independent auditors, making recommendations to the
Board to improve such practices and approving any transactions
with affiliates, as described below under
"Item 10 — Additional
Information — Memorandum and Articles of
Association — Directors' Powers." The
current members of Teva's audit committee are Dov Shafir
(Chairman), Ory Slonim, Dr. Leora Meridor, Dr. Max
Reis, Prof. Moshe Many and Prof. Meir Heth.
Compensation
The aggregate direct compensation paid or accrued
on behalf of all directors and executive officers as a group
during 2002 was $8,551,497. This amount includes directors'
fees and expenses for non-employee directors of $319,000 and
amounts set aside or accrued to provide pension, retirement or
similar benefits of $251,000. This amount does not include
$13,128,843 from the exercise of previously granted stock
options, nor expenses (including business travel, professional
and business association dues and expenses) reimbursed to
officers and directors and other fringe benefits commonly
reimbursed or paid by companies in Israel. None of the
non-employee directors have agreements with Teva that provide
for benefits upon termination of service.
Teva has adopted a number of stock option or
stock incentive programs in the past, as have certain of its
subsidiaries, principally Teva USA and its predecessor entities,
covering either ordinary shares or ADRs. In 2002, Teva's
directors and executive officers were granted an aggregate of
1,640,000 options to purchase 3,280,000 ordinary shares or ADRs,
at an average exercise price of $29.16 per share or ADR and an
average expiration date in 2009.
For further information regarding outstanding
Teva options, see Note 9 to the Notes to Consolidated
Financial Statements.
Share Ownership
As of February 16, 2003, all the directors
and executive officers as a group held 21,884,033 ordinary
shares (approximately 8.3% of Teva's outstanding shares).
This figure includes the shares beneficially owned by Leslie
Dan, who beneficially owns 1.3% of Teva's outstanding
shares, Eli Hurvitz, who beneficially owns approximately 1.7% of
Teva's outstanding shares, and Harold Snyder, who
beneficially owns approximately 2.4% of Teva's outstanding
shares. Such persons are the only directors or officers who hold
1% or more of Teva's outstanding shares.
Employees and Labor Relations
As of December 31, 2002, Teva employed
approximately 9,600 employees, 3,100 of whom were based in
Israel. Approximately 90% of Teva's employees in Israel are
represented by local or national trade unions. Teva considers
its labor relations with its employees around the world to be
good.
Israeli law generally requires severance pay upon
dismissal or retirement of an employee or, in some
circumstances, upon termination of employment for other reasons.
See Note 5 to the Notes to Consolidated Financial
Statements.
In North America, Teva employs approximately
2,600 persons, of whom approximately 1,650 are in the
United States and 950 are in Canada. Except for
244 employees at certain former Biocraft facilities who are
represented under collective bargaining agreements with Drug,
Chemical, Cosmetic, Plastic and Affiliated Warehouse Employees
Locals 815 (New Jersey) and 688 (Missouri), which are
affiliated with the International Brotherhood of Teamsters, none
of its employees are represented by labor unions.
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In Holland, Teva's subsidiary, Pharmachemie
employs approximately 550 persons. Most of its employees
are represented by labor unions.
In the United Kingdom, Teva's subsidiary
APS/Berk employs approximately 240 persons. Except for some
production employees, most of its employees are not represented
by labor unions.
In Hungary, Teva's subsidiaries Biogal and
Human, its manufacturing and development units, employ
approximately 1,900 persons, substantially all of whom are
represented by labor unions. Teva's marketing and
distribution units BTP and Human Trade employ together
approximately 310 persons. In France, Teva's
subsidiaries Teva Classics and Teva Sante, acquired in midyear
from Bayer, employ about 240 persons. Most of the employees
are represented by unions.
In Italy, Teva's subsidiaries of its API
division employ about 300 persons, 200 of them joined Teva
through a midyear acquisition of Honeywell Pharmaceutical Fine
Chemicals. Teva's marketing and distribution unit employs
about 85 persons. Most of the employees are represented by
unions.
There are an additional 375 persons employed
in various small groups around the world.
Over the past three years, the number of Teva
employees by geographic area were as follows:
December 31,
December 31,
December 31,
Geographic Area
2002
2001
2000
Israel
3,128
2,906
2,661
Europe
3,766
3,427
3,407
North America
2,569
2,543
2,449
Rest of the World
114
110
108
Total
9,577
8,986
8,625
Grouped by function, approximately 60% of
Teva's employees work in pharmaceutical production, 12% in
sales and marketing, 12% in research and development and 12% in
general and administrative. Over 35% of Teva's employees
are university graduates.
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ITEM 7:
MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS
To the best knowledge of Teva, as of
February 15, 2003, there is no shareholder who beneficially
owns 5% or more of Teva's ordinary shares. All holders of
Teva ordinary shares have one vote per share.
Mr. Leslie Dan, a director of Teva,
beneficially owned approximately 2.5 million ordinary
shares of Teva (including shares exchangeable for Teva ordinary
shares) as of December 31, 2002 representing approximately
1.3% of Teva's outstanding shares as of such date. As of
December 31 2001, Mr. Dan had beneficially owned
approximately 16.9 million ordinary shares of Teva
(including shares exchangeable for Teva ordinary shares)
representing approximately 6.3% of the then outstanding Teva
shares.
In connection with the Novopharm acquisition in
2002, Teva entered into a registration rights agreement with Dan
Family Holdings Ltd., an affiliate of Mr. Dan and his
children. Under the agreement, Dan Family Holdings Ltd. and
certain affiliates of Mr. Dan and his children have the
right to request that Teva file a registration statement under
the Securities Act (on up to an aggregate of three occasions)
covering the sale of certain Teva ordinary shares or ADRs
beneficially owned by such persons. In addition, under the
agreement, if Teva proposes to register any of its ordinary
shares or ADRs, whether or not for sale for its own account, Dan
Family Holdings Ltd. and such affiliates of Mr. Dan and his
children may require Teva to include all or a portion of such
shares or ADRs in the registration and any related underwriting.
As a result of various transactions during 2002, Teva believes
that the registration rights now apply to up to 9,581,107
ordinary shares beneficially owned by such persons. In general,
all fees and expenses of such registration (other than
underwriting discounts and selling commissions) will be paid by
Teva.
Under a registration rights agreement entered
into in connection with the closing of the Biocraft acquisition
in 1996, Harold Snyder, a director of Teva, and certain
affiliated trusts have the right to request that Teva file a
registration statement under the Securities Act (on up to three
occasions) covering the sale of the ADRs owned by such persons.
In addition, under the agreement, if Teva proposes to register
any of its ordinary shares or ADRs, whether or not for sale for
its own account, these persons may require Teva to include all
or a portion of such ADRs in the registration and any related
underwriting. In general, all fees and expenses of such
registration (other than underwriting discounts and selling
commissions) will be paid by Teva. However, based on current
trading volume of the ADRs on the NASDAQ National Market, these
ADRs can be sold without registration under Rule 144 under
the Securities Act. As a result, under the terms of the
registration rights agreement, these registration rights cannot
currently be exercised.
In 2002 Teva paid Almad Investments
CDN $4,267,063 for the rental of office and manufacturing
space in Canada. Leslie Dan and his family own Almad.
As of January 31, 2003, there were 1,110
record holders of ADRs, whose holdings represented approximately
79% of the total outstanding ordinary shares, substantially all
of which record holders were in the United States.
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ITEM 8:
FINANCIAL INFORMATION
Consolidated Statements
See "Item 18 — Financial
Statements."
Export Sales
Teva manufactures products and chemicals in its
facilities in Israel, the United States, Canada and Europe. A
substantial amount of these products and chemicals are exported.
For a breakdown of Teva's sales by geographic market for
the past three years, see "Item 5: Operating and
Financial Review and Prospects — Results of
Operations — Sales — General."
Legal Proceedings
General
Teva from time to time seeks to develop generic
products for sale prior to patent expiration in various
territories. In the United States, to obtain generic approval
for a product prior to the expiration of the originator patent,
Teva must challenge the patent under the procedures set forth in
the Waxman-Hatch Act of 1984. To the extent that it seeks to
utilize such patent challenge procedures, Teva is involved and
expects to be involved in patent litigation regarding the
validity or infringement of the originator's patent.
Additionally, Teva may be involved in patent litigation
involving the extent to which alternate manufacturing process
techniques may infringe on originator or third party process
patents. No provision for these matters has been included in the
accounts.
Teva and its subsidiaries are from time to time
subject to claims arising in the ordinary course of their
business, including product liability claims. Teva believes that
it has meritorious defenses to such claims and legal proceedings
pending as of December 31, 2002, and that, in any event, it
has adequate product liability insurance to cover material
damages related to product liability claims pending as of
December 31, 2002.
Teva's business inherently exposes it to
potential product liability claims. From time to time, the
pharmaceutical industry has experienced difficulty in obtaining
product liability insurance coverage for certain products or
coverage in the desired amounts or with the desired deductibles.
As a result, Teva sells and may continue to sell, pharmaceutical
products that are not covered by insurance and may also be
subject to product liability claims that are not covered by
insurance or that exceed Teva's policy limits.
Pending and Resolved Matters
In August 2001, Teva USA won a judgment in a
patent infringement action in the U.S. Federal District
Court in Boston, Massachusetts, brought against it by SmithKline
Beecham Corp. and Beecham Group p.l.c. (together,
"Beecham") regarding the U.S. patent covering
nabumetone, the active ingredient in Relafen®. The court
ruled in Teva USA's favor. Following the district
court's decision, Teva USA launched its nabumetone product.
As the first applicant to challenge the listed patent for this
drug, Teva USA had enjoyed a statutory 180-day period of generic
marketing exclusivity. In August 2002, the United States Court
of Appeals for the Federal Circuit affirmed the district
court's judgment that Beecham's patent was invalid and
did not disturb the district court's judgment that
Beecham's patent was unenforceable due to inequitable
conduct. On January 14, 2003, Beecham's time to file a
petition of certiorari with the U.S. Supreme Court lapsed.
On December 17, 2001, Teva and Teva USA
filed a complaint in the District Court in Boston, Massachusetts
against Beecham and GlaxoSmithKline p.l.c. On November 12,
2002, following a favorable decision in the nabumetone action
described above, Teva and Teva USA filed an amended complaint
against Beecham and GlaxoSmithKline p.l.c., and added
Carl J. Rose and Richard K. Anderson as defendants
(all defendants collectively, "GSK defendants"). The
amended complaint alleges that the GSK defendants unlawfully
prevented Teva and Teva USA from manufacturing, marketing and
selling generic
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formulations of Relafen® and asserts claims
under the Sherman Act, certain state antitrust and unfair
competition statutes, the Massachusetts Consumer Protection Act,
and state common law and equitable principles. Teva and Teva USA
seek actual damages, including lost profits and loss of market
share, trebled, plus their costs of suit, as well as
restitution, disgorgement and other equitable relief. The time
for the GSK defendants to answer or move to dismiss the amended
complaint has not yet expired. Discovery has commenced and a
trial date has been set for January 2004.
Teva USA is a manufacturer of Adipex-P brand
phentermine hydrochloride, and has been sued in both class
actions and individual lawsuits relating to the alleged negative
health effect of phentermine and fenfluramine. While neither
drug had been indicated or approved for combination use by the
FDA, physicians sometimes prescribed the two together in a
combination treatment for weight control known as
"fen-phen." Plaintiffs have filed lawsuits from August
1997 to the present in a variety of state and federal
jurisdictions seeking monetary damages in unspecified amounts.
The federal actions have been consolidated for pretrial purposes
to the United States District Court for the Eastern District of
Pennsylvania in a multidistrict litigation proceeding. Based
upon the advice of counsel, Teva believes that it has adequate
insurance to cover these claims and that the outcome of the
remaining litigation in which Teva USA is involved will not have
a material adverse effect on Teva's financial position. No
provision for this matter has been included in the accounts.
Teva's Hungarian subsidiary, Biogal
Pharmaceutical Works Ltd., was sued in July 1999 in the County
Court of Debrecen, Hungary by a Hungarian institute
(Gyógyszerkutató Intézet Kft) for additional
royalties arising out of a series of contracts for the
development of a pharmaceutical active ingredient. Although the
plaintiff has not made any claims for a specific amount, the
court, in an interim decision, ordered Biogal to submit an
accounting on the contested terms. Biogal has appealed the
decision and, based on the advice of counsel, expects to
prevail. No provision for this matter has been included in the
accounts.
On January 13, 2002, a claim was filed in
the Tel Aviv District Court by Paka Industries Ltd. against
Teva, Teva Assets Ltd., an Israeli subsidiary of Teva, and a
senior officer and a former senior officer of Teva Assets, in
the amount of approximately $17 million. The claim relates
to a 1998 agreement between Paka and Teva Assets, under which
Teva Assets sold off the assets (excluding real property) of its
plant to the plaintiff. Paka claims to have been deceived and
consequently lost the entire investment in the acquired plant.
Teva, based on the advice of counsel, believes that its chances
of prevailing are good. Accordingly, no provision for this
matter has been included in the accounts.
In August 2000, a claim was filed in the
Tel Aviv District Court, and is now pending against Teva,
with respect to damages caused to the plaintiff as a result of
the use of a product containing the ingredient
diethylstilbestrol ("DES"). In May and November 2001,
69 plaintiffs filed an additional claim against Teva, in the
District Court of Jerusalem, for damages caused by the use of
two products containing DES. In July 2002, the plaintiffs
amended their claim to include the Clalit Health Services as a
further defendant (in addition to the Ministry of Health). In
December 2002, nine women requested the District Court of
Jerusalem to join the claim as plaintiffs, while four plaintiffs
requested to withdraw from the proceedings. The court has not
yet ruled on this matter. The aggregate amount of the two claims
is approximately $10 million, not including general
damages. Teva is vigorously defending itself against these
claims. Because the above claims are still in their early
stages, no determination can be made of the likelihood of
prevailing in the actions; however, based on the advice of
counsel, Teva believes it has meritorious defenses. No provision
for this matter has been included in the accounts.
On April 5, 2001, a claim was filed against
Teva in the Tel Aviv District Court with respect to the use
of a pharmaceutical product known as "Chorigon Ampoules
5000 Units." The plaintiffs allege that they were
administered with allegedly defective ampoules of the product
during the course of an in vitro fertilization treatment,
resulting in the failure of the treatment and causing financial
damages and mental anguish. The plaintiffs filed a petition to
certify the claim as a class action. The plaintiffs have since
filed a reply to Teva's response. Because the claim is
still in its early stage, Teva's counsel is unable to
express an opinion as to the merits of the claim. Nevertheless,
based on information to date, Teva believes that this
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matter will not have a material adverse effect on
its results of operations and financial condition and that
provision for this matter in the accounts is not required.
Teva USA, along with Elan Corporation, Elan
Pharma Ltd. and Biovail Corporation International, were
defendants in a patent litigation brought by Bayer AG and
Bayer Corporation on May 8, 2000 in the U.S. District
Court for the District of Delaware. On July 17, 2000, the
court transferred the case to the Northern District of Georgia.
Bayer had alleged that Elan's Nifedipine Extended Release
Tablets CC, 30 mg, which are marketed by Teva USA,
infringed a Bayer patent. On August 16, 2002, Teva USA was
dismissed from the case pursuant to a settlement agreement under
which Teva USA did not pay any damages or provide any other
consideration.
Teva USA, along with Biovail, are defendants in
two related patent litigations brought by Bayer AG, Bayer
Corporation and, in one of the cases, Pfizer Inc. Both cases
involve allegations against Teva USA of infringement of the same
patent that had been at issue in the above discussed Georgia
case and both cases are currently pending in the
U.S. District Court for the District of Puerto Rico. The
first case was commenced on February 16, 2001 by
Bayer AG and Pfizer against Teva USA and Biovail for patent
infringement relating to the sale of Biovail's Nifedipine
Extended Release Tablets XL, 60 mg, which are marketed
in the United States by Teva USA. The second case was commenced
on February 20, 2001 by Bayer Corporation against Biovail
and Teva USA for patent infringement relating to the sale of
Biovail's Nifedipine Extended Release Tablets CC,
60 mg, which are also marketed in the United States by Teva
USA. The plaintiffs in each of the two cases are seeking
enhanced damages and attorneys' fees in unspecified
amounts, preliminary and permanent injunctions, and a recall of
the products at issue. Each of these cases is in the pre-trial
phase and no provision for these matters has been included in
the accounts.
Teva USA is a named defendant, along with Biovail
Corp. and Elan Corporation, plc, in two civil actions currently
pending in the federal district courts in the District of
Columbia and New York City. Teva is also named as a defendant in
the case pending in New York City. The cases allege generally
that arrangements between Biovail and Elan relating to sales of
Nifedipine Extended Release Tablets CC, in connection with
which Teva USA acted as a distributor for Biovail, were unlawful
under the federal antitrust laws. The challenged arrangements
were previously the subject of a consent decree entered into by
the U.S. Federal Trade Commission with Biovail and Elan, to
which Teva and Teva USA were not parties. The cases seek
injunctive relief, unspecified monetary damages, attorneys'
fees, and costs. Each of the cases is brought on behalf of an
alleged class of persons that purchased Nifedipine Extended
Release Tablets CC made by Elan or Biovail and sold in the
United States by Teva USA. A motion is currently pending before
the federal Judicial Panel on Multidistrict Litigation seeking
consolidation of these cases with four other cases pending in
the District of Columbia and two other cases pending in the
Southern District of New York; Teva and Teva USA are not parties
in those other cases. Teva USA and Teva (to the extent they
remain a defendant in any of these cases) intend to defend
vigorously against these claims. These cases are in a very
preliminary stage, so it is not possible to assess the
likelihood of an unfavorable outcome or the magnitude of any
potential loss. No provision for these matters has been included
in the accounts.
In May 2002, Teva USA won a judgment in the
U.S. District Court in Norfolk, Virginia in a declaratory
judgment action it brought against GlaxoSmithKline
("GSK") regarding seven U.S. patents related to
potassium clavulanate, an active ingredient in Augmentin®
(or "amoxiclav"). The court ruled that all seven
patents were invalid based on double patenting. GSK has appealed
the judgment and oral argument is scheduled for March 5,
2003 on the appeal. Annual sales of the branded product in the
U.S. were estimated to be in excess of $1 billion.
Following the district court decision, and subsequent FDA
approval, Teva USA launched its amoxiclav product, which
contains potassium clavulanate. Although Teva believes that the
findings of fact and legal conclusions of the district court are
well founded and that the decision will be upheld, were GSK to
be successful in its appeal, Teva USA could be required to pay
damages to GSK related to the sales of Teva USA's amoxiclav
products and enjoined from selling its amoxiclav products. No
provision for these matters has been included in the accounts.
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In August 2002, GSK filed a complaint against
Teva USA in the Pennsylvania Court of Common Pleas. Ranbaxy
Pharmaceuticals, Inc. is a defendant in the same case, though
GSK does not allege any connection between Teva USA and Ranbaxy.
The Complaint alleges that Teva USA's amoxiclav products
are derived from a strain of Streptomyces clavuligerus stolen
from GSK. The complaint asserts causes of action for alleged
trade secret misappropriation, unfair competition, and
conversion. The suit seeks equitable relief and imposition of a
constructive trust related to Teva USA's amoxiclav
products. The case is scheduled to be ready for trial in
February 2004. Although Teva believes that the likelihood of GSK
prevailing is low, if GSK's allegations were proven true,
Teva USA could be required to pay damages to GSK related to the
sales of Teva USA's amoxiclav products and enjoined from
selling its amoxiclav products. No provision for these matters
has been included in the accounts.
On August 5, 2002, Lek Pharmaceuticals d.d.
filed a complaint against Teva USA in the United States District
Court for the District of New Jersey. Lek has accused Teva USA
of misappropriating Lek's trade secrets and proprietary
information pertaining to formulations for Teva USA's
amoxiclav products. In its complaint, Lek seeks equitable relief
and unspecified damages. Teva USA filed its answer on
September 24, 2002, denying all allegations of wrongdoing.
The parties have agreed on a discovery plan and all fact and
expert discovery is scheduled to be completed by
December 17, 2003. Although Teva believes that the
likelihood of Lek prevailing is low, if Lek's allegations
are proven true, Teva USA could be required to pay damages to
Lek related to the sales of Teva USA's amoxiclav products
and enjoined from selling its amoxiclav products. No provision
for these matters has been included in the accounts.
