Annual Report 2002 - 2003

1 Board of Directors R. A. Shah Hocine Sidi Said Chairman Managing Director Richard Hugh Gane Pradip P. Shah Kewal Handa B. M. Gagrat (Dr.) Director Director Executive Director – Finance Executive Director – Technical Operations Management Committee H. Sidi Said K. G. Ananthakrishnan B. M. Gagrat (Dr.) A. Gupta Managing Director Pharmaceuticals Technical Operations Business Technology K. Handa C. Lele (Dr.) S. Madhok V. Mahurkar Finance Biometrics Animal Health Business Development S. Mukherjee (Dr.) S. Ramkrishna H. Walder Y. Goutam Medical Research Division Corporate Affairs Employee Resources (till April 30, 2004) Employee Resources (w.e.f. May 1, 2004) Secretary A. Anjeneyan Registered Office Pfizer Centre, 5, Patel Estate Off S V Road, Jogeshwari (W) Mumbai 400 102 Tel.: 022 5693 2000 Fax : 022 5693 2377 Email: sundaresan@pfizer.com CONTENTS TEN-YEAR FINANCIAL SUMMARY NOTICE OF ANNUAL GENERAL MEETING 2 3-4 DIRECTORS’ REPORT INCLUDING MANAGEMENT DISCUSSION AND ANALYSIS REPORT 5-11 ANNEXURES TO DIRECTORS’ REPORT 12-15 CORPORATE GOVERNANCE REPORT 16-21 Registrars & Transfer Agents AUDITORS’ REPORT 22-23 Tata Consultancy Services Park West II, Raheja Estate Kulupwadi Road, Borivli (East) Mumbai – 400 066 Tel.: 022 566 89898 Fax : 022 566 89799 Email: tcssharac@mumbai.tcs.co.in BALANCE SHEET 24 PROFIT AND LOSS ACCOUNT 25 Auditors Bharat S. Raut & Co. CASH FLOW STATEMENT 26-27 SCHEDULES 28-50 REPORT AND ACCOUNTS OF THE SUBSIDIARY COMPANY DUCHEM LABORATORIES LIMITED 51-60 CONSOLIDATED STATEMENT OF PFIZER LIMITED AND DUCHEM LABORATORIES 61-80 2 Pfizer Limited: Ten Year Financial Summary Amount – Rupeees in Lakhs 2001 2002++ 2003 1995 1996 1997 1997# 1998 1999 2000 1172 1172 1172 1172 1172 1172 2344* 2344 Total Shareholders’ Funds 3653 4825 4506 5678 5925 7097 6694 7866 7104 8276 9541 10713 11167 13511 14645 16989 2344 536 27923 30803 Total 1995 3151 9971 2077 806 8561 397 629 8123 84 2002 9952 156 1 8433 — 1 10714 — — 13511 — — 16989 — — 30803 3240 23 — 3343 23 — 3085 25 — 3885 324 — 3678 346 — 3502 324 — 3728 324 310 4210 324 503 5696 529 790 4439 1699 3875 1999 3596 2155 3286 2462 4018 2317 4486 3810 5780 3918 5644 5421 8484 12341 197 2741 9076 81 2436 8391 49 3234 9034 234 4572 10554 820 3923 11078 2329 3839 14464 4609 3529 17836 5763 4289 21117 6840 7260 34925 2186 182 6708 2938 925 4528 3484 1574 3976 3857 1690 5007 5375 2047 3656 5439 2376 6649 6771 2366 8699 6312 2853 11952 11112 5244 18569 — — 9971 667 — 8561 1037 — 8123 736 — 9952 753 — 8433 239 — 10714 — 450 13511 — — 16989 5219 — 30803 23978 25260 26290 14160 23343 28733 32719 65127 5719 5165 54243 4366 634 — 1007 60250 284 21694 8784 (32) 130 1064 76 16990 — 95 49085 11165 1518 12683 5089 7594 40.1 11.7 26.37 7.50+ 2160 106.95 Sources of Funds Shareholders Funds Share Capital Share Capital Suspense A/C Reserves and Surplus Borrowed 2880 27960 30840 Funds Secured Loans Unsecured Loans Application of Funds Net Fixed Assets Investments Deferred Tax Asset (Net) Current Assets, Loans and Advances: Inventories Sundry Debtors Cash and Bank Balances (including amounts held on deposit accounts with banks) Others Total Current Assets, Loans and Advances Less: Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets Misc. Expenditure (Deferred Revenue Expenditure) Voluntary Retirement Scheme Commercial Rights Total Net Assets 6110 324 989 8658 5883 8908 8375 31824 9619 4192 18013 5404 30840 Income Gross Sales Less: Excise Duty Less: Sales Tax Net Sales Services Interest Income Dividend Income Other Income Total — 57 3 508 24546 205 88 3 292 25848 1105 111 2 880 28388 2321 204 3 279 16967 3036 279 3 426 27087 4275 331 — 501 33840 4237 376 — 549 37881 36207 3796 2643 29768 4826 668 — 653 35915 216 8614 4865 3414 1968 768 54 8192 — 526 28617 5223 — 5223 2130 3093 40.8 10.8 26.39 5.00 586 91.41 (691) 10757 5056 3940 2394 676 37 8875 — 565 31609 6272 — 6272 2518 3754 40.1 11.5 16.02@ 4.00 938 57.64@ (531) 11267 5580 348 187 717 26 10373 — 246 28213 7702 — 7702 2953 4749 38.3 13.1 20.26 5.00 1172 72.48 55896 3954 4478 47464 2944 364 743 51515 Costs and Expenses (Increase)/Decrease in Stock of Hospital Products, Finished Goods, Work in process and Own Manufactured Bulk Drugs (24) 402 307 119 (607) Materials Consumed 9178 8159 8931 4293 7604 Personnel Costs 3179 4051 4333 3072 5712 Excise Duty 3118 3195 3105 1618 2806 Sales Tax 1564 1655 1627 933 1548 Depreciation 354 362 437 319 967 Interest Expense 627 571 358 160 211 Other Expenses 4663 5015 5768 4124 6504 Goodwill/Technical Know-How Written off — — — — — Royalty and Technical Know-How Fees 682 583 555 270 455 Total Costs and Expenses 23341 23993 25421 14908 25200 Profit before Taxation & Exceptional Items 1205 1855 2967 2059 1887 Exceptional items - (Expenses)/Income — — — — — Profit before Taxation 1205 1855 2967 2059 1887 Taxation 396 785 1067 681 629 Profit after Taxation 809 1070 1900 1378 1258 Tax Provision as % of PBT 32.9 42.3 36.0 33.1 33.3 Net Profit as % of Sales 3.4 4.2 7.2 9.7 5.4 Earnings per share (Rs.) 6.90 9.13 16.21 11.76 10.73 Equity Dividend per share (Rs.) 1.50 3.00 4.00 3.00 4.00 Total Dividend Amount (Rs. in Lakhs) 176 352 469 352 469 Book Value per share (Rs.) 41.17 48.45 60.55 67.12 70.61 # 8 months period ended 30th November, 1997 * Increase due to issue of Bonus Shares in the ratio 1:1 @ Diluted due to issue of Bonus Shares in the ratio of 1:1 + Proposed dividend for the year ended 30th November, 2002 (includes special dividend @ Rs. 2.50 per share) ++ Includes results of erstwhile Parke-Davis (India) Ltd. on its amalgamation with the Company 790 18947 7942 137 191 1083 39 15759 322 45210 6305 (1673) 4632 1881 2751 40.6 4.9 9.55 7.50 2160 107.08 3 Notice of Annual General Meeting Notice is hereby given that the 53rd Annual General Meeting of Pfizer Limited will be held at the Y.B. Chavan Auditorium, General Jagannath Bhosale Marg, Next to Sachivalaya Gymkhana, Mumbai-400 021 on April 29, 2004 at 3.00 P.M. to transact the following business: ORDINARY BUSINESS provisions, if any of the Act, the Company do hereby approve the payment to the resident Indian Non-Executive Directors of the Company, a commission at the rate of 1% of the net profits of the Company, subject to a maximum limit of Rs.20 lakhs per annum, to be computed in the manner laid down in Section 198(1) of the Act, for a period of five years commencing from 1st December, 2003. 1. To receive, consider and adopt the Audited Profit and Loss Account for the year ended November 30, 2003, the Audited Balance Sheet as at that date and the Reports of the Board of Directors and Auditors. RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorized to determine the precise quantum of commission payable to each such Non-Executive Directors on a year to year basis.” 2. To declare Dividend for the year ended November 30, 2003. NOTES: 3. To appoint a Director in place of Mr. Pradip P. Shah who retires by rotation and being eligible, offers himself for reappointment. 