Bayer and Bayer's marketing joint venturer
GSK have been named in extensive litigation for personal
injuries allegedly related to the use of the product
Baycol®, a blood lipid reducing agent, which Bayer withdrew
from the market in August 2001. Teva is the manufacturer of
gemfibrozil, the generic version of Lopid®, another blood
lipid reducing drug, which was at times prescribed in
combination with Baycol®. In five cases where there
allegedly was concomitant use of Baycol® and gemfibrozil,
Teva USA has been named as a co-defendant of Bayer and GSK in
the Court of Common Pleas of the Commonwealth of Pennsylvania,
County of Philadelphia. The Complaints in each of these cases
allege that plaintiff was injured as a result of exposure to
gemfibrozil, either alone or in combination with Baycol®.
Because these claims are still in their early stages,
Teva's counsel is unable to express an opinion as to their
merits. Nevertheless, based upon currently available
information, Teva believes that these cases will not have a
material adverse effect on its results of operations and
financial condition. No provision for these matters has been
included in the accounts.
Dividend Policy
See "Item 3: Key
Information — Dividends."
Significant Changes
Except as otherwise disclosed in this annual
report, there has been no significant change in Teva's
financial position since December 31, 2002.
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ITEM 9:
THE OFFER AND LISTING
ADRs
In February 2000 and in December 2002, Teva
effected a 2 for 1 stock split. Each holder of an ordinary
share, or an ADR, as the case may be, was issued another share.
All figures in this annual report have been adjusted to reflect
the stock splits.
Teva's ADRs have been traded in the United
States since 1982 and were admitted to trading on the Nasdaq
National Market in October 1987. The ADRs are quoted under the
symbol TEVA. The Bank of New York serves as Depositary for the
ADRs. In November 2002, Teva was added to the NASDAQ 100 Index.
Each ADR represents one ordinary share.
The following table sets forth information
regarding the high and low prices of the ADR on Nasdaq for the
periods specified in U.S. dollars.
Period
High
Low
Last six months:
February 2003
38.50
34.50
January 2003
39.28
37.06
December 2002
39.56
36.57
November 2002
39.53
36.01
October 2002
38.86
32.13
September 2002
34.97
32.28
Last eight quarters:
Q4 2002
39.56
32.13
Q3 2002
34.97
28.58
Q2 2002
34.25
25.85
Q1 2002
32.58
26.77
Q4 2001
34.20
27.17
Q3 2001
37.18
26.75
Q2 2001
32.94
25.62
Q1 2001
34.97
25.44
Last five years:
2002
39.56
25.85
2001
37.18
25.44
2000
39.00
16.06
1999
17.92
9.97
1998
12.50
8.03
On February 28, 2003, the last reported sale
price for the ADRs on the Nasdaq National Market was $37.78. The
American Stock Exchange, the Chicago Options Exchange and the
Pacific Stock Exchange quote options on Teva's ADRs under
the symbol TEVA.
Teva's ADRs are also traded on SEAQ
International in London and on the exchanges in Frankfurt and
Berlin.
Ordinary Shares
Teva's ordinary shares have been listed on
the Tel Aviv Stock Exchange since 1951. The table below sets
forth in U.S. dollars the high and low last reported sale
prices of the ordinary shares on the Tel Aviv Stock Exchange
during the periods as reported by such Exchange (restated to
reflect the stock splits). The
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translation into U.S. dollars is based on
the daily representative rate of exchange published by the Bank
of Israel then in effect.
Period
High
Low
Last six months:
February 2003
38.30
35.09
January 2003
38.04
37.34
December 2002
39.79
36.19
November 2002
39.61
35.48
October 2002
36.85
32.53
September 2002
34.54
32.54
Last eight quarters:
Q4 2002
39.79
32.51
Q3 2002
34.54
29.31
Q2 2002
33.73
26.33
Q1 2002
32.39
26.46
Q4 2001
33.75
27.64
Q3 2001
36.36
29.31
Q2 2001
32.53
25.99
Q1 2001
35.76
26.24
Last five years:
2002
39.79
26.33
2001
36.36
25.99
2000
36.79
16.33
1999
17.21
9.91
1998
12.44
8.05
On February 27, 2003, the last reported sale
price of the ordinary shares on the Tel Aviv Stock Exchange
was $37.56.
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ITEM
10:     ADDITIONAL
INFORMATION
MEMORANDUM AND ARTICLES OF
ASSOCIATION
Register
Teva's registration number at the Israeli
registrar of companies is 52-001395-4.
Directors' Powers
The Israeli Companies Law (the "Companies
Law") requires approval by both the Board of Directors and
the audit committee of, among other things, the following
actions or transactions:
(a) proposed transactions in which an
    executive officer or director (an "office holder") has
    a direct or indirect personal interest and which is outside the
    ordinary course of the company's business, which is not in
    accordance with market conditions or which may materially
    influence the earnings, assets or liabilities of the company;
(b) material actions which may otherwise be
    deemed to constitute a breach of fiduciary duty of any office
    holder of the company, that are done in good faith and that are
    in the interest of the company;
(c) terms of service of directors (including
    terms of their employment as officers of the company); and
(d) indemnification, insurance and
    exemptions to office holders.
Under the Companies Law, certain other
transactions (listed in Section 270 of the Companies Law)
that require approval by the Board of Directors and the audit
committee may also require shareholder approval (including, in
certain cases, a specified percentage of disinterested
shareholders).
An office holder with an interest in any of the
above transactions may not be present and may not vote at the
Board of Directors and audit committee's meetings at which
such transaction is approved. In cases where the approval of the
audit committee is required, the audit committee may only
approve such transactions if two independent directors are
members of the committee and at least one of them is present at
the meeting at which the transaction is approved.
The Companies Law requires that an office holder
promptly disclose any "personal interest" (including a
personal interest of certain relatives or a corporation or
entity in which the office holder or such relative is an
interested party) that he may have, and all related material
information known to him, in connection with any existing or
proposed transaction by the company and codifies the duty of
care and fiduciary duties that an office holder has to the
company. The company must approve such transactions as not being
adverse to the best interests of the company.
Neither Teva's Memorandum or Articles of
Association, nor the laws of the State of Israel, mandate
retirement or non-retirement of directors at a certain age, or
share ownership for a director's qualification.
Description of Teva Ordinary Shares
The par value of Teva's ordinary shares is
NIS 0.10 per share, and all issued and outstanding
ordinary shares are fully paid and non-assessable. Holders of
paid-up ordinary shares are entitled to participate equally in
the payment of dividends and other distributions and, in the
event of liquidation, in all distributions after the discharge
of liabilities to creditors.
Teva's Board of Directors may declare
interim dividends and propose the final dividend with respect to
any fiscal year out of profits available for dividends after
statutory appropriation to capital reserves. Declaration of a
final dividend (not exceeding the amount proposed by the Board)
requires shareholder approval through the adoption of an
ordinary resolution. All ordinary shares represented by the ADRs
will be issued in registered form only. Ordinary shares do not
entitle their holders to preemptive rights.
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Voting is on the basis of one vote per share. An
ordinary resolution (for example, resolutions for the approval
of final dividends and the appointment of auditors) requires the
affirmative vote of a majority of the shares voting in person or
by proxy. Certain resolutions (for example, resolutions amending
the Articles of Association and authorizing changes in the
rights of shareholders) require the affirmative vote of at least
75% of the shares voting in person or by proxy, and certain
amendments of the Articles of Association require the
affirmative vote of at least 85% of the shares voting in person
or by proxy.
Neither Teva's Memorandum or Articles of
Association, nor the laws of the State of Israel, restrict in
any way the ownership or voting of Teva's ordinary shares
by nonresidents or persons who are not citizens of Israel,
except with respect to citizens or residents of countries that
are in a state of war with Israel.
Meetings of Shareholders
Under the Companies Law, Teva is required to hold
an annual meeting every year no later than fifteen months after
the previous annual meeting. In addition, Teva is required to
hold a special meeting:
(1) at the direction of the Board of
    Directors;
(2) if so requested by two directors or
    one-fourth of the serving directors; or
(3) upon the request of one or more
    shareholders who have at least 5% of the issued share capital
    and at least 1% of the voting rights or one or more shareholders
    who have at least 5% of the voting rights.
If the Board of Directors receives a demand to
convene a special meeting, it must publicly announce the
scheduling of the meeting within 21 days after the demand
was delivered. The meeting must then be held no later than
35 days after the notice was made public.
The agenda at an annual meeting is determined by
the Board of Directors. The agenda must also include proposals
for which the convening of a special meeting was demanded, as
well as any proposal requested by one or more shareholders who
hold no less than 1% of the voting rights, as long as the
proposal is one suitable for discussion at an annual meeting.
A notice of an annual meeting must be made public
and delivered to every shareholder registered in the
shareholders register at least 30 days before the meeting
is convened. The shareholders entitled to participate and vote
at the meeting are the shareholders as of the record date set in
the decision to convene the meeting, provided that the record
date is not more than 40 days, and not less than four days,
before the date of the meeting.
Under the Companies Law, a shareholder who
intends to vote at a meeting must demonstrate that he owns
shares in accordance with the regulations. Under these
regulations, a shareholder whose shares are registered with a
member of a stock exchange (such as NASDAQ or the Tel Aviv Stock
Exchange) must provide Teva with an authorization from such
member regarding his ownership as of the record date.
Right of Non-Israeli Shareholders to
Vote
Neither the Memorandum of Association, the
Articles of Association, nor the laws of the State of Israel
restrict in any way the ownership or voting of Teva's
ordinary shares by nonresidents or persons who are not citizens
of Israel, except with respect to citizens or residents of
countries that are in a state of war with Israel.
Change of Control
Under the Companies Law, a merger requires
approval by the Board of Directors and by the shareholders of
each of the merging companies. In approving a merger, the Board
of Directors must determine that there is no reasonable
expectation that, as a result of the merger, the merged company
will not be able to meet its obligations to its creditors.
Creditors may also seek a court order to enjoin or delay the
merger if there is an expectation that the merged company will
not be able to meet its obligations to
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its creditors. A court may also issue other
instructions for the protection of the creditors' rights in
connection with a merger.
Under the Companies Law, a control share
acquisition of a public company (in which there is no holder of
a control share) and a share acquisition in which, following the
purchase, the purchaser holds more than 45% of the voting rights
of the company (in case there is no holder of more than 50% of
the voting rights) are prohibited unless a special purchase
offer is made to all shareholders. Such a special purchase offer
requires, among other things, that the Board of Directors of the
target company either states its opinion regarding the
expedience of the purchase offer or state why it cannot state
its opinion.
FOREIGN EXCHANGE REGULATIONS
Nonresidents of Israel who purchase ADRs with
U.S. dollars or other non-Israeli currency will be able to
receive dividends, if any, and any amounts payable upon the
dissolution, liquidation or winding up of the affairs of Teva,
as well as the proceeds of any sale of the ordinary shares in
Israel into freely reportable dollars, at the rate of exchange
prevailing at the time of conversion.
U.S. FEDERAL INCOME TAX
CONSIDERATIONS
The following is a summary of the principal U.S.
federal income tax consequences to U.S. Holders (as defined
below) of ADRs who hold such securities as capital assets. For
purposes of this summary, a "U.S. Holder" means a
holder of an ADR that is:
•
a citizen or resident of the United States;
•
a corporation (or another entity taxable as a
    corporation for U.S. federal income tax purposes) created
    or organized in the United States or under the laws of the
    United States or any political subdivision thereof;
•
an estate, the income of which is includable in
    gross income for U.S. federal income tax purposes
    regardless of its source; or
•
a trust if a U.S. court is able to exercise
    primary supervision over the administration of the trust and one
    or more U.S. persons have the authority to control all
    substantial decisions of the trust.
This summary of United States income tax laws is
based on the United States Internal Revenue Code (the
"Code"), its legislative history, existing and
proposed regulations thereunder, judicial decisions and
published positions of the Internal Revenue Service, all as of
the date of this annual report and all of which are subject to
change (including changes in interpretation), possibly with
retroactive effect.
The discussion set forth below is intended only
as a summary of the principal U.S. federal income tax
consequences to U.S. Holders of ADRs and does not purport
to be a complete analysis of all potential tax consequences of
owning ADRs. In particular, this discussion does not take into
account the specific circumstances of any particular investor
(such as tax-exempt entities, certain insurance companies,
broker-dealers, investors subject to the alternative minimum
tax, investors that actually or constructively own 10% or more
of the voting securities, investors that hold ordinary shares or
ADRs as part of a straddle or hedging or conversion transaction,
or investors whose functional currency is not the
U.S. dollar), some of which may be subject to special
rules. Investors are advised to consult their tax advisors with
respect to the tax consequences of the ownership of ADRs,
including the consequences under applicable state and local law
and federal estate tax law, and the application of foreign laws
or the effect of nonresident status on U.S. taxation.
Holder for U.S. Federal Income Tax
Purposes
For purposes of the Code, a holder of ADRs will
be treated as the beneficial owner of the underlying ordinary
shares represented by the ADRs.
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Taxation of Dividends
The amount of any distribution paid to a
U.S. Holder, including any Israeli taxes withheld from the
amount of such distribution, will be subject to
U.S. federal income taxation as ordinary income to the
extent paid out of current or accumulated earnings and profits,
determined for U.S. federal income tax purposes. The amount
of any distribution of property other than cash will be the
property's fair market value on the date of the
distribution. To the extent that an amount received by a
U.S. Holder exceeds that U.S. Holder's allocable
share of current and accumulated earnings and profits, such
excess will be applied first to reduce that
U.S. Holder's tax basis in the shares and then, to the
extent the distribution exceeds that U.S. Holder's tax
basis, will be treated as capital gain. Any dividend received
will not be eligible for the dividends-received deduction
generally allowed to U.S. corporations in respect of
dividends received from U.S. corporations.
U.S Holders may claim the amount of any Israeli
income taxes withheld as either a deduction from gross income or
as a dollar-for-dollar credit against their U.S. federal
income tax liability. Individuals who do not claim itemized
deductions but instead utilize the standard deduction may not
claim the amount of the Israeli income taxes withheld as a
deduction from their gross income, but such amounts may be taken
as a credit against the individual's U.S. federal
income tax liability. The Code sets forth complex limitations on
the amount of the credit, which varies in application from
taxpayer to taxpayer. These limitations include rules which
limit foreign tax credits allowable for specific classes of
income to the amount of U.S. federal income taxes otherwise
payable on each class of income. The total amount of allowable
foreign tax credits in any year may not exceed the pre-credit
U.S. tax liability for the year attributable to foreign
source taxable income. However, pursuant to a
de minimis
exception certain individuals may claim a credit of up to
$300 ($600 for joint filers) without being subject to these
limitations.
U.S. tax law provides that foreign tax credits
are not allowed for withholding taxes imposed in respect of
short-term or hedged positions in securities or in respect of
arrangements in which a U.S. Holder's expected
economic benefit, after non-U.S. taxes, is insubstantial.
U.S. Holders should consult their tax advisors concerning
the application of these rules in light of their particular
circumstances.
Taxation of the Disposition of ADRs
Upon the sale or exchange of ADRs, a
U.S. Holder will generally recognize gain or loss for
U.S. federal income tax purposes in an amount equal to the
difference between the amount realized and the
U.S. Holder's tax basis in the ADRs. Such gain or loss
will be capital gain or loss if the ADRs were capital assets in
the hands of the U.S. Holder. There are different tax rates
that may apply depending upon the date of sale, the holding
period and the individual's marginal rate of tax. In
general, the capital gain of a non-corporate U.S. Holder is
subject to tax at ordinary rates for ADRs held for one year or
less and to a maximum tax rate of 20% for ADRs held for more
than one year.
The surrender of ADRs in exchange for ordinary
shares, or vice versa, will not be a taxable event for
U.S. federal income tax purposes, and U.S. Holders
will not recognize any gain or loss upon such an exchange.
U.S. Information Reporting and Backup
Withholding
A U.S. Holder generally will be subject to
information reporting with respect to dividends paid on, or
proceeds from the sale or other disposition of, an ADR unless
the U.S. Holder is a corporation or comes within another
category of exempt recipients. If it is not exempt, a
U.S. Holder may also be subject to backup withholding at a
rate of 31% with respect to dividends or proceeds from the sale
or disposition of an ADR unless a taxpayer identification number
is provided and the other applicable requirements of the backup
withholding rules are complied with. Any amount withheld under
these rules will be creditable against the
U.S. Holder's U.S. federal income tax liability
or refundable to the extent that it exceeds this liability,
provided that the required information is furnished to the
Internal Revenue Service.
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U.S. Holders should review the summary below
under "Israeli Taxation" for a discussion of the
Israeli taxes which may be applicable to them.
ISRAELI TAXATION
Corporate Tax Rate
The regular corporate tax rate in Israel is 36%
for undistributed earnings. However, Teva's effective
consolidated tax rates (before deduction of one-time charges)
for the years ended December 31, 2000, 2001 and 2002 were
24.4%, 19.6% and 17.0%, respectively, since part of Teva's
income is derived from Approved Enterprises (as discussed below)
and operations outside of Israel.
Law for the Encouragement of Industry (Taxes),
1969 (the "Industry Encouragement Law")
Teva and certain of its Israeli subsidiaries
currently qualify as Industrial Companies pursuant to the
Industry Encouragement Law. As such, Teva and these subsidiaries
qualify for certain tax benefits, including a deduction of 12.5%
per annum of the purchase price of a good-faith acquisition of a
patent or of certain other intangible property rights and the
right to file consolidated tax returns. Currently, Teva files
consolidated tax returns together with certain Israeli
subsidiaries. The tax laws and regulations dealing with the
adjustment of taxable income for local inflation provide that
industrial enterprises such as those of Teva and its
subsidiaries which qualify as Industrial Companies can claim
special rates of depreciation such as up to 40% on a straight
line basis for industrial equipment.
Eligibility for the benefits under the Industry
Encouragement Law is not subject to receipt of prior approval
from any government authority. Teva cannot assure you that Teva
or any of its Israeli subsidiaries that presently qualify as
"Industrial Companies" will continue to qualify as
such in the future, or that the benefits will be granted in the
future.
Law for the Encouragement of Capital
Investments, 1959 (the "Investment Law")
Industrial projects of Teva and certain of its
Israeli subsidiaries have been granted the status of an
"Approved Enterprise" under the Investment Law. This
law provides that capital investments in production facilities
may, upon application to the Israel Investment Center, be
designated as an Approved Enterprise. Each certificate of
approval for an Approved Enterprise relates to a specific
investment program delineated both by its financial scope,
including its capital sources, and by its physical
characteristics, i.e., the equipment to be purchased and
utilized pursuant to the program. The tax benefits derived from
any such certificate of approval relate only to taxable profits
attributable to the specific program, based upon criteria set in
the certificate of approval. In addition, certain financial
benefits are available (as discussed below). In the event that
Teva and its subsidiaries which have been granted Approved
Enterprise status are operating under more than one approval or
that their capital investments are only partly approved (a
"Mixed Enterprise"), their effective corporate tax
rate will be the result of a weighted combination of the various
applicable rates.
Income derived from an Approved Enterprise is
subject to a tax rate of 25%, rather than the usual rate of 36%,
for a period of seven years, commencing with the year in which
the Approved Enterprise first generates taxable income. This
period cannot extend beyond 12 years from the year of
commencement of operations or 14 years from the year in
which approval was granted, whichever is earlier.
Teva is a "Foreign Investors Company"
("FIC"), as defined by the Investment Law, and is
entitled to further reductions in the tax rate normally
applicable to Approved Enterprises. Because its current level of
foreign ownership is more than 49%, its Approved Enterprise
income is taxable at a 20% rate. The period of such benefit is
ten years, commencing with the year in which the Approved
Enterprise first generates taxable income. This ten-year period
cannot extend beyond 12 years from the year of commencement
of operations or 14 years from the year in which approval
was granted, whichever is earlier. Unless extended, FIC benefits
are granted to enterprises seeking approval not later than
December
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31, 2002. We cannot assure you that Teva will
continue to qualify as an FIC in the future, or that the
benefits will be granted in the future.
Most of the projects of Teva and certain of its
subsidiaries were granted Approved Enterprise status for which
the companies elected to apply for alternative tax
benefits — waiver of grants in return for tax
exemptions on undistributed income. Upon distribution of such
exempt income, the distributing company will be subject to
corporate tax at the rate ordinarily applicable to the Approved
Enterprise's income. Such tax exemption on undistributed
income is for a period limited to two to ten years, depending
upon the location of the enterprises. During the remainder of
the benefits period (until the expiration of ten years), a
corporate tax rate of 20% as above will apply.