1. The relative Explanatory Statement pursuant to section 173 of the Companies Act, 1956 in respect of items 5 & 6 of Special Business is annexed hereto. 4. To appoint Auditors and to fix their remuneration. 2. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT ONE OR MORE PROXIES TO ATTEND AND VOTE ON A POLL ONLY INSTEAD OF HIMSELF AND A PROXY NEED NOT BE A MEMBER. SPECIAL BUSINESS 5. To consider and if thought fit, to pass, with or without modification(s), the following resolution as a SPECIAL RESOLUTION: “RESOLVED THAT in partial modification of the Special Resolution passed at the 43rd Annual General Meeting held on August 31, 1994 and pursuant to Section 163 of the Companies Act, 1956 (the Act), the Company hereby approves that the Register of Members, Index of Members and copies of all Annual Returns prepared under Section 159 of the Act, together with copies of the certificates and documents required to be annexed thereto under Section 161 of the Act, be kept at the office of Tata Consultancy Services, a Division of Tata Sons Limited, the Registrars and Share Transfer Agents of the Company at Park West II, Raheja Estate, Kulupwadi Road, Borivli (East), Mumbai 400 066 instead of at Lotus House, 6, New Marine Lines, Sir V. Thakersay Road, Mumbai 400 020. RESOLVED FURTHER THAT the registers, indexes, returns and copies of certificates and other documents of the Company referred to above be kept open for inspection at the place where they are kept, by the persons entitled thereto, to the extent, in the manner and on payment of fee, if any specified in the Act, between 10.00 a.m. and 1.00 p.m. on any working day, except when the Registers and Books are closed under the provisions of the Act or the Articles of Association of the Company. RESOLVED FURTHER THAT the Board of Directors be and is hereby authorized to take such further steps as may be necessary in this regard.” 6. To consider and if thought fit, to pass, with or without modification(s), the following resolution as a SPECIAL RESOLUTION: “RESOLVED THAT pursuant to Section 309(4) of the Companies Act, 1956 (the Act) and Article 125 of the Articles of Association of the Company and other applicable The Proxy duly completed and signed must be deposited at the Registered Office of the Company not less than 48 hours before the Meeting. 3. The Register of Members and the Share Transfer Books of the Company will remain closed from 20.04.2004 to 29.04.2004 (both days inclusive). 4. Members (Beneficiaries) holding shares in dematerialised mode are requested to note that the bank details furnished by them to their respective Depository Participants will be printed on their Dividend Warrants, if not opted for Electronic Clearing Service (ECS). This is pursuant to the SEBI directive vide Circular No. D&CC/FITTC/CIR-4/2001 dated 13.11.2001. 5. In compliance with Sections 205A & 205C of the Companies Act, 1956, unclaimed dividend for the year ended 1996 has been transferred to the “Investor Education and Protection Fund” established by the Central Government. Members shall not be able to register their claim in respect of their unencashed Dividend with regard to the above dividend. Unclaimed dividend for all the subsequent years will be transferred to the “Investor Education and Protection Fund” according to the statutory stipulations. Members are requested to contact the Company’s Registrars and Transfer Agents, Tata Consultancy Services in respect of their outstanding dividends for the succeeding years. By Order of the Board of Directors A. Anjeneyan Secretary Mumbai, February 26, 2004 Registered Office: Pfizer Centre, Patel Estate, Patel Estate Road, Off. S.V. Road, Jogeshwari (West), Mumbai – 400 102. 4 EXPLANATORY STATEMENT PURSUANT TO SECTION 173 OF THE COMPANIES ACT, 1956 Item No. 5 At the 43rd Annual General Meeting of the Company held on August 31, 1994, the shareholders had approved appointment of Tata Consultancy Services, a Division of Tata Sons Limited, as the Company’s Registrars and Transfer Agents and for keeping the Register of Members and Index of Members and copies of all Annual Returns prepared by the Company under Section 159 of the Companies Act, 1956 (the Act), together with copies of certificates and documents required by the Act to be annexed thereto at their office at Lotus House, 6, New Marine Lines, Sir V. Thakersay Road, Mumbai 400 020. Tata Consultancy Services have shifted their office from Lotus House, 6, New Marine Lines, Sir V. Thakersay Road, Mumbai 400 020 to Park West II, Raheja Estate, Kulupwadi Road, Borivli (East), Mumbai 400 066. Accordingly, approval of the shareholders by a Special Resolution is being sought, pursuant to the provisions of Section 163 of the Act. A copy of the Special Resolution set out in Item No. 5 of the Notice will be delivered to the Registrar of Companies, Maharashtra, Mumbai in advance. None of the Directors are interested or concerned in the passing of this Resolution except as a member, if any, of the Company. Item No.6 At the 50th Annual General Meeting of the Company held on April 26, 2001, the shareholders had approved payment of commission at the rate of 1% of the net profits of the Company subject to a maximum limit of Rs.20 lakhs per annum to each Directors resident in India, who are not in the Company’s whole-time employment. This approval was for a period of three years commencing from December 1, 2000. Approval of the shareholders by a Special Resolution is being sought, pursuant to the provisions of Section 309(4) of the Companies Act, 1956 for payment of commission at the rate of 1% of the net profits of the Company subject to a maximum limit of Rs.20 lakhs per annum to Non-Executive Directors who are resident in India. This approval would be effective for a period of five years commencing from December 1, 2003. Messrs. R.A.Shah and Pradip Shah who are resident Indian NonExecutive Directors of the Company may be deemed to be concerned or interested in the passing of this Special Resolution as it concerns them. None of the other Directors of the Company are interested or concerned in the passing of this Special Resolution. By Order of the Board of Directors A. Anjeneyan Secretary Mumbai, February 26, 2004 Registered Office: Pfizer Centre, Patel Estate, Patel Estate Road, Off. S.V. Road, Jogeshwari (West), Mumbai – 400 102. 