Dividends paid by companies owning Approved
Enterprises, the source of which is income derived from an
Approved Enterprise during the benefits period, are generally
taxed at a rate of 15% (which is withheld and paid by the
company paying the dividend) if such dividends are paid during
the benefits period or at any time up to 12 years
thereafter. The 12-year limitation does not apply to a FIC.
Taxation of Non-Israeli Subsidiaries
Non-Israeli subsidiaries are generally taxed
based upon tax laws applicable in their countries of residence.
Income Taxes on Dividends Distributed by Teva
to Non-Israeli Residents
Dividends distributed by an Israeli company to
non-Israeli residents are subject to a 25% tax to be withheld at
source (15% in the case of dividends distributed from the
taxable income attributable to an Approved Enterprise), unless a
different rate is provided in a treaty between Israel and the
shareholder's country of residence.
Under the U.S.-Israel Tax Treaty, the maximum
Israeli tax and withholding tax on dividends paid to a holder of
ordinary shares who is a resident of the United States is
generally 25%, but is reduced to 12.5% if the dividends are paid
to a corporation that holds in excess of 10% of the voting
rights of Teva during Teva's taxable year preceding the
distribution of the dividend and the portion of Teva's
taxable year in which the dividend was distributed. Dividends of
an Israeli company derived from the income of an Approved
Enterprise will still be subject to a 15% dividend withholding
tax. The withheld tax is the final tax in Israel on dividends
paid to non-residents who do not conduct a business in Israel.
A non-resident of Israel who has interest or
dividend income derived from or accrued in Israel, from which
tax was withheld at the source, is generally exempt from the
duty to file tax returns in Israel in respect of such income,
provided such income was not derived from a business conducted
in Israel by the taxpayer.
Capital Gains and Income Taxes Applicable to
Non-Israeli Shareholders
Israeli law generally imposes a capital gains tax
on the sale of securities and any other capital asset. The basic
capital gains tax rate applicable to corporations effective
until December 31, 2002 had been 36%, and the maximum tax
rate for individuals had been 50%. Effective January 1,
2003, the capital gains tax rate imposed upon sale of capital
assets acquired after that date has been reduced to 25%; capital
gains accrued from assets acquired before that date are subject
to a blended tax rate based on the relative periods of time
before and after that date that the asset was held.
In addition, if the ordinary shares are traded on
the Tel Aviv Stock Exchange (or listed on a stock exchange
recognized by the Israeli Ministry of Finance), gains on the
sale of ordinary shares held by non-Israeli tax resident
investors will generally be exempt from Israeli capital gains
tax. Notwithstanding the foregoing, dealers in securities in
Israel are taxed at regular tax rates applicable to business
income.
The U.S.-Israeli Tax Treaty exempts U.S.
residents who hold an interest of less than 10% in an Israeli
company, including Teva, and who held an interest of less than
10% during the 12 months prior to
61
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a sale of their shares, from Israeli capital
gains tax in connection with such sale. Certain other tax
treaties to which Israel is a party also grant exemptions from
Israeli capital gains taxes.
Recent Tax Reform Legislation
In July 2002, the Israeli Parliament approved a
law enacting extensive changes to Israel's tax law (the
"Tax Reform Legislation") generally effective
January 1, 2003. Among the key provisions of the Tax Reform
Legislation are (i) changes which may result in the
imposition of taxes on dividends received by an Israeli company
from its foreign subsidiaries; and (ii) the introduction of
the "controlled foreign corporation" concept according
to which an Israeli company may become subject to Israeli taxes
on certain income of a non-Israeli subsidiary if the
subsidiary's primary source of income is passive income
(such as interest, dividends, royalties, rental income or
capital gains). An Israeli company that is subject to Israeli
taxes on the income of its non-Israeli subsidiaries will receive
a credit for income taxes paid by the subsidiary in its country
of residence.
DOCUMENTS ON DISPLAY
Teva files annual and special reports and other
information with the SEC. You may inspect and copy such material
at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, as well as at the SEC's regional offices at
500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and the Woolworth Building, 233 Broadway, New York,
New York 10279. You may also obtain copies of such material from
the SEC at prescribed rates by writing to the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.
The SEC maintains an Internet website at
http://www.sec.gov that contains reports, proxy statements,
information statements and other material that are filed through
the SEC's Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. Teva began filing through the EDGAR
system beginning on October 31, 2002.
Teva's ADRs are quoted on the Nasdaq
National Market. You may inspect reports and other information
concerning Teva at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
Information about Teva is also available on its
website at http://www.tevapharm.com. Such information on its
website is not part of this annual report.
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Table of Contents
ITEM 11:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK
General
Teva takes various measures to compensate for the
effects of both inflation and devaluation. These measures
include traditional currency hedging transactions as well as
attempts to maintain a balance between monetary assets and
liabilities in each of Teva's principal operating
currencies, the U.S. dollar, the NIS, the Euro, the
Canadian dollar (CAD), the British pound (GBP) and the Hungarian
Forint (HUF). These measures are mainly designed to deal with
general economic trends and exposures to Teva as a whole, and
therefore most of the costs and benefits of such measures are
not allocated to specific income statement line items, but are
concentrated to a large extent under the caption "financial
expenses — net".
Teva can borrow funds in NIS, U.S. dollars
or any other major currency. Given that Teva's functional
currency is the U.S. dollar, Teva would logically prefer to
borrow in U.S. dollars. However, to provide a
"natural" hedge against the potential erosion of
shekel-based financial assets, Teva also borrows funds
denominated in shekels. During 2002 while the average interest
on the Israeli shekel borrowings was 7.5%, those costs were
compensated by the annual devaluation of 13%. Teva uses
financial instruments and derivatives in order to limit its
exposure to risks deriving from changes in exchange rates and
interest rates. The use of such instruments does not expose Teva
to additional exchange rate or interest rate risks because the
derivatives are held to hedge corresponding assets owned by
Teva. No derivative instruments are entered into for trading
purposes.
Teva's derivative transactions during 2002
were executed through Israeli banks and foreign banks, including
Hungarian banks. In the opinion of Teva's management, the
credit risk of these banks is de minimis.
Exchange Rate Risk Management
Teva's functional currency and that of most
of its consolidated subsidiaries is the U.S. dollar, with
the exception of its European and Canadian subsidiaries, where
the functional currency is the local currency in each country.
Accordingly, in Teva's subsidiaries in which
the functional currency is the U.S. dollar, Teva covers
itself against exposure deriving from the gap between current
assets and current liabilities in each currency other than the
U.S. dollar ("balance sheet exposure"). The
majority of the balance sheet exposure in such subsidiaries is
in European currencies and Israeli shekels. In Teva's
European subsidiaries, protection is taken against the gap
between current assets and current liabilities in currencies
other than the functional-local currency (generally against the
U.S. dollar and other European currencies). Teva strives to
limit its exposure through "natural" hedging, i.e.,
attempting to have similar levels of assets and liabilities in
any one currency. Thus, for example, borrowings for acquisitions
and borrowings for activities of acquired companies are
generally taken in the functional currency of such companies.
The rest of the exposure, which is not set off naturally, is
covered by the use of derivative instruments. To the extent
possible or desirable, this is done on a consolidated basis.
In certain cases, Teva protects itself against
exposure from a specific transaction — for example,
the acquisition of a company or a large investment in
assets — which is done in a currency other than the
functional currency. To a large extent Teva uses the
"Cylinder strategy" (purchasing calls on the dollar,
usually together with writing put options on the dollar at a
lower exchange rate). Teva usually limits the hedging
transactions to three-month terms.
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The table below details the balance sheet
exposure, by currency and geography, as at December 31,
2002 (at fair value in millions). All data in the table has been
converted for convenience into U.S. dollar equivalents.
US
English
Canadian
New Israeli
Dollar
Euro
Pound
Dollar
Shekel
Total
Israel
—
58
8
(20
)
86
European Union
17
—
19
—
—
36
Canada
(13
)
—
—
—
—
13
Hungary
152
34
13
1
—
200
Total
182
92
32
9
20
335
Explanatory notes:
1.
Total exposure is the summation of the absolute
    value figures.
2.
The data under Euro, both in the foregoing and
    the following tables, includes exposures in the currencies of
    all the countries that joined the European Union.
Net Exposure:
EUR/USD
GBP/USD
CAD/USD
NIS/USD
Exposure after setting off positions
41
19
21
(20
)
Natural Hedge
25
—
11
—
Net Exposure
16
19
10
(20
)
The set-off does not include exposure against the
HUF.
The table below details (in millions) the hedging
acquired in derivative instruments in order to limit the
exposure to exchange rate fluctuations. The data is as at
December 31, 2002 and is presented in U.S. dollar
equivalent terms.
Hedging
Value
Fair Value
2002 Weighted
Cross
Average Settlement
Currency
Currency
2002
2001
2002
2001
Prices/Strike Prices
Forward:
Euro
HUF
29
22
29
22
256.08
GBP
HUF
10
6
10
6
382.17
USD
HUF
120
49
120
49
262.29
Canadian Dollar
HUF
2
—
2
—
152.23
New Israeli Shekel
USD
5
—
5
—
4.89
Canadian Dollar
USD
2
—
2
—
1.57
Options:
New Israeli Shekel
USD
15
25
—
0
5.02
Canadian Dollar
USD
8
6
—
0
1.57
Euro
USD
38
18
—
0
0.99
USD
HUF
22
—
—
—
241.38
Euro
HUF
9
—
—
—
243.94
GBP
HUF
2
—
—
—
378.00
Total
262
126
168
77
Explanatory notes:
1.
An option's value reflects its fair value
    disregarding the notional amount represented by such an option.
2.
See explanatory note 2 in the preceding table.
3.
In addition to the above, Teva protects itself
    for the next 12 months against Operational Exposure.
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Interest Rate Risk Management
The majority of Teva's debt bears interest
at a fixed rate primarily as a result of the issuance of three
series of senior convertible debentures over the last three
years — $550 million in 2000 with a coupon of
1.5%, $360 million in 2001 with a coupon of 0.75% and
$450 million in 2002 with a coupon of 0.375%. In addition
to the debentures, Teva's fixed interest bearing debt also
includes the $110 million of senior notes issued to U.S.
institutional investors in three series: $20 million due
2005, $75 million due 2008 and $15 million due 2018, and
Missouri Economic Development Bonds. The blended fixed interest
rate of the senior notes is approximately 6.9% per annum, and
the Missouri Economic Development Bonds bear floating or fixed
interest rates according to a particular formula.
During 2002, Teva entered into a number of swap
agreements with respect to a series of $75 million
principal amount of senior notes due 2008. As a result of these
agreements Teva is currently paying an effective interest rate
of Libor plus 0.9% on $30 million of these notes and a
fixed rate of 4.5% on the remaining $45 million of these
notes, as compared to the original 6.9% fixed rate.
The remaining debt consists of bank loans at
floating interest rates. In currencies other than Israeli
shekels, these borrowings are usually linked to the relevant
LIBOR plus a spread of 0.2%—0.7%. Part of Teva's
Canadian subsidiary debt is at floating rate based on the
Canadian bankers acceptance rate +0.65%. In Israel, most
borrowings are NIS demand loans bearing interest rates set at
the inter-bank rate plus a spread of 0.35%.
The excess of funds is invested in the United
States primarily in short-term investments. As of
December 31, 2002, the average maturity of the portfolio
was May 2003, with average credit quality of AA+ and a minimum
credit quality of BBB+.
Teva's liabilities, the average interest
they bear and their repayment schedule by currencies as at
December 31, 2002 are set forth in the table below in U.S.
dollar equivalent terms (in millions).
Total
Interest
2008 &
Currency
Amount
Rate
2003
2004
2005
2006
2007
Thereafter
Fixed interest-Debentures:
US Dollar
1,506
0.375%- 7
%
570
7
20
909
Floating Rates:
US Dollar
New Israeli Shekel
14
9.25
%
14
Euro
240
4
%
129
111
English Pound
31
4
%
31
Canadian Dollar
109
3.5
%
31
78
Total
1900
—
744
7
162
78
909
Explanatory note:
See explanatory note 2 in the preceding table.
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PART II
ITEM 15:     CONTROLS
AND PROCEDURES
(a)
Disclosure controls and procedures.
Teva's Chief Executive Officer and Chief Financial
Officer have evaluated the effectiveness of its disclosure
controls and procedures within the 90 days prior to the
date of filing of this Annual Report on Form 20-F. Based
upon such review, the Chief Executive Officer and Chief
Financial Officer have concluded that Teva has in place
appropriate controls and procedures designed to ensure that
information required to be disclosed by Teva in the reports it
files or submits under the Securities Exchange Act of 1934, as
amended, and the rules thereunder, is recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms.
(b)
Internal controls.
Since the date
of the evaluation described above, there have not been any
significant changes in Teva's internal controls or in other
factors that could significantly affect those controls.
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Table of Contents
PART III
ITEM 18:
FINANCIAL STATEMENTS
(a) Consolidated Financial
Statements:
Page
Report of Independent Auditors
F-2
Consolidated Statements of Income for the Years
    Ended December 31, 2000, 2001 and 2002
F-3
Consolidated Balance Sheets at December 31,
    2001 and 2002
F-4
Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended December 31, 2000,
    2001 and 2002
F-5
Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2000, 2001 and 2002
F-6
Notes to Consolidated Financial Statements
F-8
Reports of Independent Auditors with Respect to
    Subsidiaries
F-44
(b) Financial Statement
Schedule:
Page
Report of Independent Accountants
S-1
Schedule II — Valuation and
    Qualifying Accounts
S-2
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ITEM  19:
EXHIBITS
1.1
Memorandum of Association(1)(2)
1.2
Restated Articles of Association(1)(3)
2.1
Amended and Restated Deposit Agreement, dated
    February 12, 1997, among Teva Pharmaceutical Industries
    Limited, The Bank of New York, as depositary, and the holders
    from time to time of ADRs(4)
2.2
Form of American Depositary Receipt(4)
2.3
Indenture, dated as of October 11, 2000, by
    and among Teva Pharmaceutical Finance, LLC, Teva Pharmaceutical
    Industries Limited and The Bank of New York, as trustee(5)
2.4
Form of Global Debentures (included in
    Exhibit 2.3)
2.5
Indenture, dated as of August 20, 2001, by
    and among Teva Pharmaceutical Finance, NV, Teva Pharmaceutical
    Industries Limited and The Bank of New York, as trustee(6)
2.6
Form of Global Debentures (included in
    Exhibit 2.5)
2.7
Indenture, dated as of November 18, 2002, by
    and among Teva Pharmaceutical Finance B.V., Teva Pharmaceutical
    Industries Limited and The Bank of New York, as trustee(3)
2.8
Form of Global Debentures (included in
    Exhibit 2.7)
2.9
Other long-term debt instruments: The registrant
    hereby undertakes to provide the Securities and Exchange
    Commission with copies upon request.
4.1
Purchase Agreement, dated February 1, 2000,
    between Dan Family Holdings Ltd. and Almad Investments Limited
    and 1377077 Ontario Inc. and Teva Pharmaceutical Industries Ltd.
    and related exhibits, relating to the acquisition of Novopharm
    Limited(7)
4.2
Amending and Indemnity Agreement, dated as of
    April 4, 2000, between Dan Family Holdings Ltd., Almad
    Investments Limited, 1377077 Ontario Inc., Teva Pharmaceutical
    Industries Ltd., Novopharm Limited and Leslie L. Dan and related
    exhibits, relating to the acquisition of Novopharm Limited(8)
8
Subsidiaries of the Registrant
10.1
Consent of Kesselman & Kesselman
10.2
Consent of KPMG Hungaria Kft
10.3
Consent of Ehrenkrantz Sterling & Co. LLC
10.4(i)
Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002
10.4(ii)
Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002
(1)
English translation or summary from Hebrew
    original, which is the official version.
(2)
Incorporated by reference to Exhibit 3.1 to
    Teva's Registration Statement on Form F-1 (Reg.
    No. 33-15736).
(3)
Incorporated by reference to Teva's
    Registration Statement on Form F-3 (Reg. No. 333-102259).
(4)
Incorporated by reference to Teva's
    Registration Statement on Form F-6 (Reg. No. 333-11474).
(5)
Incorporated by reference to Teva's
    Registration Statement on Form F-3 (Reg. No. 333-13126).
(6)
Incorporated by reference to Teva's
    Registration Statement on Form F-3 (Reg. No. 333-140106).
(7)
Incorporated by reference to Exhibit 10.5(i)
    to Teva's Annual Report on Form 20-F for the year
    ended December 31, 1999.
(8)
Incorporated by reference to
    Exhibit 10.5(ii) to Teva's Annual Report on
    Form 20-F for the year ended December 31, 1999.
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SIGNATURES
The registrant hereby certifies that it meets all
of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual
report on its behalf.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
By:
/s/ DAN S. SUESSKIND
Name: Dan S. Suesskind
Title: Chief Financial Officer
Date: March 4, 2003
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Table of Contents
CERTIFICATIONS
I, Israel Makov, certify that:
1.
I have reviewed this annual report on
    Form 20-F of Teva Pharmaceutical Industries Limited;
2.
Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
3.
Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;
4.
The registrant's other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:
a.     designed such
    disclosure controls and procedures to ensure that material
    information relating to the registrant, including its
    consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this
    annual report is being prepared;
b.     evaluated the
    effectiveness of the registrant's disclosure controls and
    procedures as of a date within 90 days prior to the filing
    date of this annual report (the "Evaluation Date"); and
c.     presented in this
    annual report our conclusions about the effectiveness of the
    disclosure controls and procedures based on our evaluation as of
    the Evaluation Date;
5.
The registrant's other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrant's auditors and the audit committee of
    registrant's board of directors (or persons performing the
    equivalent function):
a.     all significant
    deficiencies in the design or operation of internal controls
    which could adversely affect the registrant's ability to
    record, process, summarize and report financial data and have
    identified for the registrant's auditors any material
    weaknesses in internal controls; and
b.     any fraud,
    whether or not material, that involves management or other
    employees who have a significant role in the registrant's
    internal controls; and
6.
The registrant's other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.
/s/ ISRAEL MAKOV
Israel Makov
Chief Executive Officer
Date: March 4, 2003
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CERTIFICATIONS
I, Dan S. Suesskind, certify that:
1.
I have reviewed this annual report on
    Form 20-F of Teva Pharmaceutical Industries Limited;
2.
Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
3.
Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;
4.
The registrant's other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:
a.     designed such
    disclosure controls and procedures to ensure that material
    information relating to the registrant, including its
    consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this
    annual report is being prepared;
b.     evaluated the
    effectiveness of the registrant's disclosure controls and
    procedures as of a date within 90 days prior to the filing
    date of this annual report (the "Evaluation Date"); and
c.     presented in this
    annual report our conclusions about the effectiveness of the
    disclosure controls and procedures based on our evaluation as of
    the Evaluation Date;
5.
The registrant's other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrant's auditors and the audit committee of
    registrant's board of directors (or persons performing the
    equivalent function):
a.     all significant
    deficiencies in the design or operation of internal controls
    which could adversely affect the registrant's ability to
    record, process, summarize and report financial data and have
    identified for the registrant's auditors any material
    weaknesses in internal controls; and
b.     any fraud,
    whether or not material, that involves management or other
    employees who have a significant role in the registrant's
    internal controls; and
6.
The registrant's other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.
/s/ DAN S. SUESSKIND
Dan S. Suesskind
Chief Financial Officer
Date: March 4, 2003
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TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended December 31, 2002
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT AUDITORS
F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Statements of income
F-3
Balance sheets
F-4
Statements of changes in shareholders' equity
F-5
Statements of cash flows
F-6 – F-7
Notes to financial statements
F-8 – F-43
REPORTS OF INDEPENDENT AUDITORS WITH RESPECT
    TO SUBSIDIARIES
F-44 – F-45
The amounts are stated in U.S. dollars ($) in
millions.
F-1
Table of Contents
REPORT OF INDEPENDENT AUDITORS
To the shareholders of
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
We have audited the consolidated balance sheets
of Teva Pharmaceutical Industries Limited (the
"Company") and its subsidiaries as of
December 31, 2002 and 2001 and the consolidated statements
of income, changes in shareholders' equity and cash flows
for each of the three years in the period ended December 31,
2002. These financial statements are the responsibility of the
Company's Board of Directors and management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial
statements of certain subsidiaries whose sales included in
consolidation constitute approximately 16% of total consolidated
sales for the year ended December 31, 2000. The financial
statements of those subsidiaries were audited by other
independent auditors, whose reports have been furnished to us,
and our opinion, insofar as it relates to amounts included for
those subsidiaries, is based on the reports of the other
independent auditors.