5 DIRECTORS’ REPORT including Management Discussion and Analysis Report TO THE MEMBERS Your Directors have pleasure in presenting this 53rd Annual Report together with the Audited Accounts for the year ended November 30, 2003. The Report reviews the Company’s diversified operations covering Pharmaceuticals and Animal Health Products. DIVIDEND Your Directors are pleased to recommend a dividend of Rs. 7.50 per share (75%) for the financial year ended November 30, 2003. The total amount of dividend for the year ended November 30, 2003 is Rs. 2160 Lakhs. The dividend, if declared, will be paid to those Members whose names appear in the Register of Members on the date of the ensuing Annual General Meeting. Under the Income Tax Act 1961, the receipt of dividend is tax-free in the hands of the shareholders. The tax on distributed profits, payable by the Company would amount to Rs. 277 Lakhs. Dividend Per Share (Rs.) 10 8 6 7.50 Nov-02 Nov-03 5.00 5.00 4.00 7.50* 4.00 4 2 0 Nov-98 Nov-99 Nov-00 Nov-01 * Includes one-time special dividend of Rs. 2.50 per share FINANCIAL RESULTS Rupees in Lakhs Year ended November 30 2003 2002 47464 54243 Services 2944 4366 Profit Before Tax and Exceptional Items 6305 11164 Sales (Net of Excise Duty & Sales Tax) Exceptional Items (Expense)/Income (1673) 1518 4632 12682 - Current Tax 2080 5344 - Deferred Tax (Credit)/Debit (199) (256) 2751 7594 Balance of Profit from Prior Years 19411 14608 Surplus available for Appropriation 22162 22202 Transfer to General Reserve 300 800 Proposed Dividend - Regular 2160 1440 Proposed Dividend - Special — 720 Tax on dividend 277 — Tax on dividend for the previous year 277 — — (169) 19148 19411 22162 22202 Profit Before Tax Less: Taxation Profit After Tax Appropriation: Tax on dividend for the previous year reversed Balance carried to Balance Sheet 6 AMALGAMATION The Supreme Court of India, vide its Order dated September 9, 2003 dismissed the Special Leave Petition filed by the dissenting shareholder thereby restoring the Order passed by the Bombay High Court on February 7, 2003 approving the Amalgamation of Parke-Davis (India) Limited (PDI), with your Company. Accordingly, on September 10, 2003, the shareholders of PDI were allotted four shares of your Company for every nine shares held by them in PDI as on the Record Date, i.e. March 14, 2003. As a consequence, the Paid-up Capital of your Company has increased by Rs.5.36 Crores to Rs.28.80 Crores. CORPORATE In compliance with Accounting Standard No.21, your Company has attached the Consolidated Statement of Accounts giving therein the Consolidated Financial Statements relating to Pfizer Limited and Duchem Laboratories Limited. REVIEW OF OPERATIONS GENERAL The Pharmaceutical market posted a single digit growth for the third successive year, growing by 5.1% in 2003 to end at Rs.19229 Crores (Source: ORG Retail Audit). Growth continued to be driven by volume (3.5%) and new launches (2.3%), while price declined by 0.7%. Trade issues such as uncertainty of implementation of VAT and transporters’ strike during the first half of the year contributed to the low growth. IMS Market Prognosis predicts growth at a CAGR of 10.5% during the five-year period 2003-2007. Therapeutic segments like Cardiovasculars, Anti-diabetics, Neuropsychiatry, Respiratory and NSAIDs grew at 13%. However, in contrast, acute therapeutic segments like Anti-Infectives, CoughCold, Gastro-intestinal, Pain and Fever, grew by only 1%. The market is gradually shifting towards life-style related segments due to increasing awareness, detection and treatment of these ailments. Higher growth is observed in urban markets compared to rural markets. There is also an increase in the number of prescriptions from the specialists segment compared to general practitioners. (Source: ORG) The announcement of the much-awaited new Drug (Prices Control) Order (DPCO) has been delayed further, on account of legal issues. The new DPCO and National Health Policy are expected to encourage more domestic and foreign investment in new drug research. The Government took one step towards IPR implementation by granting Exclusive Marketing Rights (EMR) to Novartis and Wockhardt during the year. The recent proposal for stringent penalties against offenders will result in a substantial reduction in the production of spurious drugs. This will result in greater consumer protection and ensure adherence to higher quality standards within pharmaceutical products. Increase in healthcare awareness is expected to fuel the growth of the OTC segment. Major players like Ranbaxy, Hindustan Lever, Nicholas Piramal are active in developing the OTC segment. Proper regulatory framework for OTC products will help streamline the business. The Pharmaceutical Industry is partnering with the Government in the development of OTC guidelines. BUSINESS SEGMENT: PHARMACEUTICALS DIVISION Performance 2003 The revenue of your Company’s Pharmaceuticals Division at Rs. 432 Crores (Previous Year Rs. 512 Crores) were affected by the slow down of the market in general and lower growth rates in the therapeutic segments that your Company operates in. The Division’s business operations were restructured, following the operational integration with Pharmacia Healthcare Limited in mid-2003. Other factors that contributed to the decline in sales include reduction in price of Becosules due to the ceiling price order passed under DPCO, 1995, inventory rationalization, trade apprehension on VAT implementation and transporters’ strike. Key Brands Performance Corex continued to be ranked #1 among all Industry brands in 2003, with Becosules following at #3. Gelusil MPS, Benadryl Cough Formula and Dolonex, the major brands of your Company, continue to be ranked among the Industry’s top 100 brands. Your Company continues to hold leadership position in several therapeutic areas. Becosules, Corex, Benadryl Cough Formula and Gelusil MPS are leaders in Vitamins, Cough preparations and Antacid/Anti-flatulent categories respectively. BRAND LEADERSHIP Brand Therapeutic Segment Rank % Share # Of Competitors COREX Cough Preparations BECOSULES B-Complex+C 1 16.9 471 1 57.3 GELUSIL MPS Antacids / Anti-flatulents 29 1 19.7 138 BENADRYL Cough Preparations 3 5.2 471 Source: IMS MAT December 2003 Minipress XL is ranked among the top ten brands in the highly competitive anti-hypertensives market. This was achieved through a focused campaign to expand usage of the brand in new indications. Dolonex Orals gained market share and is now ranked #5, while Dolonex IM remained at #2 in the Injectable NSAID market. Extensive mass media advertising, targeted promotion to the right doctors, coupled with merchandising efforts across the country, were effectively used to consolidate the ‘Rx to OTC’ switch of our Consumer Health products like Gelusil MPS, Benadryl Cough Formula and Listerine Mouthwash. These products continue to dominate, and outperform their respective markets in terms of growth. The advertising campaign for Gelusil tablets won an award for Creative Excellence at the 36th ABBY- The All India Awards for Creative Excellence. Marketing and Medical Initiatives Daxid, the anti-depressant brand launched in 2002 was strongly supported by a series of nation-wide medical education programs 7 – Prime MD Today – that focuses on the management of depression. Prime MD Today is a diagnostic tool that helps primary care physicians to diagnose depression through a simple self-administered patient questionnaire. This program was well received by the medical fraternity. BUSINESS SEGMENT: ANIMAL HEALTH DIVISION The rollout of the “Magnex post marketing surveillance study” was conducted on 850 Indian hospitalized patients with serious infections. The findings of this study helped establish the brand among the top five brands in the Injectable Cephalosporins market. India has a cattle population of 350 million and is the world’s largest producer of milk (over 80 million tons milk production). The poultry population is estimated at 900 million. The Companion Animal business is in a nascent stage but is likely to grow faster with increasing focus on pet care. This is further accentuated by the increasing number of pet food companies that have entered the Indian market, in the last couple of years. In a bid to standardize patient care, and have uniform treatment practices across the country, an eminent body of Oncologists issued the first Indian guidelines for the management of infections in cancer patients (Febrile Neutropenia). Your Company in collaboration with the Indian Society of Medical and Pediatric Oncology supported the development of Febrile Neutropenia Management Guideline. The Animal Health Industry in India is estimated to be Rs. 900 Crores with Cattle and Poultry business contributing almost equally to this potential. The milk and meat consumption in India is also growing. The meat consumption is predominantly poultry (beef and pork is negligible). An independent study over the past 30 years has shown an increasing trend in the consumption of meat and milk as a part of the diet. Your Company will continue its efforts at market expansion through such science based promotional programs that aim at educating physicians and creating awareness about disease conditions. Your Company aims to become the most preferred partner of physicians and patients, in each of the therapeutic areas that it operates in. Market share and ranking data is not available in the Animal Health business segment. Yet, an assessment on the total sales of different companies indicates your Company’s strength and position in the Indian market. Pfizer is among the top four Animal Health Businesses, despite recent mergers and acquisitions. Field Force Initiatives The revenue of Animal Health Division for the year under review was Rs. 54 Crores (Previous Year Rs. 58 Crores). The adverse market conditions & erosion in selling prices in the poultry segment have had a negative impact on performance for the year. To provide focus on the mature segment of the prescription portfolio, your Company appointed Innovex, a globally reputed contract Sales Force Organization, to promote these brands. It is expected that this initiative will help sustain the growth of the assigned matured portfolio. The field force automation tool “Optima” was successfully implemented across the entire sales organization. This web based program helps the sales force to plan their customer contacts and implement marketing programs in an effective manner. The pilot project on “Targeting” – a tool to optimize field force effectiveness was initiated in two locations with encouraging results. The roll out of this program to the entire field force is expected to occur during 2004. Training and Development Training and development of people has always been a prime focus area of your Company. Several innovative custom-designed programs were rolled out to the field force to achieve competitive advantage. One such major program is the Leaders Academy, a comprehensive management development program, for first line managers. Further, there were several training programs that were implemented, to upgrade the knowledge and skills of the newly merged field force. Your Company’s efforts in developing people were recognized and rewarded with a special commendation of the “Golden Peacock National Training Award” in 2003 from the Institute of Directors – Delhi. Way Ahead Your Company is evaluating the introduction of several new products from the global portfolio and line extensions to further augment the current product portfolio. The Industry growth rate has been of concern in the past few years, both at the international level as well as at the local level. The key is to ensure growth at a pace that this business segment demands irrespective of the unique market conditions. The challenge is to look not only for “bigger opportunities” but also at “incremental opportunities”. The outlook for 2004 has been strengthened by not only the launch of new products but through a marketing alliance signed with Bayer Polychem India Limited in November 2003. The alliance with Bayer offers a product portfolio that strengthens Pfizer’s presence in Cattle, Poultry and Companion Animal business. The strength of this alliance lies in the near perfect fit with the product portfolio of Bayer. This alliance offers a presence in segments where there was zero or negligible presence. In some instances, it will strengthen some of the therapeutic areas where your Company already holds a significant presence. The strong research pipeline of Pfizer and Bayer is yet another factor which augurs well for the future of your Company’s business. The pipeline of new products will also be augmented by the launch of Pharmacia products that have already established themselves internationally. Pharmacia had a limited presence in India through a constrained distribution network. This offers yet another opportunity to grow the business. To ensure the success of new products, your Company has not only increased the size of the field force in all the business segments but will also lay equal emphasis on training and field force effectiveness. This will result in optimizing the level of productivity from each member. 