We conducted our audits in accordance with
auditing standards generally accepted in Israel and in the
United States, including those prescribed by the Israeli
Auditors (Mode of Performance) Regulations, 1973. 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 the
Company's Board of Directors and management, as well as
evaluating the overall financial statement presentation. We
believe that our audits and the reports of the other independent
auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the
reports of the other independent auditors, the consolidated
financial statements referred to above, present fairly, in all
material respects, the consolidated financial position of the
Company and its subsidiaries as of December 31, 2002 and
2001, and the consolidated results of their operations, changes
in shareholders' equity and their cash flows for each of
the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the
United States.
As discussed in note 1g, effective
January 1, 2002, the Company changed its method of
accounting for goodwill and other indefinite life intangible
assets, to conform with FASB Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible
Assets".
/s/ KESSELMAN & KESSELMAN
Kesselman & Kesselman
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
February 17, 2003
Kesselman & Kesselman is a member of
PricewaterhouseCoopers International Limited,
a company limited by guarantee registered in
England and Wales.
F-2
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
2002
2001
2000
(U.S. dollars in millions, except
earnings per ADR)
Net sales
$
2,518.6
$
2,077.4
$
1,749.9
Cost of sales
1,423.2
1,230.1
1,058.0
Gross profit
1,095.4
847.3
691.9
Research and development expenses:
Total expenses
192.6
168.6
132.3
Less — participations and grants
27.6
61.4
27.7
165.0
107.2
104.6
Selling, general and administrative
    expenses
406.4
358.1
301.0
Restructuring expenses
15.7
Acquisition of research and development in
    process
35.7
Operating income
524.0
366.3
250.6
Financial
    expenses
— net
24.6
26.0
42.2
Income before income taxes
499.4
340.3
208.4
Income taxes
84.8
63.6
59.6
414.6
276.7
148.8
Share in profits (losses) of associated
    companies
— net
(2.7
)
0.8
0.4
Minority interests in losses (profits) of
    subsidiaries
— net
(1.6
)
0.7
(0.8
)
Net income
$
410.3
$
278.2
$
148.4
Earnings per ADR:
Basic
$
1.55
$
1.05
$
0.58
Diluted
$
1.52
$
1.02
$
0.57
Weighted average number of ADRs (in
    millions):
Basic
264.5
264.5
257.9
Diluted
280.8
280.9
263.7
The accompanying notes are an integral part of
the financial statements.
F-3
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
CONSOLIDATED BALANCE SHEETS
December 31
2002
2001
(U.S. dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents
$
809.9
$
768.9
Short-term investments
235.7
21.2
Accounts receivable:
Trade
855.8
651.2
Other
218.9
166.4
Inventories
781.1
570.2
Total current assets
2,901.4
2,177.9
Investments and other assets
313.5
141.9
Property, plant and equipment,
net
675.4
554.2
Intangible assets and debt issuance costs,
net
176.2
120.1
Goodwill
560.3
466.1
Total assets
$
4,626.8
$
3,460.2
LIABILITIES AND SHAREHOLDERS'
    EQUITY
Current liabilities:
Short-term credit
$
176.1
$
206.5
Accounts payable and accruals
785.7
531.6
Convertible senior debentures
562.4
Total current liabilities
1,524.2
738.1
Long-term liabilities:
Deferred income taxes
43.7
39.0
Employee related obligations
63.2
53.3
Loans and other liabilities
351.4
334.9
Convertible senior debentures
810.0
912.0
Total long-term liabilities
1,268.3
1,339.2
Commitments and contingencies,
see note 8
Total liabilities
2,792.5
2,077.3
Minority interests
4.9
2.2
Shareholders' equity:
Ordinary shares of NIS 0.10 par value;
    December 31, 2002 and 2001: authorized —
    999.6 million and 499.6 million, respectively; issued
    and outstanding — 263.2 million and
    256.2 million, respectively
33.9
31.0
Additional paid-in capital
481.5
480.6
Deferred compensation
(0.1
)
(0.2
)
Retained earnings
1,345.7
970.4
Accumulated other comprehensive income (loss)
17.3
(58.5
)
Cost of Company shares held by
    subsidiaries — December 31, 2002 and
    2001 — 4.6 million and 4.5 million ordinary
    shares, respectively
(48.9
)
(42.6
)
Total shareholders' equity
1,829.4
1,380.7
Total liabilities and shareholders' equity
$
4,626.8
$
3,460.2
/S/ E. HURVITZ
/S/ I. MAKOV
E. Hurvitz
Chairman of the Board
I. Makov
President and Chief Executive Officer
The accompanying notes are an integral part of
the financial statements.
F-4
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
Ordinary shares
Accumulated
Cost of
Number of
Additional
other
Company
shares (in
Par
paid-in
Deferred
Retained
comprehensive
shares held by
millions)
value
capital
compensation
earnings
income (loss)
subsidiaries
Total
(U.S. dollars in millions)
Balance at January 1, 2000
250.1
$
31.0
$
163.6
$
(1.4
)
$
608.9
$
(29.2
)
$
(25.6
)
$
747.3
Changes during 2000:
Net income
148.4
148.4
Differences from translation of non-dollar
    currency financial statements of subsidiaries and associated
    companies
(22.6
)
(22.6
)
Unrealized holding losses on available-for-sale
    securities — net
(0.8
)
(0.8
)
Total comprehensive income
125.0
Deferred compensation related to employee stock
    option plans
0.1
(0.1
)
Amortization of deferred compensation related to
    employee stock option plans
0.8
0.8
Exercise of options by employees
1.3
*
9.3
9.3
Dividends
(29.0
)
(29.0
)
Exercise of warrants
0.3
*
0.6
0.6
Shares issued in connection with the acquisition
    of Novopharm (note 2a)
4.2
*
73.6
73.6
Special shares that are exchangeable into
    12.8 million ordinary shares issued in connection with the
    acquisition of Novopharm (note 2a)
226.4
226.4
Cost of acquisition of Company shares, net of
    proceeds from sale
2.7
(5.4
)
(2.7
)
Balance at December 31, 2000
255.9
31.0
476.3
(0.7
)
728.3
(52.6
)
(31.0
)
1,151.3
Changes during 2001:
Net income
278.2
278.2
Differences from translation of non-dollar
    currency financial statements of subsidiaries and associated
    companies
(6.4
)
(6.4
)
Unrealized holding gains on available-for-sale
    securities — net
0.5
0.5
Total comprehensive income
272.3
Deferred compensation related to employee stock
    option plans
0.3
(0.3
)
Amortization of deferred compensation related to
    employee stock option plans
0.8
0.8
Exercise of options by employees
0.3
*
3.9
3.9
Dividends
(36.1
)
(36.1
)
Cost of acquisition of Company shares, net of
    proceeds from sale
0.1
(11.6
)
(11.5
)
Balance at December 31, 2001
256.2
31.0
480.6
(0.2
)
970.4
(58.5
)
(42.6
)
1,380.7
Changes during 2002:
Net income
410.3
410.3
Differences from translation of non-dollar
    currency financial statements of subsidiaries and associated
    companies
85.6
85.6
Unrealized holding losses on available-for-sale
    securities — net
(9.8
)
(9.8
)
Total comprehensive income
486.1
Amortization of deferred compensation related to
    employee stock option plans
0.1
0.1
Exercise of options by employees
0.5
*
5.8
5.8
Dividends
(35.0
)
(35.0
)
Ordinary shares issued in exchange for special
    shares (note 2a)
6.5
*
*
Distribution of stock dividend
2.9
(2.9
)
Cost of acquisition of Company shares, net of
    proceeds from sale
(2.0
)
(6.3
)
(8.3
)
Balance at December 31, 2002
263.2
$
33.9
$
481.5
$
(0.1
)
$
1,345.7
$
17.3
$
(48.9
)
$
1,829.4
*
Represents an amount of less than $
    0.1 million.
The accompanying notes are an integral part of
the financial statements.
F-5
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Year Ended December 31
2002
2001
2000
(U.S. dollars in millions)
Cash flows from operating
    activities:
Net income
$
410.3
$
278.2
$
148.4
Adjustments to reconcile net income to net cash
    provided by operating activities:
Income and expenses not involving cash
    flows*
(1)
84.5
132.2
131.4
Changes in certain assets and
    liabilities*
(1)
(141.1
)
(137.2
)
(114.2
)
Net cash provided by operating
    activities*
(2)
353.7
273.2
165.6
Cash flows used in investing
    activities:
Purchase of property, plant and equipment
(160.4
)
(114.8
)
(89.4
)
Investment grants relating to property, plant and
    equipment
1.9
Acquisition of subsidiaries*
(3)
(156.3
)
(8.0
)
Acquisition of intangible assets
(25.2
)
(19.3
)
(22.5
)
Proceeds from sale of property, plant and
    equipment
24.3
5.1
26.2
Proceeds from sale of long term investments
4.0
Acquisition of long-term investments and other
    assets
(202.4
)
(45.0
)
(5.7
)
Net decrease (increase) of short-term
    investments
(148.9
)
(16.6
)
13.2
Net cash used in investing
    activities
(664.9
)
(190.6
)
(84.3
)
Cash flows from financing
    activities:
Proceeds from exercise of options by employees
8.5
5.2
12.1
Cost of acquisition of Company shares, net of
    proceeds from sale
(6.3
)
(11.6
)
(5.4
)
Proceeds from exercise of warrants
0.6
Proceeds from issuance of convertible senior
    debentures, net of issuance costs (2002 —
    $10.8 million; 2001 — $7.7 million;
    2000 — $12.6 million)
439.2
352.3
537.4
Long-term loans and other long-term liabilities
    received
82.4
136.2
Discharge of long-term loans and other long-term
    liabilities
(3.9
)
(64.2
)
(309.6
)
Net decrease in short-term credit
(53.4
)
(64.7
)
(78.0
)
Dividends paid
(46.6
)
(32.8
)
(27.6
)
Net cash provided by financing
    activities
337.5
266.6
265.7
Translation differences on cash balances of
    certain subsidiaries
14.7
(0.9
)
(3.6
)
Net increase in cash and cash
    equivalents
41.0
348.3
343.4
Balance of cash and cash equivalents at
    beginning of year
768.9
420.6
77.2
Balance of cash and cash equivalents at end of
    year
$
809.9
$
768.9
$
420.6
* See details on page F-7.
The accompanying notes are an integral part of
the financial statements.
F-6
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
DETAILS TO THE CONSOLIDATED STATEMENTS OF CASH
FLOWS
Year Ended December 31
2002
2001
2000
(U.S. dollars in millions)
(1)Adjustments to reconcile net income to net
    cash provided by operating activities:
Income and expenses not involving cash flows:
Depreciation and amortization
$
96.8
$
109.1
$
95.0
Deferred income taxes — net
(31.7
)
(0.9
)
(3.3
)
Restructuring expenses
14.2
Acquisition of research and development in process
34.4
Increase in employee related obligations
6.0
8.2
7.0
Amortization of deferred compensation related to
    employee stock option plans
0.1
0.8
0.8
Capital gains
(7.5
)
(1.3
)
(0.4
)
Share in losses (profits) of associated
    companies — net
2.7
(0.8
)
(0.4
)
Minority interests
1.6
(0.7
)
0.8
Other items — net
16.5
3.6
(2.5
)
$
84.5
$
132.2
$
131.4
Changes in certain assets and liabilities:
Increase in accounts receivable
$
(101.8
)
$
(147.4
)
$
(115.5
)
Increase in inventories
(149.1
)
(73.4
)
(56.2
)
Increase in accounts payable and accruals
109.8
83.6
57.5
$
(141.1
)
$
(137.2
)
$
(114.2
)
(2)Supplemental disclosure of cash flow
    information:
Interest paid
$
25.1
$
36.6
$
47.3
Income taxes paid
$
54.2
$
89.4
$
36.5
(3)Acquisition of subsidiaries (in 2002 and
    2000):
Assets and liabilities of the subsidiaries upon
    acquisition:
Working capital (excluding cash and cash
    equivalents)
$
18.7
$
(100.5
)
Long-lived assets other than goodwill
60.0
157.7
Long-term liabilities
(36.1
)
(112.6
)
Minority interests in subsidiary at date of
    acquisition
0.1
Research and development in process
34.4
Goodwill arising on acquisition
80.1
255.3
Cost of investment in shares
122.7
234.4
Acquisition of shareholders loan
33.6
Issuance of special shares exchangeable into
    ordinary shares of the Company (note 2a)
(226.4
)
Cash paid — net
$
156.3
$
8.0
The accompanying notes are an integral part of
the financial statements.
F-7
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Note 1 — Significant Accounting
Policies
a.     General:
Operations
Teva Pharmaceutical Industries Limited (the
"Company") is an Israeli corporation which, together
with its subsidiaries and associated companies ("Teva"
or the "Group"), is engaged in development,
production, marketing and distribution of products in two
reportable operating segments, Pharmaceuticals and Active
Pharmaceutical Ingredients.
Functional currency
The currency of the primary economic environment
in which the operations of the Company and its subsidiaries in
Israel and in the United States are conducted is the U.S. dollar
("dollar" or "$"), this in view of the
overall trend of increasing dollar sales of the Company.
Operating expenses (including purchase of materials) incurred in
non-Israeli currencies, mainly the dollar, constitute over 50%
of the total operating expenses of each of those companies. Most
purchases of materials are also made in non-Israeli currencies
(mainly the dollar). Thus, the functional currency of these
companies is the dollar.
The functional currency of the remaining
subsidiaries and associated companies, mainly European and
Canadian companies, is their local currency. The financial
statements of those companies are included in the consolidation
based on translation into dollars in accordance with Statement
of Financial Accounting Standards ("FAS") 52 of the
Financial Accounting Standards Board of the United States
("FASB"): assets and liabilities are translated at
year end exchange rates, while operating results items are
translated at average exchange rates during the year.
Differences resulting from translation are presented under
shareholders' equity, in the item accumulated other
comprehensive income (loss).
Accounting principles
The consolidated financial statements are
prepared in accordance with accounting principles generally
accepted in the United States.
Use of estimates in the preparation of
    financial statements
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 dates of
the financial statements and the reported amounts of revenues
and expenses during the reporting years. The most significant
estimates and assumptions relate to sales reserves and
allowances, income taxes, inventories, contingencies and
intangible assets impairment. Actual results could differ from
those estimates.
b.
Principles of consolidation:
The consolidated financial statements include the
accounts of the Company and all of its subsidiaries. In these
financial statements, "subsidiaries" are companies
controlled to the extent of over 50%, the financial statements
of which are consolidated with those of the Company. Significant
intercompany transactions and balances were eliminated in
consolidation; profits from intercompany sales, not yet realized
outside the Group, have also been eliminated.
F-8
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 1 — Significant Accounting
Policies (continued)
c.
Inventories:
These are valued at the lower of cost or market.
Cost is determined as follows:
Raw and packaging materials and purchased
products — mainly on the "first-in,
first-out" basis. Finished products and products in
process: raw material and packaging component — mainly
on the "first-in, first-out" basis; labor and
overhead — on the average basis over the production
period.
d.
Investee companies:
These investments are included among investments
and other assets. Companies controlled to the extent of 20% or
more, which are not subsidiaries ("associated
companies"), are accounted for by the equity method. Other
non-marketable investments are carried at cost.
e.
Marketable securities:
Held-to-maturity securities consist of debt
securities, which are carried at amortized cost. At
December 31, 2002 and 2001, the carrying value of these
securities — which approximated their fair
value — amounting to $709.8 million and
$20.9 million, respectively, was included among cash and
cash equivalents — $371.5 million
(2001 — $20.9 million); short-term
investments — $223.9 million; and investments and
other assets — $114.4 million. These debt
securities mature as follows: 2003 —
$595.4 million; and 2004 to 2006 —
$114.4 million.
Other marketable securities consist of equity
investments classified as available-for-sale securities and
presented in investments and other assets. Marketable securities
are carried at market value with unrealized gains and losses,
net of taxes, reported as a separate component of accumulated
other comprehensive income (loss). The fair market value, cost
and gross unrealized holding losses of such securities at
December 31, 2002 were $22.5 million,
$31.5 million and $9.0 million, respectively;
December 31, 2001 — $15.2 million,
$16.0 million and $0.8 million, respectively. In 2002,
it was determined that the impairment in value of one the
investments was other then temporary. Consequently, the
accumulated unrealized loss in the amount of $3.4 million
relating to such investment, was charged to financial expenses.
f.
Property, plant and equipment:
Property, plant and equipment are carried at
cost, after deduction of the related investment grants
($11.5 million at December 31, 2002 and 2001).
Equipment leased under capital leases is classified as the
Group's assets and included at the present value of lease
payments as determined by the lease agreement.
Interest expenses in respect of loans and credit
applied to finance the construction or acquisition of property,
plant and equipment, incurred until the assets are ready for
their intended use, are charged to cost of such assets. Interest
capitalized for each of the years ended December 31, 2002,
2001 and 2000 was less than $1 million.
Depreciation is computed using the straight-line
method over the estimated useful life of the assets:
buildings — mainly 25 years; machinery and
equipment — 8-12 years; motor vehicles, computer
equipment, furniture and other assets — mainly
7 years. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of the
related asset.
g.     Goodwill,
intangible assets and debt issuance costs:
Goodwill reflects the excess of the purchase
price of subsidiaries acquired over the fair value of net assets
acquired. In conjunction with the adoption of FAS 141,
"Business Combinations", the Company reclassified an
intangible asset relating to assembled work force with a
carrying value of $3.8 million net of
F-9
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 1 — Significant Accounting
Policies (continued)
income taxes to goodwill. As from January 1,
2002, pursuant to FAS 142, "Goodwill and Other Intangible
Assets", goodwill is no longer amortized but rather tested
for impairment at least annually. Prior to the adoption of FAS
142, goodwill was amortized in equal annual installments, mainly
over a period of 30 years. As of January 1, 2002, the
Company has completed the transitional impairment review of
Goodwill, as required by FAS 142: the various reporting units,
for which separately identifiable cash flow information is
available, were identified and the fair values of such reporting
units were determined using expected future discounted cash
flows. Consequently, the Company has determined that there is no
indication of impairment with respect to Goodwill as of
January 1, 2002. The Company has selected
December 31st as the date on which it will perform its
annual goodwill impairment test. As of December 31, 2002,
no impairment was required.
Intangible assets consist mainly of marketing and
other rights relating to products in respect of which an
approval for marketing was received from the US Food and Drug
Administration ("FDA") or the equivalent agencies in
other countries. In 2002, in accordance with FAS 142, a
review was performed of the remaining estimated useful lives for
all recorded intangible assets. As a result of this review, an
intangible asset with a carrying value of $29.6 million,
relating to tradename, was determined to have an indefinite
life. Accordingly, as from January 1, 2002, this intangible
asset is no longer amortized, but rather tested for impairment
at least annually. Other intangible assets are amortized using
the straight-line method over their estimated period of useful
life, as follows: marketing and product rights —
mainly 12 years; other intangible assets — mainly
5-14 years. The Company has selected December 31st as
the date on which it will perform its annual impairment test for
the indefinite life intangible asset. As of December 31,
2002, no impairment was required.
Debt issuance costs in respect of issuance of
debentures are deferred and amortized as a component of interest
expense over the period from issuance of the debentures through
first redemption date.
h.     Impairment in
value of long-lived assets:
On January 1, 2002, the Company adopted FAS
144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". FAS 144 requires that long-lived
assets, to be held and used by an entity, be reviewed for
impairment and, if necessary, written down to the estimated fair
values, whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable
through undiscounted future cash flows. The adoption of FAS 144
did not have a material effect on the financial position and
results of operations of the Company.
i.     Deferred
income taxes:
Deferred taxes are determined utilizing the asset
and liability method based on the estimated future tax effects
of differences between the financial accounting and tax bases of
assets and liabilities under the applicable tax laws. Deferred
income tax provisions and benefits are based on the changes in
the deferred tax asset or tax liability from period to period.
Valuation allowances are provided if, based upon the weight of
available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized.
Taxes which would apply in the event of disposal
of investments in subsidiaries have not been taken into account
in computing deferred taxes, as it is the Company's
intention to hold these investments, not to realize them.
Teva intends to permanently reinvest the amounts
of tax-exempt income and does not intend to cause dividend
distribution from such income (see note 10a). Therefore, no
deferred taxes have been provided in respect of such tax-exempt
income.