8 From mid 2003, your Company’s Animal Health group entered the Aqua business segment. Your company is currently deploying resources to initiate growth. These initiatives alongwith the ongoing activities would be the drivers of business growth as your Company moves ahead. BUSINESS SEGMENT: RESEARCH AND DEVELOPMENT DIVISION The Development Operations Group of Pfizer Global Research and Development (PGRD) in India was reorganized, in keeping with the worldwide reorganization. As a result, the Clinical Research group integrated with the Medical Research Division, while Biometrics continues to be part of Development Operations. This Division generated a higher revenue of Rs. 19 Crores for the year under review as compared to Rs. 17 Crores during the Previous Year. Your Company’s Biometrics division further expanded the scope of its activities in 2003. It has added new PGRD sites to its list of customers and there is an increase in volumes, across all functions. The activity of data management for Ann Arbor and the activity of programming and reporting for the Development Operations group in Japan were added. With the closure of legacy Pharmacia’s data management group in Bangalore, the data entry activities for that group were transferred to the data capture group in Mumbai. As an extension of the newly created Study Start Up group in New London, a small group specializing in design of case report forms and databases has been created within Biometrics. In addition to contributing to several early development protocols from Groton and Sandwich, Biometrics also worked on many Phase II protocols from Sandwich and Phase II/III protocols from New London. Your Company’s Biometrics division is also providing support to the global Azithromycin-malaria program. Some of the drug projects include Voriconazole, Sildenafil, Varenicline, Lasofoxifene and Geodon. Quality and timelines were maintained despite the expansion in the scope of activities. The Informatics group also supported the Clinical Research Department in the deployment and maintenance of an electronic data capture tool at investigator locations across India. Your Company’s Biometrics Division has continued to be a leader in the development of clinical research culture in the country through its continued efforts to enhance the awareness on clinical research and biometrics in the country. Biometrics has achieved this by its active participation in several workshops and through certificate programs offered by the ‘Academy for Clinical Excellence’ (ACE), a Pfizer initiative. OPPORTUNITIES AND THREATS The Pharmaceutical Industry in India is rapidly changing the way it does business. The Industry has a domestic turnover of around Rs.19000 crores and it is growing at a 5% rate (as per ORG-MAT Sept ’03). Last year, the Pharmaceutical Industry saw a spate of new launches. The product portfolios among serious domestic companies are undergoing a major stir. The local pharmaceutical companies attempted to accelerate the launch of global products that do not have a presence in India. This was driven by their belief that these products would become inaccessible after the existence of Product Patents post 2005. However, many of them soon realized that establishing brands with critical mass is more important than the breadth of their portfolio. Further, the different growth opportunities within the various therapeutic categories, also determined a shift in portfolio among the major players. This resulted in greater competition among value-added segments like anti-hypertensives and cholesterol reducers, and the market in these areas saw significant expansion. Access to healthcare continues to be a major shortcoming in India. Despite having some of the lowest prices in the world for pharmaceutical products, our per capita consumption of drugs is also one of the lowest in the world. Only 30% of India’s population has access to modern healthcare. The government needs to recognize that it must boost its poor delivery capabilities, by taking help from the private sector. It is certainly not affordability that is the major issue here. It is the nonavailability of hospitals, healthcare centers, or even qualified doctors, in the vast tracts of India that preclude the use of modern medicines by a large number of Indians. The government’s own expenditure on healthcare infrastructure has actually shrunk over the past few years as a percentage of GDP. This failure of the government has led to their continued dependence on price controls of drugs as a means to demonstrate their intervention to the public. The potential for the private sector to expand healthcare access is vast. Indeed, in recent times hospital chains, like Apollo group, have made significant contribution to the establishment of new capacity. This paradigm, coupled with an emerging health insurance sector, is well poised to significantly improve the healthcare scenario in India. This will thereby, push up the demand for quality medicines. Unfortunately, there is a serious dichotomy in the way the government has been viewing the pharmaceutical industry. On the positive side, the health ministry has initiated several measures to ensure the quality of drugs available in India. Steps have been taken to ascertain the quality of drugs imported in India, which predominantly goes unchecked. Regrettably, the government has postponed the enforcement of Good Manufacturing Practice (GMP), since the vast majority of the small-scale manufacturers lobbied against it. It is difficult to reconcile the fact that the same government which proposes harsh action against sub-standard and spurious drug manufacturers can be so lenient with such large number of firms that are virtually incapable of producing consistent quality drugs. Even if regulations are made more stringent, the administrative machinery to enforce it is simply inadequate. OUTLOOK India is shining, with a GDP forecast in excess of 8%, forex reserves exceeding the $100bn mark, inflation at the rate of 6% and set to fall further, India is on the threshold of exceptional growth. The year 2003-4 is estimated to be the highest economic growth in the last 15 years. Agriculture is no longer a constraint on the economy. Its contribution to the GDP has gone down to 23%. In the rural areas as well, its contribution to the GDP is only 48%. Furthermore, the industry to agricultural linkage has weakened since the start of the decade. Infrastructure - a traditional weakness of the Indian 9 economy - is also undergoing some tremendous improvements. The government’s significant investment in mega projects such as the golden quadrilateral road project has indicated its desire to create an enabling structure that would support change. lobbying of small-scale manufacturers, adherence to the same has been postponed till January 2005. Furthermore, the Government has re-engineered the financial sector and slashed the interest rates and pushed down the cost of money by over 500 points. This enables Industries to restructure and increase the consumer’s ability to buy. The operational integration of Pharmacia colleagues with Pfizer was smoothly accomplished during the year and a total of 267 Pharmacia colleagues migrated to Pfizer. A well-designed induction and training module was rolled out to all the colleagues through a workshop process. It included product related training, cultural orientation – the Company’s Core Values, Leader Behaviors and other salient features of the organization – and a module on Change Management. Backed by its brain power – 5 Lakh engineers, 2.5 Lakh doctors and 75 Lakh graduates – India is seen as having a clear shot at being the coding capital of the world, the back office to global corporations, the global original equipment manufacturer of auto ancillaries and the preferred supplier of infrastructure – erection – construction skills. Goldman Sachs’ BRIC Report sees India as the third largest economy in the world by 2050 behind China and the US. A DSP Merrill Lynch Report predicts doubling of India’s GDP to over a trillion dollars by the end of the decade. CLSA, an FII with over Rs 3,254 Crore invested in Indian stocks, set Dalal Street galloping with a prediction of 9-plus per cent growth in 2004-5. HUMAN RESOURCES Simultaneously, a comprehensive plan was developed and implemented to address the non-migration contingent of legacy colleagues in compliance with Pfizer’s Core Values. A team of Senior Managers met each colleague to communicate matters relating to separation in a transparent manner. The feedback from exit interviews indicated that despite the difficult circumstances, mutual goodwill was retained. The Company’s present employee strength is 2280. Performance Management Framework: The Parliament was dissolved on February 6th, paving the way for early elections. The Election Commission has announced that general elections will be held in four phases. This may be the first time in Indian politics that an election would be contested on the basis of meaningful economic agendas, rather than on populism or religion. RISKS AND CONCERNS The third amendment to the patent bill was introduced at the Indian Parliament in December 2003. However, with the dissolution of the Parliament in advance of the elections, the bill has lapsed. The bill proposed to introduce Product Patents, in compliance with the TRIPS commitments. However, the existence of ambiguous compulsory licensing provisions in the Patents Act, 1970 will lead to considerable litigation. If the new government that comes to power bears a disposition similar to the existing government, then the bill will be passed as is, with no added clarity. The amendment to the Drugs and Cosmetics Act, 1940 was also introduced at the Parliament in December, 2003 and since no vote was taken on the same, it has now lapsed. The bill proposes to introduce the death penalty for spurious drug manufacturers and a central drug regulatory authority to administer the introduction of new drugs. The bill has received strong support from the health ministry as well as the Industry. The Pharmaceutical Policy, 2002, was warmly welcomed by the entire Industry as it sought to reduce the number of drugs under price control. However, the introduction of public interest litigation has stalled the implementation of the same. The matter is currently pending before the Supreme Court. GMP compliance, which was mandated for all players in the industry, too has received a set back. Owing to the strong The Performance Management System has been redesigned to facilitate good documentation of individual performance. It has been rolled out to the key users with necessary training and support. This will be a core focus area during 2004 to enhance the process of goal setting, to ensure high quality and timeliness of performance reviews and to facilitate identification of appropriate development plans. Web-based Performance Management Tool: Business Technology Division has developed an in-house, customized web-based Performance Management Tool in partnership with Employee Resources. The rollout to the employees has commenced. This will enable colleagues to electronically log and access objectives, incorporate milestones, create self-assessments and solicit feedback. In turn, supervisors will be able to review and track the team member’s objectives and development plans prior to the Performance Review Meetings. There will be further work to provide an interface of this tool with People Soft and this is slated for introduction in mid 2004. Talent Planning: Talent Planning continues to be a critical area of focus. Key positions have been covered under the Talent Planning Review. This includes identification of next line colleagues with potential for succession to critical positions and development plans. During the course of ’04, the Talent Planning process will be cascaded to cover the rest of the managerial positions. People Development: The People Development initiatives can be covered under two broad areas, Core Values & Leader Behaviors and the Leader’s Academy. 10 A) Core Values and Leader Behaviors: Continuous and significant emphasis is placed to enhance the understanding and practice of Core Values and Leader Behaviors amongst colleagues across the organization, through different initiatives. Some of these include: • Special sessions and workshops for all migrating colleagues and new recruits; • Wide dissemination of the Guidelines on Ethical Business Conduct; • Sessions on ‘Open Door Policy’ to encourage an inclusive environment and two way communication processes; • Holding ‘Open Forums’ where the Leadership Team address concerns, issues and suggestions raised by the colleagues. B) Leaders Academy: A novel initiative ‘Pfizer Leaders Academy’ was launched with the specific objective of developing the competencies of District Managers in the area of Leader Behaviors, interpersonal skills and coaching. A specially customized curriculum with pedagogic tools was designed and rolled out for all the District Managers. The post program evaluation and feedback has indicated a sustained impact. Industrial Relations: The Industrial Relations area can be summarized under three broad categories, the Collective Bargaining Agreement, the Closure of Depot Locations and the Status of Chandigarh Plant. A) Collective Bargaining Agreement: The Union and Management signed a Collective Bargaining Agreement including requirements on productivity improvement with the Pfizer Employees Union in June ’03. The Settlement is effective for a period of 4 years from 1.1.2001 to 31.12.2004. Overall, a positive industrial relations climate prevails. B) Closure of Depot Locations: Closure of six Depot Locations was achieved in a smooth manner. The changeover to a CFA based arrangement has been put in its place. C) Status of Chandigarh Plant: An extensive programme of Internal Audit further supplements the Company’s internal control systems. This is done by the Internal Audit department, which is supported by an independent firm of Chartered Accountants. The Management and the Audit Committee of the Board periodically reviews reports of Internal Auditors. Your Company has clearly laid down policies, guidelines and procedures that form part of its internal control system. The internal control system is designed to ensure that all the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of the assets. PRODUCTION OPERATIONS The up-gradation of the Thane Facility is nearing completion. The first and second phase involving Pharmacy-storage and dispensing, granulation, tabletting, oral liquid manufacturing, primary and