F-10
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 1 — Significant Accounting
Policies (continued)
The Group might incur additional taxes if
dividends are distributed out of the income of non-Israeli
companies in the Group. Such additional tax liability has not
been provided for in these financial statements as the Company
does not expect these companies to distribute dividends in the
foreseeable future.
j.     Company shares
held by subsidiaries:
Company shares held by subsidiaries are presented
as a reduction of shareholders' equity, at their cost to
the subsidiaries, under cost of Company shares held by
subsidiaries. Gains and losses on sale of these shares, net of
related income taxes, are carried to additional paid-in capital.
k.     Revenue
recognition:
Revenue is recognized when title and risk of loss
for the products is transferred to the customer. Provisions for
estimated returns, customer volume rebates, chargebacks,
discounts and shelf-stock adjustments are established
concurrently with the recognition of revenue, and are deducted
from net sales.
l.     Research and
development expenses:
Research and development expenses are charged to
income as incurred. Participations and grants in respect of
research and development expenses are recognized as a reduction
of research and development expenses as the related costs are
incurred, or as the related milestone is met.
m.     Shipping and
handling costs:
Shipping and handling costs, which amounted to
$35.9 million, $23.4 million and $19.3 million
for the years ended December 31, 2002, 2001 and 2000,
respectively, are included in Selling, general and
administrative expenses.
n.     Advertising
expenses:
Advertising expenses are charged to income as
incurred. Advertising expenses for the years ended
December 31, 2002, 2001 and 2000 were $28.7 million,
$21.4 million and $10.1 million, respectively.
o.
Concentration of credit risks —
    allowance for doubtful accounts:
Most of the Group's cash and cash
equivalents and short-term investments as of December 31,
2002 and 2001 were deposited with Israeli, U.S. and European
banks. The Company is of the opinion that the credit risk in
respect of these balances is remote.
Most of the Group's sales are made in North
America, Europe and Israel, to a large number of customers. The
sales to each of certain two customers constitute approximately
9% of total consolidated sales in the year ended
December 31, 2002 (2001 — 8% to each of certain
two customers and 2000 — 6% to each of certain three
customers).
In general, the exposure to the concentration of
credit risks relating to trade receivables is limited, due to
the relatively large number of customers and their wide
geographic distribution. The Group performs ongoing credit
evaluations of its customers for the purpose of determining the
appropriate allowance for doubtful accounts and generally does
not require collateral. An appropriate allowance for doubtful
accounts is included in the accounts. The allowance in respect
of trade receivables amounts to $30.4 million and
$15.6 million at December 31, 2002 and 2001,
respectively, and has been determined for specific debts
doubtful of collection.
F-11
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 1 — Significant Accounting
Policies (continued)
p.
Derivatives:
The Company carries out transactions involving
foreign exchange derivative financial instruments (mainly
forward exchange contracts and written and purchased currency
options). The transactions are designed to hedge the cash flows
resulting from existing assets and liabilities and transactions
expected to be entered into over the next twelve months, in
currencies other than the functional currency. However, except
for one interest rate swap transaction, these contracts do not
qualify for hedge accounting under FAS 133,
"Accounting for Derivative Instruments and Hedging
Activities".
In 2002, the Company entered into an interest
rate swap transaction in respect of a portion of a series of
debentures issued in a private placement in 1998. This
derivative qualifies as a fair value hedge under FAS 133,
and is recognized on the balance sheet at its fair value. The
carrying amount of the hedged liability is adjusted for the
entire changes in the fair value of the derivative. All other
derivatives are recognized on the balance sheet at their fair
value, with changes in the fair value carried to the statements
of income and included in financial expenses — net.
q.
Cash and cash equivalents:
The Group considers all highly liquid
investments, which include short-term (up to three months) bank
deposits that are not restricted as to withdrawal or use and
short-term debentures, the period to maturity of which did not
exceed three months at time of investment, to be cash
equivalents.
r.
Earnings per American Depository Receipt
    ("ADR"):
Basic earnings per ADR are computed by dividing
net income by the weighted average number of ADRs/ ordinary
shares and ordinary "A" shares (including special
shares exchangeable into ordinary shares) outstanding during the
year, net of Company shares held by subsidiaries.
In computing diluted earnings per ADR, basic
earnings per ADR are adjusted to take into account the potential
dilution that could occur upon: (1) the conversion of the
convertible senior debentures due 2005, using the if-converted
method, by adding to net income interest expense on these
debentures and issuance costs, net of tax benefits, and by
adding the weighted average number of shares issued upon assumed
conversion of these debentures (no account was taken of the
potential dilution that could occur upon the conversion of the
convertible senior debentures due 2021 and 2022, since as at
December 31, 2002 and 2001, the conditions necessary for
conversion of these debentures have not been satisfied); and
(2) the exercise of options granted under employee stock
option plans, using the treasury stock method.
Basic and diluted earnings per ADR are computed
after giving retroactive effect to distribution of 100% stock
dividend in December 2002 (see note 9a).
s.
Stock based compensation:
The Company accounts for its employee stock
option plans using the intrinsic value based method of
accounting prescribed by APB 25 and related
interpretations. Accordingly, the compensation cost relating to
stock options is charged on the date of grant of such options,
to shareholders' equity, under deferred compensation, and
is thereafter amortized by the straight-line method and charged
against income over the expected service period of the related
employees.
FAS 123, "Accounting for Stock-Based
Compensation", established a fair value based method of
accounting for employee stock options or similar equity
instruments, and encourages adoption of such method for stock
compensation plans. However, it also allows companies to
continue to account for those plans using the accounting
treatment prescribed by APB 25. FAS 148 amends
FAS 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for
F-12
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 1 — Significant Accounting
Policies (continued)
such plans. The Company has elected to continue
accounting for employee stock option plans according to
APB 25, and has accordingly complied with the disclosure
requirements set forth in FAS 123, as amended by
FAS 148, for companies electing to apply APB 25.
The following table illustrates the effect on net
income and earning per ADR, assuming the Company had applied the
fair value recognition provisions of FAS 123 to its
stock-based employee compensation:
Year Ended December 31
2002
2001
2000
(In millions, except
earnings per ADR)
Net income, as reported
$
410.3
$
278.2
$
148.4
Add: amortization of deferred compensation
    related to employee stock option plans, included in consolidated
    statements of income, net of related tax effect
0.1
0.6
0.6
Deduct: amortization of deferred compensation, at
    fair value, net of related tax effect
58.6
28.5
13.2
Pro forma net income
$
351.8
$
250.3
$
135.8
Earnings per ADR:
Basic — as reported
$
1.55
$
1.05
$
0.58
Basic — pro forma
$
1.33
$
0.95
$
0.53
Diluted — as reported
$
1.52
$
1.02
$
0.57
Diluted — pro forma
$
1.30
$
0.92
$
0.52
t.     Comprehensive
income:
Comprehensive income, presented in
shareholders' equity, includes, in addition to net income:
(i) translation gains and losses of non-dollar currency
financial statements of subsidiaries and associated companies
(accumulated balance at December 31, 2002 — gain
of $27.4 million; 2001 — loss of
$58.2 million); and (ii) unrealized holding losses on
available-for-sale securities, net of tax (accumulated balance
at December 31, 2002 — $10.1 million;
2001 — $0.3 million).
u.
Recently issued accounting
    pronouncements:
1) FAS 143
In
    August 2001, the FASB issued FAS No. 143, "Accounting
    for Obligations Associated with the Retirement of Long-Lived
    Assets". FAS 143 addresses accounting and reporting
    for obligations associated with the retirement of tangible
    long-lived assets and the associated asset retirement costs,
    including, but not limited to, clean-up costs, etc. FAS 143
    is effective for financial statements issued for fiscal years
    beginning after June 15, 2002. The Company does not expect
    the adoption of FAS 143 to have a material effect on its
    consolidated financial statements.
2) FAS 146
In
    June 2002, the FASB issued FAS No. 146, "Accounting
    for Costs Associated with Exit or Disposal Activities".
    FAS 146 requires that a liability for costs associated with
    an exit or disposal activity be recognized, at fair value, when
    the liability is incurred. Previously, a liability
F-13
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 1 — Significant Accounting
    Policies (continued)
for an exit cost was recognized at the date of
the commitment to an exit plan. FAS 146 is to be applied
prospectively to exit or disposal activities initiated after
December 31, 2002.
3) FIN 45
In
    November 2002, the FASB issued FIN No. 45,
    "Guarantor's Accounting and Disclosure Requirements
    for Guarantees, Including Indirect Guarantees of Indebtedness of
    Others". FIN 45 requires the guarantor to recognize,
    at the inception of a guarantee, a liability for the fair value
    of the obligation undertaken in issuing such guarantee and to
    provide certain disclosures. The recognition provisions of
    FIN 45 are applicable on a prospective basis to guarantees
    issued or modified after December 31, 2002. The Company
    does not expect the adoption of FIN 45 to have a material effect
    on its consolidated financial statements.
4) FIN 46
In
    January 2003, the FASB issued FIN No. 46,
    "Consolidation of Variable Interest Entities".
    FIN 46 classifies entities into two groups: (1) those
    for which voting interests are used to determine consolidation;
    and (2) those for which other interests (variable
    interests) are used to determine consolidation. FIN 46 deals
    with the identification of Variable Interest Entities
    ("VIE") and the business enterprise which should
    include the assets, liabilities, non-controlling interests, and
    results of activities of a VIE in its consolidated financial
    statements. FIN 46 would become effective during 2003. At
    this stage, the Company is evaluating the effect of this
    pronouncement on its consolidated financial statements.
v.     Reclassifications:
Certain comparative figures have been
reclassified to conform to the current year presentation.
Note 2 — Certain
Transactions
a.     Acquisitions:
2002
acquisitions
In June 2002, the Company acquired full control
and ownership of Honeywell Pharmaceutical Fine Chemicals S.r.l.,
an Italian manufacturer of active pharmaceutical ingredients
(later renamed Teva Pharmaceutical Fine Chemicals
S.r.l. — "TPFC"). The acquisition was made
in order to broaden Teva's API product line, which provides
strategic depth to its generic business.
In June 2002, the Company also acquired full
control and ownership of Bayer Classics S.A., a French generic
pharmaceutical company (later renamed Teva Classics
S.A. — "Teva Classics"), as well as a
shareholders' loan of $34 million granted to the
acquired company by the vendor. The acquisition was made in
order to expand Teva's presence in the fast growing
emerging generic pharmaceutical market in France.
Total consideration paid for the two acquisitions
(including the shareholder's loan mentioned above and
acquisition costs) was $168 million in cash.
The Company accounted for these acquisitions by
the purchase method. The results of operations of TPFC and Teva
Classics have been included in the consolidated financial
statements of Teva commencing
F-14
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 2 — Certain Transactions
(continued)
the third quarter of 2002. The following table
summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition:
U.S. $ in
millions
Current assets
$
69.5
Property, plant, and equipment
35.8
Intangible assets
21.3
Other long lived assets
2.9
Goodwill
80.1
Total assets acquired
209.6
Current liabilities
39.1
Long-term liabilities
36.1
Total liabilities assumed
75.2
Net assets acquired
$
134.4
The intangible assets acquired include product
rights of $13.6 million and customer lists of $7.7 million, with
a weighted-average useful life of 6 years. No in-process
research and development was identified.
Hereafter are certain unaudited pro forma
combined statements of income data for the years ended
December 31, 2002 and 2001, as if the acquisition of TPFC
and Teva Classics occurred on January 1, 2002 and 2001,
respectively, after giving effect to purchase accounting
adjustments, including amortization of certain identifiable
intangible assets, the elimination of intercompany transactions
and profits not yet realized outside the Group.
The pro forma financial information is not
necessarily indicative of the combined results that would have
been attained had the acquisitions taken place at the beginning
of 2002 and 2001, respectively, nor is it necessarily indicative
of future results.
Year Ended December 31
2002
2001
(U.S. $ in millions)
(Except earning per ADR)
(Unaudited)
Net sales
$
2,546.8
$
2,133.8
Net income
$
412.1
$
279.2
Earnings per ADR:
Basic
$
1.56
$
1.06
Diluted
$
1.53
$
1.02
2000 acquisition
In 2000, Teva acquired full control and ownership
of Novopharm Ltd. ("Novopharm"), a Canadian-based
generic company, as well as a shareholders' loan of
approximately $74 million granted to Novopharm by the
vendor, and other rights of the vendor. In consideration, the
vendor was issued 4.2 million ordinary shares of Teva and
12.8 million special shares that are exchangeable into
ordinary
F-15
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 2 — Certain Transactions
(continued)
shares of the Company at his discretion at a
one-to-one ratio. The ordinary shares and the special
shares — with a total value determined to be
$300 million — entitled the holders, assuming
full conversion, to approximately 6.2% of the Company's
issued and outstanding share capital at the date of issuance. In
addition, in 2000, Teva acquired shares in a subsidiary of
Novopharm the latter did not already own for a total amount of
$12 million.
An amount of $34.4 million out of the cost
of acquisition was attributed to in-process research and
development. This amount was expensed upon acquisition, in
accordance with generally accepted accounting principles.
Goodwill, representing the excess of cost of acquisition over
the fair value of net assets on acquisition date, not
attributable to in-process research and development, after
adjustments in 2001 and 2002, amounted to $257 million.
Additional purchase liabilities recorded included
$10.5 million for severance pay and related costs
associated with the shut-down and consolidation of certain
acquired facilities, which was completed in 2002. At
December 31, 2002, none of the purchase liabilities in
respect of the above were outstanding.
b.     Cooperation
agreements:
1) With Impax
In
    June 2001, a subsidiary entered into an agreement with Impax
    Laboratories, Inc. ("Impax") under which Teva was
    granted exclusive U.S. marketing rights and an option to acquire
    exclusive marketing rights for certain Impax products in the
    rest of North America, South America, the European Union and
    Israel. Under the agreement, Teva granted Impax a
    $22 million loan bearing 8% annual interest, and
    payable — principal and accrued interest —
    in 2004 in cash or in Impax stock, unless previously forgiven.
    Pursuant to the agreement, portions of the loan (principal and
    accrued interest) are to be forgiven upon the achievement by
    Impax of certain milestones. If not forgiven, Teva may elect to
    have repayment of the loan made in part in terms of a
    non-exclusive right to market certain products.
In
addition, Teva invested $15 million in Impax common stock.
This investment is treated as an "available-for-sale"
investment and included, together with the loan mentioned above,
under investments and other assets.
In
2002, Teva exercised the option to acquire exclusive marketing
rights for additional Impax products in Canada. In addition,
Impax achieved a milestone as defined in the agreement, which
resulted in the forgiveness of the accrued interest balance in
the amount of $2.4 million. This amount is reflected in
intangible assets and is to be amortized over the estimated
economic life of the marketing rights.
2)
With Aventis
a) Under
    agreements entered into by Teva and Aventis Pharmaceuticals,
    Inc. ("Aventis"), sale and distribution of
    Copaxone®, an innovative product of the Company for the
    treatment of multiple sclerosis, in North America is being
    carried out by Aventis. As from January 1, 2001, marketing
    of Copaxone® in the U.S. and Canada is done by indirect
    wholly-owned entities of the Company, operating under the name
    "Teva Neuroscience".
Aventis
    also participates in certain research and development expenses
    of Teva relating to the development of the oral version of
    Copaxone® and to a new indication for injectible
    Copaxone® (collectively referred to as the
    "Studies"). Such participation will not exceed maximum
    amounts stipulated in the agreement. Upon receipt of approval
    from the U.S. Food and Drug Administration relating to either
    one of the Studies, the related amount of participation is to be
    refunded to Aventis.
F-16
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 2 — Certain Transactions
(continued)
b) Under
    separate agreements between the Company and the German parent
    company of Aventis, Aventis distributes and sells Copaxone®
    in Europe and certain other countries. In the core European
    countries, Copaxone® is jointly marketed by Teva and
    Aventis. In addition, under certain conditions, Teva has
    reserved the right to reacquire the marketing and distribution
    rights in Europe to the injectible formulation of Copaxone®
    for consideration to be computed based on a certain formula, as
    stipulated in the agreement.
In
    2001 and 2000, amounts of $10 million and $5 million,
    respectively, were paid by Aventis. Such amount, less the
    portion due to the relevant research institute, were deducted
    from research and development expenses under grants and
    participations.
3)
With Lundbeck
a) In
    1999, the Company entered into a cooperation agreement with a
    Danish company, H. Lundbeck A/S ("Lundbeck"), for
    the joint global development and for the marketing, mainly in
    Europe, of two innovative products of the Company for the
    treatment of Parkinson's disease. The exclusive marketing
    rights for the rest of the world will remain in the hands of the
    Company.
Under
    the agreement, commencing in 1999, Lundbeck participates in the
    research and development expenses of Teva at varying rates,
    subject to maximum amounts stipulated in the agreement.
b) Teva
    and Lundbeck have entered into an additional cooperation
    agreement, for the global development and for the marketing,
    mainly in Europe, of the oral version of Copaxone®. Under
    the agreement, Lundbeck is to fund the research and development
    of the product performed by Teva, up to a maximum amount
    stipulated in the agreement. Other provisions of the agreement
    relate to the additional funding by Lundbeck of certain other
    development, pre-marketing and marketing activities relating to
    the product. Such additional funding is to be made under certain
    conditions and up to a maximum amount, as stipulated in the
    agreement.
4) With BTG
Pursuant
    to an agreement entered into in 1999, between Teva and Bio
    Technology General Corp. ("BTG") Teva is to make
    payments of up to $20 million to BTG relating to certain
    biotech products. Through December 31, 2002 an amount of
    $12.5 million was paid, of which $10 million relates
    to certain marketing and distribution rights which are expected
    to become effective no later than 2004 and is included among
    intangible assets. The remaining amount of $2.5 million
    represents participation in research and development expenses of
    BTG relating to certain products in development and was recorded
    as research and development expenses in the year ended
    December 31, 2000. The balance is to be paid on fulfillment
    of certain conditions, as per the agreement.
5) With other parties
In
    2002, Teva entered into agreements with two companies pursuant
    to which it is to participate in the funding of research and
    development conducted by these companies in a total amount of
    $20 million, payable upon achievement of certain
    milestones. In consideration, Teva would be granted certain
    exclusive marketing rights with respect to the products to be
    developed. Through December 31, 2002, an amount of
    $4.3 million, representing participation in
F-17
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 2 — Certain Transactions
(continued)
development expenses of these companies, relating
    to certain products under research and development, was paid by
    Teva and expensed in the accounts.
In
    2001, Teva entered into agreements with two other companies
    pursuant to which it is to participate in the funding of
    research and development conducted by these companies in a total
    amount of $20 million, payable upon achievement of certain
    milestones. In consideration, Teva would be granted certain
    exclusive worldwide rights with respect to the products to be
    developed. In addition, Teva acquired shares in these companies
    for a total amount of approximately $10 million which are
    carried at cost and included under investments and other assets.
Note 3 — Property, Plant and
Equipment
Property, plant and equipment, net, consisted
of the following:
December 31
2002
2001
(U.S. $ in millions)
Land
$
55.7
$
50.3
Buildings
282.3
272.5
Machinery and equipment
645.5
548.0
Motor vehicles, computer equipment, furniture and
    other assets
182.8
151.5
Payments on account
42.0
12.1
1,208.3
1,034.4
Less — accumulated depreciation and
    amortization
(532.9
)
(480.2
)
$
675.4
$
554.2
Depreciation and amortization expense was
$76.5 million, $71.5 million and $68.0 million in the
years ended December 31, 2002, 2001 and 2000, respectively.
In the year ended December 31, 2001 an additional
impairment charge of $9.7 million was made in connection
with the Group's restructuring plans.
Land includes leasehold land, the rights to which
extend over original periods of 49 years ending in the
years 2007-2043, with an option for an additional period of
49 years.
Note 4 — Goodwill, Intangible Assets
and Debt Issuance Costs
a.     Goodwill:
The changes in the carrying amount of goodwill
for the year ended December 31, 2002, are as follows:
Pharmaceuticals
A.P.I
Total
(U.S. $ in millions)
Balance as of January 1, 2002
$
459.2
$
6.9
$
466.1
Goodwill acquired during the year
61.6
18.5
80.1
Translation differences
21.4
0.3
21.7
Other adjustments
(7.6
)
(7.6
)
Balance as of December 31, 2002
$
534.6
$
25.7
$
560.3
F-18
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 4 — Goodwill, Intangible Assets
and Debt Issuance Costs (continued)
b.     Intangible
assets and debt issuance costs:
1) Intangible assets and debt issuance
    costs, net, consisted of the following:
Original
Accumulated
Amortized
amount
amortization
balance
December 31,
2002
2002
2002
2001
(U.S. $ in millions)
Intangible assets (mainly — product
    rights)
$
177.3
$
48.7
$
128.6
$
73.4
Tradename
29.8
29.8
29.6
Debt issuance costs
32.4
14.6
17.8
17.1
$
239.5
$
63.3
$
176.2
$
120.1
2) Amortization of intangible assets
    amounted to $21.4 million; $16.2 million and
    $10.8 million in the years ended December 31, 2002,
    2001 and 2000, respectively. As of December 31, 2002, the
    estimated aggregate amortization of intangible assets for the
    years 2003 to 2007 is as follows: 2003 —
    $22 million; 2004 — $22 million; 2005 —
    $19 million; 2006 — $17 million and
    2007 — $12 million.
3) Amortization of debt issuance costs
    amounted to $10.0 million, $3.7 million and
    $0.7 million in the years ended December 31, 2002,
    2001 and 2000, respectively, and included among financial
    expenses — net.
c.     The effect of
FAS 142 adoption:
The following table summarizes the Company's
reported results adjusted to eliminate the effect of
amortization of goodwill and of tradename, as of January 1,
2000:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions, except
earnings per ADR)
(Unaudited)
Net income — as reported
$
410.3
$
278.2
$
148.4
Add, amortization of goodwill and tradename, net
    of taxes, charged through 2001
18.5
16.0
As adjusted
$
410.3
$
296.7
$
164.4
Earnings per ADR — basic, as reported
$
1.55
$
1.05
$
0.58
Add — amortization of goodwill and
    tradename, net of taxes, charged through 2001
0.07
0.06
As adjusted
$
1.55
$
1.12
$
0.64
Earnings per ADR — diluted, As reported
$
1.52
$
1.02
$
0.57
Add, amortization of goodwill and tradename, net
    of taxes, charged through 2001
0.07
0.06
As adjusted
$
1.52
$
1.09
$
0.63
F-19
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 5 — Employee Related
Obligations
a.     Employee
related obligations consisted of the following:
December 31
2002
2001
(U.S.$ in
millions)
Accrued severance pay
$
49.4
$
42.9
Obligation in respect of defined benefit plans
13.8
10.4
$
63.2
$
53.3
Costs of severance pay and defined contribution
plans charged to income in the years ended December 31,
2002, 2001 and 2000 was $22.2 million, $16.9 million
(excluding $2.3 million in respect of restructuring) and
$15.9 million, respectively. Pension costs under the
defined benefit plans in those years amounted to
$3.7 million, $2.8 million and $2.7 million,
respectively.
The main terms of the different arrangements with
employees are described in b. below. Further details relating to
defined benefit plans are presented in c. below.
b.
Terms of arrangements:
1) In Israel
Israeli
    law generally requires payment of severance pay upon dismissal
    of an employee or upon termination of employment in certain
    other circumstances. The following principal plans relate to the
    Group's employees in Israel:
a) Pension
    plans for the majority of the Group's employees: under
    collective labor agreements, these external pension plans
    provide 72% of the severance pay liability. The pension and
    severance pay liabilities covered by these plans are not
    reflected in the financial statements as the pension and
    severance pay risks have been irrevocably transferred to the
    pension funds.
b) Insurance
    policies for employees in managerial positions: the policies
    provide coverage for severance pay and pension liabilities of
    managerial personnel.
c) Severance
    pay liabilities not covered above are fully provided for in the
    financial statements on an undiscounted basis, based upon the
    number of years of service and the latest monthly salary of the
    Group's employees in Israel.
2) Non-Israeli
    subsidiaries
The
    majority of the employees in the European subsidiaries are
    entitled to a retirement grant when they leave the subsidiaries.
    In the consolidated financial statements, an accrual of the
    Company's liability is made, based on the length of service
    and remuneration of each employee at the balance sheet date.
    Other employees in Europe are entitled to pension according to a
    defined benefits scheme providing benefits based on final
    pensionable pay or according to a hybrid pension scheme that
    provides retirement benefits on a defined benefit and a defined
    contribution basis. Professionally qualified independent
    actuaries value these schemes, the rates of contribution payable
    are being determined by the actuaries. Pension costs for the
    defined benefit section of the scheme are accounted for on the
    basis of charging the expected cost of providing pensions over
    the period during which the subsidiaries benefit from the
    employees' services.
F-20
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 5 — Employee Related
Obligations (continued)
The
    North American subsidiaries provide various defined contribution
    plans for the benefit of their employees. Under these plans,
    contributions are based on specified percentages of pay.
    Additionally, a multi-employer plan is maintained in accordance
    with various union agreements.
c.
Certain details relating to defined benefit
    plans:
1) The consolidated components of net
    periodic benefit costs are as follows:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
Service cost
$
3.5
$
2.5
$
2.4
Interest cost
2.7
2.3
2.3
Expected return on plan assets
(2.0
)
(2.0
)
(2.0
)
Recognized net actuarial loss
(0.5
)
*
*
Employers' pension cost
$
3.7
$
2.8
$
2.7
* Represents
an amount of less than $ 0.1 million.
F-21
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 5 — Employee Related
Obligations (continued)
2) The consolidated components of the
    projected benefit obligation and plan assets are as follows:
December 31
2002
2001
(U.S. $ in millions)
Change in benefit obligation:
Projected benefit obligation at beginning of year
$
40.1
$
37.8
Service cost
3.5
2.5
Interest cost
2.7
2.3
Plan participants' contribution
0.2
0.7
Benefits paid
(0.5
)
(0.7
)
Actuarial loss (gain)
8.9
(1.4
)
Acquisitions
2.7
Exchange rate differences
7.2
(1.1
)
Benefit obligation at end of year
64.8
40.1
Change in plan assets:
Fair value of plan assets at beginning of year
29.4
30.6
Actual return on plan assets
(2.0
)
(2.2
)
Employer contribution
5.5
2.1
Plan participants' contribution
0.2
0.7
Benefits paid
(0.5
)
(0.6
)
Exchange rate differences
5.0
(1.2
)
Fair value of plan assets at end of year
37.6
29.4
Reconciliation of funded status:
Unfunded obligation
27.2
10.7
Unrecognized net actuarial loss
(13.4
)
(0.3
)
Net obligation, as reported
$
13.8
$
10.4
December 31
2002
2001
Weighted average assumptions:
Discount rate
6.1
%
6.3
%
Expected return on plan assets
6.4
%
6.5
%
Rate of compensation increase
3.3
%
3.4
%
Pension increase
1.8
%
1.9
%
F-22
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 6 — Long-Term Loans and Other
Long-Term Liabilities
a.     Long-term
loans and other long-term liabilities consisted of the
following:
Interest rate
as of
December 31
December 31,
2002
2002
2001
(%)
(U.S. $ in millions)
Loans from banks(1)(4)
3.3 – 4.5
$
220.1
$
209.8
Debentures — in dollars:(2)(4)
Principal amount
6.9
110.0
110.0
Fair value hedge adjustments
9.2
Other(3)
16.2
18.8
355.5
338.6
Less — current portion
(4.1
)
(3.7
)
$
351.4
$
334.9
(1)
The balance as of December 31, 2002 is
    composed of: (1) a loan in the amount of
    $142.1 million due 2005 and bearing interest determined on
    the basis of Euro LIBOR (mainly) and Great Britain Pound
    LIBOR; and (2) a loan in the amount of $78.0 million
    due 2006 and bearing interest determined on the basis of the
    Canadian dollar LIBOR.
(2)
The balance as of December 31, 2002 and 2001
    is composed of debentures, which were issued in 1998 in a
    private placement to institutional investors in the United
    States for periods of 7, 10 and 20 years at a fixed annual
    interest rate, the weighted average of which is 6.9%. In 2002,
    the Company entered into two interest rate swap transactions
    with respect to portions of these debentures (see note 11d),
    effectively changing the weighted annual interest rate on the
    debentures at December 31, 2002 from 6.9% to 4.6%. Only the
    first interest swap transaction qualifies for hedge accounting
    under FAS 133, resulting in an increase of $9.2 million
    (identical to the fair value of the related derivative) in the
    carrying value of the portion of the debentures it hedges, to
    adjust it to the fair value of such portion based on the risk
    being hedged.
(3)
Mainly Missouri Economic Development bonds
    bearing interest at a variable or fixed rate determined
    according to a certain formula (2.0% at December 31, 2002),
    maturing serially through September 2004. The Bond is secured by
    a letter of credit, which provides for a mortgage on the Mexico,
    Missouri facility.
(4)
Certain loan agreements and debentures contain
    restrictive covenants, mainly the requirement to maintain
    certain financial ratios.
b.
As
of December 31, 2002, the required annual principal
payments of long-term debt, starting from the year 2004, are as
follows: 2004 — $8.1 million; 2005 —
$162.5 million; 2006 — $78.0 million;
2007 — $0.6 million; 2008 and
thereafter — $93.0 million. The above does not
include the three series of convertible senior debentures
described in note 7.
c.
The
Company and certain subsidiaries entered into negative pledge
agreements with certain banks and institutional investors. Under
the agreements, the Company and the said subsidiaries have
undertaken not to register floating charges on assets in favor
of any third parties without the prior consent of the banks, to
maintain certain financial ratios and to fulfill other
restrictions, as stipulated by the agreements.
F-23
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 7 — Convertible Senior
Debentures
a.
In
November 2002, Teva Pharmaceutical Finance B.V. ("Teva
Finance B.V."), an indirect wholly-owned subsidiary of the
Company, sold an aggregate principal amount of $450 million
of its 0.375% Convertible Senior Debentures due 2022. Interest
is payable on a semi-annual basis. Payment of all principal,
interest, premium and additional amounts (as defined), if any,
payable on the debenture is unconditionally guaranteed by the
Company.
Unless previously redeemed or repurchased,
holders of the debentures may convert them into ADRs, each of
which represents one ordinary share of the Company, under
certain circumstances set forth in the offering memorandum, at a
conversion price of $42.8989 per ADR, (upon a full conversion
10,489,779 ordinary shares are issuable), subject to adjustments
in certain circumstances. On or after November 18, 2007,
Teva Finance B.V. may redeem some or all of the debentures
at the principal amount of such debentures, plus accrued and
unpaid interest. On certain dates set forth in the offering
memorandum, each holder may require Teva Finance B.V. to
repurchase some or all of the holders' debentures at the
principal amount of such debentures, plus accrued and unpaid
interest. With respect to the earliest of such dates —
November 18, 2007 — or upon a change in control
or a termination of trading of Teva ADRs, if repurchase of
debentures is requested Teva Finance B.V. can elect to pay
the repurchase price in cash or in Teva ADRs (the number of Teva
ADRs to be computed as set forth in the offering memorandum), or
any combination thereof.
b.
In
August 2001, Teva Pharmaceutical Finance N.V. ("Teva
Finance N.V."), an indirect wholly-owned subsidiary of the
Company, sold an aggregate principal amount of $360 million
of its 0.75% Convertible Senior Debentures due 2021. Interest is
payable on a semi-annual basis. Payment of all principal,
interest, premium and additional amounts (as defined), if any,
payable on the debenture is unconditionally guaranteed by the
Company.
Unless previously redeemed or repurchased,
holders of the debentures may convert them into ADRs, each of
which represents one ordinary share of the Company, under
certain circumstances set forth in the offering memorandum, at a
conversion price of $42.912 per ADR, (upon a full conversion
8,389,262 ordinary shares are issuable), subject to adjustments
in certain circumstances. On or after August 20, 2004, Teva
Finance N.V. may redeem some or all of the debentures at the
principal amount of such debentures, plus accrued and unpaid
interest. On certain dates set forth in the offering memorandum,
each holder may require Teva Finance N.V. to repurchase some or
all of the holders' debentures, at the principal amount of
such debentures plus accrued and unpaid interest. With respect
to the earliest of such dates — August 20,
2004 — or upon a change in control or a termination of
trading of Teva ADRs, if repurchase of debentures is requested
Teva Finance N.V. can elect to pay the repurchase price in cash
or in Teva ADRs (the number of Teva ADRs to be computed as set
forth in the offering memorandum), or any combination thereof.
c.
In
October 2000, Teva Pharmaceutical Finance, LLC ("Teva
Finance LLC"), an indirect wholly-owned subsidiary of the
Company, sold an aggregate principal amount of $550 million
of its 1.50% Convertible Senior Debentures due 2005. Interest is
payable on a semi-annual basis. Payment of all principal,
interest, premium and additional amounts (as defined), if any,
payable on the debenture is unconditionally guaranteed by the
Company.
Unless previously redeemed or repurchased,
holders of the debentures may convert them into ADRs, each of
which represents one ordinary share of the Company, at a
conversion price of $43.1157 per ADR, (upon a full conversion
12,756,374 ordinary shares are issuable), subject to adjustments
in certain circumstances. On or after October 15, 2003,
Teva Finance LLC may redeem some or all of the debentures at the
redemption prices set forth in the offering memorandum. On
October 15, 2003 or upon a change of control or termination
of trading of Teva ADRs each holder may require Teva Finance LLC
to
F-24
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 7 — Convertible Senior
Debentures (continued)
repurchase some or all of the holders'
debentures at a redemption price set forth in the offering
memorandum. If such requirement is made, Teva Finance LLC can
elect to pay the repurchase price in cash or in Teva ADRs (the
number of Teva ADRs to be computed as set forth in the offering
memorandum), or any combination thereof. Since the issuance of
these debentures Teva has accreted the additional amounts
payable upon the holders' requiring repurchase of the
debentures on October 15, 2003. Such amounts have been
charged to interest expenses and at December 31, 2002
amounted to $12.4 million. As the holders of the debentures
are entitled to require redemption in 2003, the debentures, as
well as the additional amounts accreted as described above, are
included among current liabilities.
Note 8 — Commitments and
Contingencies
a.
Commitments:
1) Operating leases
As
    of December 31, 2002, minimum future rentals under
    operating leases of buildings, machinery and equipment for
    periods in excess of one year were as follows: 2003 —
    $13.1 million; 2004 — $11.6 million;
    2005 — $8.5 million; 2006 —
    $6.8 million; 2007 and thereafter —
    $16.8 million.
The
    lease fees for each of the years ended December 31, 2002,
    2001 and 2000 were $13.9 million, $13.4 million and
    $10.9 million, respectively, of which $2.7 million,
    $2.8 million and $2.1 million to a related party in the
    years ended December 31, 2002, 2001 and 2000, respectively.
2)
Royalty commitments
a) The
    Company is committed to pay royalties to owners of know-how and
    to parties that financed research and development, at rates
    ranging mainly from 0.5% to 10% of sales of certain products, as
    defined in the agreements. In some cases, the royalty period is
    not defined; in other cases, the royalties will be paid over
    various periods, not exceeding 20 years, commencing on the
    date of the first royalty payment.
b) The
    Company has also undertaken to pay royalties to the Government
    of Israel, at the rates of 2.0% – 3.5% of sales
    relating to a product or a development resulting from the
    research funded by the Office of the Chief Scientist. The
    royalties due to the Government should not exceed the amount of
    participation, in dollar terms (in respect of research grants
    commencing 1999 — with the addition of dollar LIBOR
    interest). The maximum amount of the contingent liability in
    respect of royalties to the Government at December 31, 2002
    amounts to $34.4 million.
c) Royalty
    expense included in cost of sales for the years ended
    December 31, 2002, 2001, and 2000 was $66.3 million,
    $55.2 million, and $35.1 million, respectively.
b.     Contingent
liabilities:
1) Teva from time to time seeks to develop
    generic products for sale prior to patent expiration in various
    territories. In the United States, to obtain generic approval
    for a product prior to the expiration of the originator patent,
    Teva must challenge the patent under the procedures set forth in
    the Waxman-Hatch Act of 1984. To the extent that it seeks to
    utilize such patent challenge procedures, Teva is involved and
    expects to be involved in patent litigation regarding the
    validity or infringement of the originator's patent.
    Additionally, Teva may be involved in patent litigation
    involving the extent to which alternate manufacturing process
    techniques may infringe on originator or
F-25
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 8 — Commitments and
Contingencies (continued)
third party process patents. No provision has
    been included in the accounts in respect of pending matters at
    December 31, 2002.
2) Teva and its subsidiaries are from time
    to time subject to claims arising in the ordinary course of
    their business, including product liability claims. Teva
    believes that it has meritorious defenses to such claims and
    legal proceedings, pending as of December 31, 2002, and
    that, in any event, it has adequate product liability insurance
    to cover material damages related to product liability claims,
    pending as of December 31, 2002.
3) Teva's business inherently exposes
    it to potential product liability claims. From time to time, the
    pharmaceutical industry has experienced difficulty in obtaining
    product liability insurance coverage for certain products or
    coverage in the desired amounts or with the desired deductibles.
    As a result, Teva sell and may continue to sell, pharmaceutical
    products that are not covered by insurance and may also be
    subject to product liability claims that are not covered by
    insurance or that exceed Teva's policy limits.
4) In August 2001, Teva Pharmaceuticals USA
    ("Teva USA") won a judgment in a patent infringement
    action in the U.S. Federal District Court in Boston,
    Massachusetts, brought against it by SmithKline Beecham Corp.
    and Beecham Group Plc (together, "Beecham") regarding
    the U.S. patent covering nabumetone, the active ingredient in
    Relafen®. The court ruled in Teva USA's favor.
    Following the district court's decision, Teva USA launched
    its nabumetone product. As the first applicant to challenge the
    listed patent for this drug, Teva USA had enjoyed a statutory
    180-day period of generic marketing exclusivity. In August 2002,
    the United States Court of Appeals for the Federal Circuit
    affirmed the district court's judgment that Beecham's
    patent was invalid, and did not disturb the district
    court's judgment that Beecham's patent was
    unenforceable due to inequitable conduct. On January 14,
    2003, Beecham's time to file a petition of certiorari with
    the U.S. Supreme Court lapsed.
5) Teva USA is a manufacturer of Adipex-P
    brand phentermine hydrochloride, and has been sued in both class
    actions and individual lawsuits relating to the alleged negative
    health effect of phentermine and fenfluramine. While neither
    drug had been indicated or approved for combination use by the
    FDA, physicians sometimes prescribed the two together in a
    combination treatment for weight control known as
    "fen-phen". Plaintiffs have filed lawsuits from August
    1997 to the present in a variety of state and federal
    jurisdictions seeking monetary damages in unspecified amounts.
    The federal actions have been consolidated for pretrial purposes
    to the United States District Court for the Eastern District of
    Pennsylvania in a multidistrict litigation proceeding. Based
    upon the advice of counsel, Teva believes that it has adequate
    insurance to cover these claims and that the outcome of the
    remaining litigation in which Teva USA is involved will not have
    a material adverse effect on Teva's financial position. No
    provision for this matter has been included in the accounts.
6) Teva's Hungarian subsidiary, Biogal
    Pharmaceutical Works Ltd., was sued in July 1999 in the County
    Court of Debrecen, Hungary by a Hungarian institute
    (Gyógyszerkutató Intézet Kft) for additional
    royalties arising out of a series of contracts for the
    development of a pharmaceutical active ingredient. Although the
    plaintiff has not made any claims for a specific amount, the
    court, in an interim decision, ordered Biogal to submit an
    accounting on the contested terms. Biogal has appealed the
    decision and, based on the advice of counsel, expects to
    prevail. No provision for this matter has been included in the
    accounts.
7) On January 13, 2002, a claim was
    filed in the Tel Aviv District Court by Paka Industries Ltd.
    against Teva, Teva Assets Ltd., an Israeli subsidiary of Teva,
    and a senior officer and a former senior officer of Teva Assets,
    in the amount of approximately $17 million. The claim
    relates to a 1998
F-26
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 8 — Commitments and
Contingencies (continued)
agreement between Paka and Teva Assets, under
    which Teva Assets sold off the assets (excluding real property)
    of its plant to the plaintiff. Paka claims to have been deceived
    and consequently lost the entire investment in the acquired
    plant. Teva, based on the advice of counsel, believes that its
    chances of prevailing are good. Accordingly, no provision for
    this matter has been included in the accounts.
8) In August 2000, a claim was filed in the
    Tel Aviv District Court, and is now pending against Teva, with
    respect to damages caused to the plaintiff as a result of the
    use of a product containing the ingredient diethylstilbestrol
    ("DES"). In May and November 2001, 69 plaintiffs
    filed an additional claim against Teva, in the District Court of
    Jerusalem, for damages caused by the use of two products
    containing DES. In July 2002, the plaintiffs amended their claim
    to include the Clalit Health Services (previously called General
    Health Fund) as a further defendant (in addition to the Ministry
    of Health). In December 2002, 9 women requested the District
    Court of Jerusalem to join the claim as plaintiffs, while
    4 plaintiffs requested to withdraw from the proceedings.