secondary packaging, part of encapsulation and oral liquid filling and packaging has been completed. The third phase that comprises the balance of encapsulation and oral liquid filling, packaging, liquid suspension manufacture has been completed up to 70%. The anticipated date for its completion is August 2004. The up-gradation of the Raw Material Warehouse and the installation of a new Purified Water Plant have been completed. Thane Plant has been accredited with the ISO 14001 (Environment Management System) Certificate. CORPORATE GOVERNANCE Your Company has always strived to incorporate appropriate standards for good Corporate Governance. It has taken adequate steps to ensure that all mandatory provisions of Corporate Governance as prescribed under the amended Listing Agreements of the Stock Exchanges, with which the Company is listed, are complied with. A separate report on Corporate Governance is annexed as a part of the Annual Report, along with the Auditor’s Certificate on its compliance. PFIZER INC. In April 2003, Pfizer Inc. merged with Pharmacia Corporation. The combined operations of the two companies enlarges Pfizer’s portfolio of Pharmaceutical products, Consumer Healthcare brands and expands its Animal Health business. For the third year in a row, Pfizer’s Lipitor tops the annual sales ranking of U.S. prescription drugs compiled by IMS Health, a provider of business intelligence about the pharmaceutical and healthcare markets. Three other Pfizer products - Zoloft, Celebrex and Neurontin - also rank in the top 10. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY For the fiscal year ended December 31, 2003, total revenues rose 40% to $45.19 billion. Net income from continuing operations before accounting change fell 82% to $1.64 billion. Results reflect the acquisition of Pharmacia and the launch of new products, offset by a $5.05 billion in-process R&D charge and increased merger costs. Your Company has maintained a proper and adequate system of internal control. This is to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition, and that transactions are authorized, recorded and reported correctly. Pfizer Inc. was presented the Excellence in Corporate Philanthropy Award by the Committee to Encourage Corporate Philanthropy (CECP) recently. This award recognizes Pfizer Inc.’s commitment to corporate giving, after highlighting both strategic and humanitarian considerations. Currently, discussions are in progress with the Union to ensure a smooth closure of the Chandigarh Plant. There are 83 workmen and 17 officers employed at the Plant. The production operations and activities have been ceased. 11 DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to Section 217 (2AA) of the Companies Act, 1956 (the Act), your Directors confirm the following: i. In the preparation of the Annual Accounts, the applicable accounting standards have been followed; ii. Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; iii. iv. Your Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; Your Directors have prepared the attached Statement of Accounts for the year ended November 30th, 2003 on a going concern basis. DIRECTORS During the year Mr. Charles L. Sarris has resigned from the Board with effect from October 28, 2003. The Board places on record its appreciation for the valuable services rendered by Mr. Sarris during his tenure of office. Mr. Richard H. Gane was appointed as a Director under Article 119 as a non-retiring Director with effect from October 28, 2003. In accordance with the Articles of Association of the Company, Mr. Pradip P. Shah retires by rotation as Director at the ensuing Annual General Meeting and is eligible for re-appointment. DUCHEM LABORATORIES LIMITED The net sales of Duchem Laboratories Limited for the year ended November 30th, 2003 amounted to Rs. 1516 Lakhs as against Rs. 7593 Lakhs for the previous year. It incurred a Net Loss of Rs. 382 Lakhs for the said year as against Net Loss of Rs.2 Lakhs for the previous year. AUDITORS M/s Bharat S. Raut & Co., the Company’s Auditors will retire at the conclusion of the ensuing Annual General Meeting. They have given their consent to continue to act as Auditors of the Company for the current year, if re-appointed. OTHER INFORMATION As required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, information pertaining to conservation of energy, technology absorption and exports is given in Annexure I to this Report. The information required under Section 217(2A) of the Companies Act, 1956 read with the Rules framed thereunder is given in Annexure II to this Report. For and on behalf of the Board of Directors R. A. SHAH Chairman Mumbai, February 26, 2004 12 Annexure I to the Directors’ Report PARTICULARS PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 (A) CONSERVATION OF ENERGY a) Energy conservation continues to receive top priority in the Company. Energy audits are carried out, consumption monitored, maintenance systems improved and distribution losses are reduced. Specific Energy Conservation Measures are: b) i) Installation of Energy Efficient Air compressors with Variable Frequency Drives. ii) Recycling of Cooling Tower Water for Central Vacuum system. iii) Replacement of conventional type lighting fixtures with fixtures having electronic chokes. vi) Use of additives in lube oil to reduce friction losses in air compressors. Additional proposals or activities, if any i) Use of energy efficient fuel for Boiler. ii) Installation of Auto Blowdown system and Sonic Soot Blower for Boiler. c) Impact of measures taken Energy conservation measures stated above have resulted in gradual savings. Total energy consumption and energy conservation per unit of production: As per Form A of the Annexure hereunder: FORM A DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY A. POWER & FUEL CONSUMPTION Current Year 1.12.2002 to 30.11.2003 1. Previous Year 1.12.2001 to 30.11.2002 Electricity (a) Purchased Units (000’s) KWH 13178 KWH 21512 Total amount (000’s) Rs. 51845 Rs. 86466 Rate/Unit Rs. 3.93 Rs. 4.02 Through diesel generator (000’s) KWH 146 KWH 396 Units/Litre of LDO KWH 2.35 KWH 2.57 Marginal Cost/Unit Rs. 6.12 Rs. 4.88 — — — — — — — — (b) Own Generation (i) (Considering only LDO price) (ii) Through steam turbine/generator 2. Coal 13 Current Year 1.12.2002 to 30.11.2003 3. 4. a) Previous Year 1.12.2001 to 30.11.2002 Furnace Oil & LSHS Quantity KL 2642 KL 4979 Total Amount (000’s) Rs. 35057 Rs. 59175 Avg. Rate per KL Rs. 13269.11 Rs. 11884.92 Others / Internal generation Quantity Nil Nil Total Cost Nil Nil Rate/Unit Nil Nil Standard Consumption per unit of production Electricity (Units) Furnace Oil (Litres) There is no specific standard as the consumption per unit depends on the product mix of basic drugs (from chemical and biochemical processes) and formulations (capsules, tablets, ointments, liquids & injectibles). } Coal Nil (B) TECHNOLOGY ABSORPTION Efforts made in technology absorption: FORM B DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION RESEARCH AND DEVELOPMENT (R & D) 1. Specific areas in which R&D is carried out by the Company: R&D is carried out in Chemical, Pharmaceutical, Clinical, Analytical and Engineering Development areas. 