    The court has not yet ruled on this matter. The aggregated
    amount of the two claims is approximately $10 million, not
    including general damages. Teva is vigorously defending itself
    against these claims. Because the above claims are still in
    their early stages, no determination can be made of the
    likelihood of prevailing in the actions; however, based on the
    advice of counsel, Teva believes it has meritorious defenses. No
    provision for this matter has been included in the accounts.
9) On April 5, 2001, a claim was filed
    against Teva in the Tel Aviv District Court with respect to the
    use of a pharmaceutical product known as "Chorigon Ampoules
    5000 Units". The plaintiffs allege that they were
    administered with allegedly defective ampoules of the product
    during the course of an in vitro fertilization treatment,
    resulting in the failure of the treatment and causing financial
    damages and mental anguish. The plaintiffs filed a petition to
    certify the claim as a class action. The plaintiffs have since
    filed a reply to Teva's response. Because the claim is
    still in its early stage, Teva's counsel is unable to
    express an opinion as to the merits of the claim. Nevertheless,
    based on information to date, Teva believes that this matter
    will not have a material adverse effect on its results of
    operations and financial condition and that provision for this
    matter in the accounts is not required.
10) Teva USA, along with Elan Corporation,
    Elan Pharma Ltd. (collectively — "Elan") and
    Biovail Corporation International ("Biovail"), were
    defendants in a patent litigation brought by Bayer AG and
    Bayer Corporation (collectively — "Bayer")
    on May 8, 2000 in the District of Delaware. On
    July 17, 2000, the court transferred the case to the
    Northern District of Georgia. Bayer had alleged that Elan's
    Nifedipine Extended Release Tablets CC, 30 mg, which
    is marketed by Teva USA, infringed a Bayer patent. On
    August 16, 2002, Teva USA was dismissed from the case
    pursuant to a settlement agreement under which Teva USA did not
    pay any damages or provide any other consideration.
11) Teva USA, along with Biovail, are
    defendants in two related patent litigations brought by
    Bayer AG, Bayer Corporation and, in one of the cases,
    Pfizer Inc. Both cases involve allegations against Teva USA of
    infringement of the same patent that had been at issue in the
    above discussed Georgia case and both cases are currently
    pending in the U.S. District Court for the District of
    Puerto Rico. The first case was commenced on February 16,
    2001 by Bayer AG and Pfizer against Teva USA and
    Biovail for patent infringement relating to the sale of
    Biovail's Nifedipine Extended Release Tablets XL,
    60 mg, which are marketed in the United States by Teva USA.
    The second case was commenced on February 20, 2001 by Bayer
    Corporation against Biovail and Teva USA for patent
    infringement relating to the sale of Biovail's Nifedipine
    Extended Release Tablets CC, 60 mg, which are also
    marketed in the United States by Teva USA. The plaintiffs in
    each of the two cases are seeking enhanced damages and
    attorneys' fees in unspecified amounts, preliminary and
    permanent
F-27
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 8 — Commitments and
Contingencies (continued)
injunctions, and a recall of the products at
    issue. Each of these cases is in the pre-trial phase and no
    provision for these matters has been included in the accounts.
12) Teva USA is a named defendant, along
    with Biovail Corp. and Elan Corporation, plc, in two civil
    actions currently pending in the federal district courts in the
    District of Columbia and New York City. The Company is also
    named as a defendant in the case pending in New York City. The
    cases allege generally that arrangements between Biovail and
    Elan Corporation, plc relating to sales of Nifedipine
    Extended Release Tablets CC, in connection with which
    Teva USA acted as a distributor for Biovail, were unlawful
    under the federal antitrust laws. The challenged arrangements
    were previously the subject of a consent decree entered into by
    the U.S. Federal Trade Commission with Biovail and Elan
    Corporation, plc, to which the Company and Teva USA
    were not parties. The cases seek injunctive relief, unspecified
    monetary damages, attorneys fees, and costs. Each of the cases
    is brought on behalf of an alleged class of persons that
    purchased Nifedipine Extended Release Tablets CC made by
    Elan Corporation, plc or Biovail and sold in the United
    States by Teva USA. A motion is currently pending before
    the federal Judicial Panel on Multidistrict Litigation seeking
    consolidation of these cases with four other cases pending in
    the District of Columbia and two other cases pending in the
    Southern District of New York; the Company and Teva USA are
    not parties in those other cases. Teva USA and the Company
    (to the extent they remain a defendant in any of these cases)
    intend to defend vigorously against these claims. These cases
    are in a very preliminary stage, so it is not possible to assess
    the likelihood of an unfavorable outcome or the magnitude of any
    potential loss. No provision for these matters has been included
    in the accounts.
13) In May 2002, Teva USA won a
    judgment in the U.S. District Court in Norfolk, Virginia in
    a declaratory judgment action it brought against GlaxoSmithKline
    ("GSK") regarding seven U.S. patents related to
    potassium clavulanate, an active ingredient in Augmentin®
    (or, "amoxiclav"). The court ruled that all seven
    patents were invalid based on double patenting. GSK has appealed
    the judgment and oral argument is scheduled for March 5,
    2003 on the appeal. Annual sales of the branded product in the
    U.S. were estimated to be in excess of $1 billion.
    Following the district court decision, and subsequent
    FDA approval, Teva USA launched its amoxiclav product,
    which contains potassium clavulanate. Although Teva believes
    that the findings of fact and legal conclusions of the district
    court are well founded and that the decision will be upheld,
    were GSK to be successful in its appeal, Teva USA could be
    required to pay damages to GSK related to the sales of
    Teva USA's amoxiclav products and enjoined from
    selling its amoxiclav products. No provision for these matters
    has been included in the accounts.
14) In August 2002, GSK filed a complaint
    against Teva USA in the Pennsylvania Court of Common Pleas.
    Ranbaxy Pharmaceuticals, Inc. ("Ranbaxy") is a
    defendant in the same case, though GSK does not allege any
    connection between Teva USA and Ranbaxy. The complaint alleges
    that Teva USA's amoxiclav products are derived from a
    strain of Streptomyces clavuligerus stolen from GSK. The
    Complaint asserts causes of action for alleged trade secret
    misappropriation, unfair competition, and conversion. The suit
    seeks equitable relief and imposition of a constructive trust
    related to Teva USA's amoxiclav products. The case is
    scheduled to be ready for trial in February 2004. Although Teva
    believes that the likelihood of GSK prevailing is low, if
    GSK's allegations were proven true, Teva USA could be
    required to pay damages to GSK related to the sales of Teva
    USA's amoxiclav products and enjoined from selling its
    amoxiclav products. No provision for these matters has been
    included in the accounts.
15) On August 5, 2002, Lek
    Pharmaceuticals d.d. ("Lek") filed a complaint
    against Teva USA in the United States District Court for
    the District of New Jersey. Lek has accused Teva USA of
    misappropriating Lek's trade secrets and proprietary
    information pertaining to formulations for
F-28
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 8 — Commitments and
Contingencies (continued)
Teva USA's amoxiclav products. In its
    complaint, Lek seeks equitable relief and unspecified damages.
    Teva USA filed its answer on September 24, 2002,
    denying all allegations of wrongdoing. The parties have agreed
    on a discovery plan and all fact and expert discovery is
    scheduled to be completed by December 17, 2003. Although
    Teva believes that the likelihood of Lek prevailing is low, if
    Lek's allegations are proven true, Teva USA could be
    required to pay damages to Lek related to the sales of Teva
    USA's amoxiclav products and enjoined from selling its
    amoxiclav products. No provision for these matters has been
    included in the accounts.
16) Bayer and Bayer's marketing joint
    venturer GSK have been named in extensive litigation for
    personal injuries allegedly related to the use of the product
    Baycol®, a blood lipid reducing agent, which Bayer withdrew
    from the market in August, 2001. Teva is the manufacturer of
    gemfibrozil, the generic version of Lopid®, another blood
    lipid reducing drug, which was at times prescribed in
    combination with Baycol®. In five cases where there
    allegedly was concomitant use of Baycol® and gemfibrozil,
    Teva USA has been named as a codefendant of Bayer and GSK in the
    Court of Common Pleas of the Commonwealth of Pennsylvania,
    County of Philadelphia. The Complaints in each of these cases
    allege that plaintiff was injured as a result of exposure to
    gemfibrozil, either alone or in combination with Baycol®.
    Because these claims are still in their early stages,
    Teva's counsel is unable to express an opinion as to their
    merits. Nevertheless, based upon currently available
    information, Teva believes that these cases will not have a
    material adverse effect on its results of operations and
    financial condition. No provision for these matters has been
    included in the accounts.
Note 9 — Shareholders'
Equity
a.     Share
capital:
As of December 31, 2002, there were
263.2 million ordinary shares issued and outstanding,
(December 31, 2001 — 256.2 million). These
shares are traded on the Tel-Aviv Stock Exchange
("TASE") and, in the form of ADRs, each of which
represents one ordinary share, on the Nasdaq National Market in
the United States. In addition, as at December 31, 2002,
there were 6.3 million outstanding special shares
(December 31, 2001 — 12.8 million), issued
by a subsidiary, that are exchangeable into ordinary shares of
the Company at a 1:1 ratio, see note 2a.
In addition to ordinary shares held by
subsidiaries of the Company, as disclosed on the face of the
balance sheet, the Company issued to a certain subsidiary, a
total of 2.8 million ordinary and
ordinary "A" shares, which do not confer on their
holder voting rights or rights to appoint directors (other
rights are identical to those of the ordinary shares) and are
not listed for trade.
b.
In
December 2002, the Company distributed a 100% stock dividend to
all holders of ordinary shares. All shares, option and
convertible senior debentures information in the consolidated
financial statements has been retroactively restated to reflect
the effect of this distribution as if it had occurred at the
beginning of the earliest period presented.
c.     Employee stock
option plans:
In 1992, the Company's Board of Directors
approved an employee stock option plan, under which options are
to be granted without consideration to the Company's senior
employees in Israel. The options may be exercised to purchase up
to 5 million ordinary shares of the Company. Any options
not exercised before the expiration date will expire, unless
extended by the Board of Directors. Through December 31,
2002, options exercisable to purchase 4.4 million ordinary
shares were granted under the plan. The plan expired in 2002 and
the balance of the options not granted was cancelled.
F-29
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 9 — Shareholders' Equity
(continued)
During the period from 1988 through 2002, certain
non-Israeli subsidiaries granted their employees options for the
purchase of the Company's ADRs. Any options not exercised
within the applicable exercise period will expire.
On January 6, 1997, September 3, 1998
and September 4, 2001, the Board of Directors resolved to
grant the Chief Executive Officer and President of the Company,
at no consideration, options exercisable in purchase of
1,000,000, 200,000 and 150,000 ordinary shares at the exercise
price of $9.88, $9.22 and $35.11, respectively. These
resolutions were approved by shareholders' meetings.
On February 14, 2002, the Board of Directors
resolved to grant, at no consideration, the following options,
each exercisable in purchase of one ordinary share: (i) to
the Chief Executive Officer and President of the Company,
1,400,000 options, at an exercise price of $27.81, which
was determined based on the price of the Company's share on
the date the grant was approved by the shareholders'
meeting; (ii) to the new Chief Executive Officer and
President of the Company, at no consideration, options
exercisable in purchase of 600,000 options at the exercise price
of $30.21; and (iii) to each of the chairman of the Board
of Directors and the chairman of its executive committee,
60,000 options, at an exercise price of $27.81.
In 1999, the Company's Board of Directors
approved an additional option plan for employees of the Group,
under which senior employees in Israel, Europe and the United
States are to be granted options for up to 4 million
ordinary shares of the Company, without consideration. Any
option not exercised by the end of the exercise period will
expire, unless the exercise period is extended by the Board of
Directors. Through December 31, 2002, options exercisable
to purchase 2.2 million ordinary shares were granted under
this plan. The balance of the options may be granted from time
to time, as determined by the Committee.
In August 2000, the Company's Board of
Directors approved an option plan under which, over five years,
employees of the Group will be granted options for up to
13.1 million ordinary shares of the Company, without
consideration. Through December 31, 2002, the Board of
Directors approved the grant of options for up to
8.1 million ordinary shares of which options to purchase
6.75 million ordinary shares were granted.
In July 2001, the Company's Board of
Directors approved an option plan, under which options to
purchase 1,257,000 ordinary shares of the Company were granted,
at no consideration, to substantially all employees who were in
the employ of the Group prior to September 1, 2000. Each
such employee was granted options to purchase 200 ordinary
shares without consideration, at an exercise price of $27.77
(85% of the market value of the Company's ADR on date of
grant). Certain other employees were granted options under the
same plan, at no consideration, to purchase
170,000 ordinary shares of the Company, at an exercise
price of $29.60. The Company accounts for this stock option plan
as a non-compensatory plan in accordance with the provisions of
APB 25.
The grant of options to Israeli employees under
the plans described above is to be subject to the terms
stipulated by the Israeli Income Tax Ordinance. Inter alia, the
Ordinance provides that the Company will be allowed to claim as
an expense for tax purposes the amounts credited to the
employees as a benefit, when the related tax is payable by the
employee.
The vesting period of the options granted is
generally 2 to 5 years from the date of grant and the
rights of the ordinary shares obtained upon exercise of the
options will be identical to those of the other ordinary shares
of the Company. The exercise period of the options granted is
mainly 5 to 8 years from the date of grant.
F-30
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 9 — Shareholders' Equity
(continued)
A summary of the status of the option plans as of
December 31, 2002, 2001 and 2000, and changes during the
years ended on those dates, is presented below (the number of
options represents ordinary shares exercisable in respect
thereof):
Year Ended December 31
2002
2001
2000
Weighted
Weighted
Weighted
average
average
average
exercise
exercise
exercise
Number
price
Number
price
Number
price
$
$
$
Balance outstanding at beginning of year
12,708,480
21.70
9,181,006
16.51
6,458,212
9.32
Changes during the year:
Granted
5,085,132
29.15
4,388,160
30.57
4,608,700
22.81
Exercised
(809,864
)
9.88
(559,758
)
10.43
(1,802,906
)
6.95
Forfeited
(87,354
)
27.58
(300,928
)
15.60
(83,000
)
14.25
Balance outstanding at end of year
16,896,394
24.75
12,708,480
21.70
9,181,006
16.51
Balance exercisable at end of year
3,721,748
15.31
2,112,668
10.43
2,628,826
10.31
The weighted average fair value of options
granted during the year, estimated by using the Black &
Scholes option-pricing model, was $13.08, $16.72 and $11.6 for
the years ended December 31, 2002, 2001 and 2000,
respectively. The fair value of the options was estimated on the
date of grant, based on the following weighted average
assumptions: dividend yield of: 2002 — 0.6%,
2001 — 0.5% and 2000 — 0.4%; expected
volatility of: 2002 — 33%, 2001 — 36% and
2000  — 37%; risk-free interest rates (in dollar
terms) of: 2002 — 4%, 2001 — 5% and
2000 — 6%; and expected lives of: 2002 —
4.9 years, 2001 — 5.2 years and
2000 — 4.5 years.
The exercise price of options granted to
employees is, generally, equal to the market price of the
Company's ADR at the time of grant. In the years ended
December 31, 2002, 2001 and 2000, 5,085,132, 3,030,960 and
4,608,700 such options were granted with fair values of
$66.5 million, $45.4 million and $53.5 million,
respectively.
In 2001, 1,357,200 options were granted at prices
below the market price of the Company's ADR at the time of
grant. The fair value of such options was $26.9 million.
F-31
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 9 — Shareholders' Equity
(continued)
The following table summarizes information about
options outstanding at December 31, 2002:
Number of ordinary shares
issuable upon exercise of
Number of ordinary shares issuable upon exercise of options outstanding
options vested
Weighted
average
Weighted
Weighted
Balance at
remaining
average
Balance at
average
Range of exercise
December 31,
contractual
exercise
December 31,
exercise
prices
2002
life
price
2002
price
Years
$
$
$
8.20 - $10.75
2,437,284
2.36
9.81
1,983,344
9.68
$
11.00 - $19.00
1,996,344
4.18
12.09
718,404
12.51
$
24.00 - $24.50
700,400
4.11
24.88
$
27.00 - $28.75
4,755,400
6.78
27.93
720,000
27.39
$
29.00 - $30.50
2,865,400
6.40
30.15
300,000
30.21
$
31.00 - $32.75
3,953,706
3.61
32.09
$
35.00 - $36.25
187,860
6.47
35.33
$
8.20 - $36.25
16,896,394
4.92
24.75
3,721,748
15.31
d.
Retained earnings:
1) Retained
earnings available for distribution as cash dividends at
December 31, 2002, includes amounts, the distribution of
which would attract tax of approximately $100 million (see
note 10a).
2) Dividends
are declared and paid in Israeli currency ("NIS").
Dividends paid per ADR for the years ended December 31,
2002, 2001 and 2000 were $0.13, $0.14 and $0.12, respectively.
Subsequent to December 31, 2002, the Company declared an
additional dividend of NIS 0.33 per ADR ($0.07 per ADR as of
date of declaration) in respect of the year 2002.
Note 10 — Income Taxes
a.
The Company and its Israeli
    subsidiaries:
Tax benefits under the Israeli Law for the
    Encouragement of Capital Investments, 1959 (the
    "law")
Expansion projects of the Company and several of
its Israeli subsidiaries have been granted "approved
enterprise" status under the law. Income derived from these
enterprises during a period of 10 years from the year in
which these enterprises first realize taxable income, provided
the maximum period to which it is restricted by the law has not
elapsed, is entitled to certain tax benefits — tax
exemption for an initial period of 2 to 10 years, having
regard to the benefit route the company had chosen and the area
in which the enterprises are located, and a reduced corporate
tax rate for the remainder of the period. Since the Company is
over 49% foreign-owned, it is entitled to reduced tax at the
rate of 20%.
With respect to certain expansions of several
Israeli subsidiaries, investment grants were received from the
State of Israel under the terms of the law (the "government
grant route"). As security for implementation of the
approved projects and compliance with the conditions of the
certificates of approval, floating charges have been registered
on the above companies' assets in favor of the State of
Israel.
F-32
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 10 — Income Taxes
(continued)
For certain other expansion projects, the Company
and certain Israeli subsidiaries elected to apply for
alternative tax benefits — waiver of grants in return
for tax exemption (the "alternative tax benefits
route").
The periods of tax benefits in respect of
approved enterprises entitled to the said benefits commenced in
1993 — 2002. Final approvals in respect of certain
expansion programs have not yet been received. In the event of
the distribution of dividends from the said tax-exempt income
(either under the government grants route or under the
alternative tax benefits route), the amount distributed will be
subject to a 20% tax (see also note 1i).
The law also allows accelerated depreciation on
buildings, machinery and equipment used by the "approved
enterprise" during five tax years commencing in the first
year of operation of each asset.
The entitlement to the above benefits is
conditional upon the companies' fulfilling the conditions
stipulated by the law, regulations published thereunder and the
certificates of approval for the specific investments in
approved enterprises. In the event of failure to comply with
these conditions, the benefits may be cancelled and the
companies may be required to refund the amount of the benefits,
in whole or in part, with the addition of interest and linkage
differences to the Israeli consumer price index (the
"Israeli CPI").
Measurement of results for tax
    purposes
Results for tax purposes are measured on a real
basis — adjusted for the increase in the Israeli CPI.
As explained in note 1a, the financial statements are presented
in dollars. The difference between the change in the Israeli CPI
and the NIS-dollar exchange rate — both on annual and
cumulative bases — causes a difference between taxable
income and income reflected in these financial statements.
Paragraph 9(f) of FAS 109,
"Accounting for Income Taxes", prohibits the
recognition of deferred tax liabilities or assets that arise
from differences between the financial reporting and tax bases
of assets and liabilities that are measured from the local
currency into dollars using historical exchange rates, and that
result from changes in exchange rates or indexing for tax
purposes. Consequently, the abovementioned differences were not
reflected in the computation of deferred tax assets and
liabilities.
Tax benefits under the Israeli Law for the
    Encouragement of Industry (Taxes), 1969
The Company and certain of its Israeli
subsidiaries currently qualify as "industrial
companies" under the above law. In accordance with this law
such companies are entitled to certain benefits including
accelerated depreciation on industrial buildings and equipment,
a deduction of 12.5% per year of the purchase price of a
good-faith acquisition of patent and certain other intangible
property rights and the right to file consolidated tax returns.
Currently, the Company files consolidated tax
returns together with certain of its Israeli subsidiaries.
Tax rates in Israel applicable to income
    from other sources
Income not eligible for "approved
enterprise" benefits, mentioned above, is taxed at the
regular rate of 36%.
Recent Israeli Tax Reform
    Legislation
In July 2002, the Israeli parliament approved a
law enacting extensive changes to Israel's tax law
generally effective January 1, 2003 (the "Tax Reform
Legislation"). Among the key provisions of the tax
F-33
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 10 — Income Taxes
(continued)
Reform Legislation as applicable to Teva is the
introduction of the "controlled foreign corporation"
concept according to which an Israeli company may become subject
to Israeli taxes on certain income of a non-Israeli subsidiary
if the subsidiary's primary source of income is passive
income (such as interest, dividends, royalties, rental income or
capital gains). An Israeli company that is subject to Israeli
taxes on the income of its non-Israeli subsidiaries will receive
a credit for income taxes paid by the subsidiary in its country
of residence.
b.     Non-Israeli
subsidiaries:
Non-Israeli subsidiaries are taxed according to
the tax laws in their country of residence.
c.     Deferred
income taxes:
December 31
2002
2001
(U.S. $ in millions)
Short-term deferred tax assets
    (liabilities) — net:
Inventory reserve
$
1.4
$
(0.8
)
Sales allowance reserve
0.4
0.6
Provisions for employee related obligations
3.0
4.5
Unrealized income from intercompany sales
33.6
11.6
Loss carryforward
2.9
2.8
Other
3.7
2.0
45.0
20.7
Long-term deferred tax assets
    (liabilities) — net:
Property, plant and equipment and intangible
    assets
(51.1
)
(53.4
)
Provisions for employee related obligations
1.6
1.6
Carryforward losses and deductions*
121.7
70.4
Other
1.0
(2.0
)
73.2
16.6
Valuation allowance — in respect of
    carryforward losses and deductions that may not be utilized
(65.1
)
(33.0
)
$
53.1
$
4.3
*
This amount represents the tax effect of
    carryforward losses and deductions and expires as follows:
    2004-2006 — $27.4 million; 2007-2012 —
    $26.7 million. The remaining balance —
    $67.6 million — can be utilized with no
    expiration date.
F-34
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 10 — Income Taxes
(continued)
The deferred income taxes are reflected in the
balance sheets among:
December 31
2002
2001
(U.S. $ in millions)
Current assets
$
48.2
$
27.4
Current liabilities
(3.2
)
(6.7
)
Investments and other assets
51.8
22.6
Long-term liabilities
(43.7
)
(39.0
)
$
53.1
$
4.3
d.     Income before
income taxes is composed of the following:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
The Company and its Israeli subsidiaries
$
282.0
$
205.5
$
82.2
Non-Israeli subsidiaries
217.4
134.8
126.2
$
499.4
$
340.3
$
208.4
e.     The provision
for income taxes included the following components:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
Current:
In Israel
$
65.2
$
37.8
$
18.3
Outside Israel
51.3
26.7
44.6
116.5
64.5
62.9
Deferred:
In Israel
(19.3
)
(1.9
)
1.5
Outside Israel
(12.4
)
1.0
(4.8
)
(31.7
)
(0.9
)
(3.3
)
$
84.8
$
63.6
$
59.6
F-35
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 10 — Income Taxes
(continued)
A reconciliation of the theoretical tax expense,
assuming all income is taxed at the regular rate applicable to
income of companies in Israel (36%) and the actual tax expense,
is as follows:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
Income before taxes on income, per consolidated
    statements of income
$
499.4
$
340.3
$
208.4
Theoretical tax expense
$
179.8
$
122.5
$
75.0
Decrease in tax arising from different statutory
    tax rates applicable to non-Israeli subsidiaries
(30.1
)
(27.0
)
(17.4
)
149.7
95.5
57.6
Tax benefits arising from reduced tax rates
under benefit programs
(81.5
)
(53.0
)
(18.4
)
68.2
42.5
39.2
Increase (decrease) in taxes resulting from
    permanent differences:
Tax exempt income
(1.9
)
(3.5
)
(1.2
)
Disallowable deductions (in 2000 —
    mainly in respect of acquisition of research and development in
    process)
4.1
13.5
17.8
Difference between income reported for tax
    purposes and income for financial reporting purposes —
    net
7.5
(1.7
)
2.4
Other — net
6.9
12.8
1.4
Income taxes in the consolidated statements of
    income
$
84.8
$
63.6
$
59.6
f.     Tax
assessments:
The Company has received final tax assessments
through tax year 1997. The subsidiaries have received final tax
assessments through tax years 1991-2001.
Note 11 — Additional Financial
Statement Information
a.     Inventories:
December 31
2002
2001
(U.S. $ in millions)
Raw and packaging materials
$
210.8
$
137.6
Products in process
133.4
117.4
Finished products
370.4
272.8
Purchased products
60.1
32.5
774.7
560.3
Materials in transit and payments on account
6.4
9.9
$
781.1
$
570.2
F-36
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 11 — Additional Financial
Statement Information (continued)
b.     Short-term
credit:
Short-term credit was obtained mainly from banks
    at a weighted average interest rate of 4.36%.
As of December 31, 2002, the Group had
    $408 million available under unused lines of credit.
c.     Accounts
payable and accruals:
December 31
2002
2001
(U.S. $ in millions)
Trade accounts payable
$
251.5
$
189.1
Sales reserves and allowances
172.6
137.2
Income taxes payable
141.0
24.4
Employees and employee related obligations
63.7
50.6
Other
156.9
130.3
$
785.7
$
531.6
d.     Financial
instruments and risks management:
1) Foreign exchange risk
    management
The
    Group enters into forward exchange contracts in foreign
    currencies and purchases and writes foreign currency options in
    order to hedge cash flows (mainly in dollars) resulting from
    existing assets and liabilities as well as anticipated
    transactions for the current year which are probable, in
    currencies other than the functional currency. In addition, the
    Group takes steps to reduce exposure by using
    "natural" hedging. The Company also acts to offset
    risks in opposite directions among the companies in the Group.
    The currency hedged items are usually denominated in the
    following currencies: European (mainly — the Euro and
    Hungarian Forint), Israeli (NIS) and Canadian Dollars
    (CAD$). The writing of options is part of a comprehensive
    currency hedging strategy. These transactions do not qualify for
    hedge accounting under FAS 133.
F-37
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 11 — Additional Financial
Statement Information (continued)
The
    notional amounts of foreign currency derivatives are as follows:
December 31
2002
2001
(U.S. $ in millions)
Currency options purchased for conversion of:
EURO into Dollars
38.0
18.0
NIS into Dollars
15.0
25.0
CAD$ into Dollars
8.0
6.0
Hungarian Forints (HUF) into Dollars
22.0
HUF into EUR
9.0
HUF into Great Britain Pounds (GBP)
1.6
Currency options written for conversion of:
EURO into Dollars
37.0
18.0
NIS into Dollars
30.0
25.0
CAD$ into dollars
8.0
6.0
HUF into dollars
22.0
HUF into EUR
9.0
HUF into GBP
1.6
Forward exchange contracts for conversion of:
Dollars into HUF
120.2
49.0
GBP into HUF
10.2
6.0
EURO into HUF
28.9
22.0
CAD$ into HUF
1.3
NIS into Dollars
5.0
CAD into Dollars
2.0
These
    transactions are for periods of less than one year. As the
    counter parties to the derivatives are banks, the Company
    considers the inherent credit risks to be remote.
2) Interest rate swaps
During
    2002, the Company entered into two interest rate swap agreements
    with respect to a portion of the debentures issued in a private
    placement during 1998 (see note 6a).
In
    March 2002, the Company entered into a 6.5 year $75 million
    notional amount interest rate swap agreement, the effect of
    which is that, for the applicable notional amount, the Company
    pays interest at the rate of LIBOR +0.65% (2.1% at
    December 31, 2002) and receives interest at the rate of
    6.9%.
In
    September 2002, the Company entered into a 6 year $45 million
    notional amount interest rate swap agreement, the effect of
    which is that, for the applicable notional amount, the Company
    pays interest at the rate of 4.5% and receives interest at the
    rate of LIBOR +0.65%.
While
    the cash flows of interest payable and receivable under the two
    interest rate swap transactions are to take place on the same
    dates through the remaining life of these transactions, under
    FAS 133, only the first interest rate swap transaction
    qualifies for hedge accounting and is accounted for as such, as
    more fully explained in note 6a.
F-38
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 11 — Additional Financial
Statement Information (continued)
3) Fair value of financial
    instruments
The
    financial instruments of the Group consist mainly of cash and
    cash equivalents, marketable securities, current and non-current
    receivables, short-term credit, accounts payable and accruals,
    long-term loans and other long-term liabilities, convertible
    senior debentures and derivatives.
The
    fair value of the financial instruments included in working
    capital and non-current receivables of the Group is usually
    identical or close to their carrying value. The fair value of
    long-term bank loans also approximates their carrying value,
    since they bear interest at rates close to the prevailing market
    rates. The fair value of the convertible senior debentures and
    long-term debentures, based on quoted market values and
    prevailing market rates, amounted to $1,584 million.
The
    fair value and the carrying amounts of derivatives at
    December 31, 2002, is an asset of $ 26.6 million
    (December 31, 2001 — $1.3 million). The fair
    value of derivatives generally reflects the estimated amounts
    that Teva would receive or pay to terminate the contracts at the
    reporting dates.
e.     Information
on operating segments:
Operating segments
1) General
The
    Group's reportable segments are strategic businesses
    differentiated by the nature of their products and customers.
    The segments are managed separately due to the differences in
    production technologies and marketing methods and can be
    described as follows:
Pharmaceutical segment —
development, production, marketing and
    distribution of medicines in various dosages and forms, in most
    areas of medicinal treatment and disposable hospital supplies.
Active Pharmaceutical Ingredients
    ("A.P.I.") segment —
development, production, marketing and
    distribution of A.P.I. for the pharmaceutical industry including
    the Group's pharmaceutical segment.
2)
Information on revenues and assets of the
    reportable operating segments
a) Measurement
    of revenues and assets of the operating segments:
The
    measurement of revenues and assets of the reportable operating
    segments is based on the same accounting principles applied in
    these financial statements.
Segment
    profits reflect the income from operations of the segment and do
    not include net interest income or expense, minority interest
    and income tax expenses, since those items are not allocated to
    the segments.
Sales
    of the A.P.I. segment to the pharmaceutical segment are recorded
    at the market prices of sales of similar products to non-related
    customers.
F-39
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 11 — Additional Financial
Statement Information (continued)
b) Financial
    data relating to reportable operating segments:
Pharmaceuticals
A.P.I.
Other
Total
(U.S. $ in millions)
Year ended December 31, 2002:
Net sales:
To unaffiliated customers
$
2,240.2
$
259.3
$
19.1
$
2,518.6
Intersegment
0.2
205.5
0.9
206.6
Total net sales
$
2,240.4
$
464.8
$
20.0
$
2,725.2
Operating income
$
426.5
$
194.4
$
1.6
$
622.5
Assets (at end of year)
$
1,986.4
$
497.2
$
28.4
$
2,512.0
Goodwill (at end of year)
$
534.6
$
25.7
$
560.3
Expenditures for segment assets
$
98.5
$
50.5
$
5.0
$
154.0
Depreciation and amortization
$
69.3
$
26.4
$
1.9
$
97.6
Year ended December 31, 2001:
Net sales:
To unaffiliated customers
$
1,838.0
$
219.2
$
20.2
$
2,077.4
Intersegment
0.2
150.1
1.0
151.3
Total net sales
$
1,838.2
$
369.3
$
21.2
$
2,228.7
Operating income
$
296.9
$
130.9
$
2.0
$
429.8
Assets (at end of year)
$
1,481.4
$
352.7
$
24.4
$
1,858.5
Goodwill (at end of year)
$
459.2
$
6.9
$
466.1
Expenditures for segment assets
$
75.8
$
30.2
$
1.4
$
107.4
Depreciation and amortization
$
78.2
$
23.5
$
0.7
$
102.4
Year ended December 31, 2000:
Net sales:
To unaffiliated customers
$
1,548.3
$
180.6
$
21.0
$
1,749.9
Intersegment
0.4
134.6
0.7
135.7
Total net sales
$
1,548.7
$
315.2
$
21.7
$
1,885.6
Operating income
$
222.9
$
100.7
$
3.2
$
326.8
Assets (at end of year)
$
1,343.3
$
316.5
$
21.5
$
1,681.3
Goodwill (at end of year)
$
474.3
$
7.7
$
482.0
Expenditures for segment assets
$
44.0
$
33.9
$
0.8
$
78.7
Depreciation and amortization
$
61.8
$
20.6
$
0.5
$
82.9
F-40
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 11 — Additional Financial
Statement Information (continued)
c) Following
    is a reconciliation of the net sales, operating income and
    assets of the reportable segments to the data included in the
    consolidated financial statements:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
Net sales:
Total sales of reportable segments
$
2,705.2
$
2,207.5
$
1,863.9
Other sales
20.0
21.2
21.7
Elimination of intersegment sales
(206.6
)
(151.3
)
(135.7
)
Total consolidated net sales
$
2,518.6
$
2,077.4
$
1,749.9
Operating income:
Total operating income of reportable segments
$
620.9
$
427.8
$
323.6
Other
1.6
2.0
3.2
Amounts not allocated to segments:
Restructuring expenses
(15.7
)
Acquisition of research and development in process
(35.7
)
Profits not yet realized
(48.5
)
(7.6
)
(5.9
)
General and administrative expenses
(39.8
)
(38.8
)
(37.2
)
Other expenses
(10.2
)
(1.4
)
2.6
Financial expenses — net
(24.6
)
(26.0
)
(42.2
)
Consolidated income before income taxes
$
499.4
$
340.3
$
208.4
Assets (at end of year):
Total assets of reportable segments
$
2,483.6
$
1,834.1
$
1,659.8
Total goodwill of reportable segments
560.3
466.1
482.0
Other assets
28.4
24.4
21.5
Elimination of intersegment balances
(13.7
)
(13.4
)
(14.0
)
Elimination of unrealized income from inventories
(50.4
)
(3.0
)
(5.0
)
Assets not allocated to segments:
Current assets
1,264.5
956.5
561.7
Investments and other assets
313.5
141.9
100.1
Property, plant and equipment, net
22.8
36.5
36.5
Debt issuance costs
17.8
17.1
13.1
Consolidated assets (at end of year)
$
4,626.8
$
3,460.2
$
2,855.7
F-41
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 11 — Additional Financial
Statement Information (continued)
3) Geographical
    information
Net
    sales by geographical areas:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
Israel
$
231.9
$
241.4
$
244.6
United States
1,473.1
1,129.6
882.6
Europe
599.7
456.9
398.9
Other
213.9
249.5
223.8
$
2,518.6
$
2,077.4
$
1,749.9
The geographical sales information is classified
    by the geographical location of the customers.
Property, plant and equipment — by
    geographical location:
December 31
2002
2001
(U.S. $ in millions)
Israel
$
311.6
$
290.0
United States
119.2
103.9
Hungary
90.7
65.0
Europe, excluding Hungary
114.6
58.7
Canada
36.8
34.3
Other
2.5
2.3
$
675.4
$
554.2
f.     Restructuring
expenses:
The consolidated statement of income for the year
ended December 31, 2001 includes restructuring expenses in
a total amount of $15.7 million, including an impairment
charge of $9.7 million relating to property, plant and
equipment. The remaining balance relates mainly to the closure
of plants of the Group and the moving of pharmaceutical
production lines between locations, according to exit plans,
which commenced in the fourth quarter of 2001. As a result of
the structural changes, the Group expects to terminate the
employment of 198 employees (mainly management, production
and sales personnel), at a total cost of $2.3 million.
Through December 31, 2002, the employment of
76 employees has been terminated at a cost of
$1.1 million; other restructuring expenses paid through
December 31, 2002, amounted to $2.5 million.
Management expects to complete the restructuring plan during
2003.
g.     Acquisition of
research and development in process:
The amounts charged to income in the year ended
December 31, 2000 relate mainly to in-process research and
development, identified at the time of acquisition of
Novopharm — see note 2a.
F-42
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 11 — Additional Financial
Statement Information (continued)
h.     Financial
expenses — net:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
Interest expense
$
54.5
$
46.9
$
53.0
Interest income
(17.8
)
(20.7
)
(10.3
)
Exchange differences — net
(12.6
)
1.4
3.3
Loss (income) from securities
0.5
(1.6
)
(3.8
)
$
24.6
$
26.0
$
42.2
i.     Earnings per
ADR:
The net income and the weighted average number of
ADRs used in computation of basic and diluted earnings per ADR
for the years ended December 31, 2002, 2001 and 2000 are as
follows:
Year Ended December 31
2002
2001
2000
(U.S. $ in millions)
Net income
$
410.3
$
278.2
$
148.4
Interest expense on convertible senior debentures
    due 2005, and issuance costs, net of tax benefit
16.4
8.4
1.4
Net income used for the computation of diluted
    earnings per ADR
$
426.7
$
286.6
$
149.8
Weighted average number of ADRs used in the
    computation of basic earnings per ADR
264.5
264.5
257.9
Add:
Additional shares from the assumed exercise of
    employee stock options
3.5
3.6
2.9
Weighted average number of additional shares
    issued upon the assumed conversion of the convertible senior
    debentures due 2005
12.8
12.8
2.9
Weighted average number of ADRs used in the
    computation of diluted earnings per ADR
280.8
280.9
263.7
For the sake of clarity, the following table
details the number of ordinary shares and special shares less
ordinary shares held by subsidiaries as of each balance sheet
date.
December 31
2002
2001
(Number of shares,
in millions)
Ordinary shares — issued and outstanding
263.2
256.2
Special shares — see note 2a
6.3
12.8
269.5
269.0
Ordinary shares, held by subsidiaries
(4.6
)
(4.5
)
264.9
264.5
F-43
Table of Contents
INDEPENDENT AUDITORS' REPORT
To the shareholders of Biogal Pharmaceutical Co.
Ltd.:
We have audited the statements of income and
comprehensive income, shareholders' equity, and cash flows
for the year ended December 31, 2000 of Biogal
Pharmaceutical Co. Ltd. (a company incorporated in Hungary).
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with
generally accepted auditing standards in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the results
of operations of Biogal Pharmaceutical Co. Ltd. and its cash
flows for the year ended December 31, 2000, in conformity
with generally accepted accounting principles in the United
States of America.
/s/ KPMG HUNGÁRIA KFT.
Budapest, Hungary
January 22, 2001
F-44
Table of Contents
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Plantex-U.S.A., Inc.
Englewood Cliffs, New Jersey
We have audited the accompanying balance sheet of
Plantex-U.S.A., Inc., as of December 31, 2000 and the
related statements of income and comprehensive income, changes
in shareholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Plantex-U.S.A., Inc. as of December 31, 2000
and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ EHRENKRANTZ STERLING & CO. L.L.C.
Certified Public Accountants
January 17, 2001
Member Of
International With
Offices In Principal Cities Throughout The World
F-45
Table of Contents
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Teva Pharmaceutical Industries Limited
Our audits of the consolidated financial
statements referred to in our report dated February 17,
2003 appearing in the 2002 Annual Report to the Shareholders of
Teva Pharmaceutical Industries Limited also included an audit of
Financial Statement Schedule II — Valuation and
Qualifying Accounts — listed in Item 18 of this
Form 20-F. In our opinion, the schedule presents fairly, in
all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.
/s/ KESSELMAN & KESSELMAN
Kesselman & Kesselman
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
February 17, 2003
S-1
Table of Contents
TEVA PHARMACEUTICAL INDUSTRIES
LIMITED
SCHEDULE II — VALUATION
AND QUALIFYING ACCOUNTS
Three Years Ended December 31,
2002
(U.S. $ in millions)
Column A
Column B
Column C
Column D
Column E
Balance at
Charged to
Charged
Balance
beginning
costs and
to other
at end of
of period
expenses
accounts
Deductions
period
Allowance for doubtful accounts:
Year ended December 31, 2002
$
15.6
$
12.3
$
4.2
$
(1.8
)
$
30.3
Year ended December 31, 2001
$
9.5
$
13.7
$
0.1
$
(7.7
)
$
15.6
Year ended December 31, 2000
$
10.2
$
1.1
$
4.4
$
(6.2
)
$
9.5
Allowance in respect of carryforward tax losses:
Year ended December 31, 2002
$
33.0
$
9.6
$
23.9
$
(1.4
)
$
65.1
Year ended December 31, 2001
$
39.5
$
(4.6
)
$
(1.9
)
$
33.0
Year ended December 31, 2000
$
13.1
$
15.5
$
10.9
$
39.5
S-2