2. Benefits derived as a result of the above R&D: (a) Product improvements, process development, import substitution, standardization of quality control of bulk drugs and formulations; (b) New application for drugs researched abroad, better dosage recommendations and improvements. 3. Future plan of action: (a) Import substitution and resolving process problems encountered in basic chemical and fermentation manufacturing for quality and productivity. (b) Optimization of process parameters with emphasis on cost control and rationalization. (c) Studying feasibility of using new manufacturing technology in existing dosage forms. (d) Development of new dosage formulations - Pharmaceutical and Animal Health. 14 4. Expenditure on R&D (i) Rs. In Lakhs Capital 147.72 (ii) Revenue 1970.60 (iii) Total 2118.32 (iv) Total R&D Expenditure as Percentage of Total Turnover 4.46% TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION 1. 2. Efforts, in brief, made towards technology absorption, adaptation and innovation: a) The Company is allowed to use the patents and technical know-how of Pfizer Inc., U.S.A. and its Affiliates. Continuous adapti ve research and development of products and processes with the objective of import substitution and cost containment in an inflationary environment is carried out; b) Clinical research to introduce new products researched abroad and to find their new applications, better dosage recommendations and improvements under Indian conditions is carried out; c) Development of ancillary technology, for packaging materials and machinery is undertaken. Benefits derived as a result of the above efforts: Product improvement, cost reduction, import substitution, standardized analytical methods which are reflected in the productivi ty of resources and better quality and stability of products. 3. Technology imported during the last 5 years reckoned from the beginning of the financial year is given below : Technology Imported Manufacture of the active substance - Azithromycin Year of Import Has technology been fully absorbed 1997-1998 Being absorbed Dihydrate Tablet formulation of Azithromycin Dihydrate 1997 - 1998 Yes Paediatric Powder formulation of Azithromycin Dihydrate 1997 - 1998 Yes Injectible formulation of Cefoperazone 1998 Yes (C) FOREIGN EXCHANGE EARNINGS AND OUTGO 1. Activities relating to exports: Initiatives taken to increase exports; development of new export markets for products and ser vices and export plans. The Company is at present exporting bulk drugs and formulations in bulk pack to Hongkong and Belgium, and nutritional supplemen ts to Sri Lanka. The Company is continuously exploring possibilities of exporting more of its products to different markets. 2. During the period under review: a) The foreign exchange earnings by the Company were Rs. 3077.07 Lakhs. b) The foreign exchange expenditure (which includes import of raw materials, spares and remittance of dividends etc.) was Rs. 4729.26 lakhs. For and on behalf of the Board of Directors R.A. SHAH Chairman Mumbai: February 26, 2004 Mr. Kewal Handa Mr. S Madhok Mr. Virendra Mahurkar Dr. Shoibal Mukherjee Mr. Subbaraman Ramkrishna Mr. Hocine Sidi Said Mr. Harold Walder Employed for a part of financial year under review and were in receipt of remuneration for any part of that year, at a rate which in the aggregate, was not less than Rs.2,00,000/- per month Mr. K G Ananthakrishnan 4 5 6 7 8 9 B 1 B.Sc. MMM, Jamnalal Bajaj Baccalaureate (Economics), Bachelor of Business Admn. B.A., D.B.M., Dip. In H.R.M. M.Sc. In Economic History (London School of Economics) M.B.A. - Finance MD. Pharmacology DM, Chemical Pharmacology Diploma Business Management Marketing, Journalism PR, B.A.(Honours) B.Sc. M.Com., A.I.C.W.A, A.C.S. 1/Jun/2003 23/Oct/1998 1/Jan/2001 23/Feb/1998 19/Jul/1990 1/Jul/2002 20/Dec/1976 18/Jun/1990 26/Aug/2002 28 38 17 26 21 13 33 29 18 2,213,573 3,876,112 4,607,809 2,799,307 2,880,925 2,809,634 2,441,197 5,373,744 2,932,372 4,225,749 48 59 38 48 43 35 51 52 41 57 @ The designation Director and Senior Director denote functional Director and not a Director on the Board of Directors of the Company. Vice President, Marketing & Sales Pharmacia India Pvt. Ltd. Country Manager, Pfizer, Denmark Group General Manager (HRD), Greaves Limited Medical Executive Alembic Chemical Works Co Ltd, President-Corporate Affairs & HRD Modern Group, Mumbai Factory Manager Indo-Pharma Pharmaceuticals Works Limited Vice President - Information Technology. Hughes Telecom(India) Limited. Secretary & Financial Controller Schrader Scovill Duncan Limited Medical Representative Alembic Chemical Works Director Ambit Corp. Finance R A SHAH Chairman ON BEHALF OF THE BOARD OF DIRECTORS No director is related to any other Director. None of the above employees is related to any director of the Company. None of the employees holds more than 2% of the paid up equity capital of the Company. Gross remuneration includes Salary, Allowances, Bonus, Taxable Value of Perquisites and Company’s Contribution to Provident and Superannuation Funds Mumbai, February 26, 2004 3 4 5 NOTES : 1 All the above persons are / were full time employees of the Company. 2 The Employment is subject to the rules and regulations of the Company in force from time to time. @ Senior Director, Pharmaceuticals @ Senior Director, Employee Resources Managing Director @ Senior Director, Medical @ Senior Director, Corporate Affairs Executive Director, Finance @ Senior Director, Animal Health @ Director, Business Development B.Sc., Post Graduate in Software Technology. 28 LAST EMPLOYMENT 3 @ Senior Director, Business Technology 2/May/1989 AGE Mr. Arun O Gupta M.Sc., Ph.D., D.O.M. GROSS REMUN 2 Executive Director, Technical Operations EXP. YRS Dr. B M Gagrat DATE OF EMPLOYMENT 1 QUALIFICATIONS NAME Sr No DESIGNATION AND NATURE OF DUTIES Employed throughout the financial year under review and were in receipt of remuneration for that financial year in the aggregate of not less than Rs.24,00,000/- per annum. A Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended November 30, 2003. Annexure II to the Directors’ Report 15 16 Report on Corporate Governance PFIZER’S PHILOSOPHY ON CODE OF GOVERNANCE Your Company strongly believes that the system of Corporate Governance protects the interests of all the stakeholders by inculcating transparent business operations and accountability from management. The 8 Core Values viz., Customer Focus, Team Work, Leadership, Innovation, Respect for People, Integrity, Performance and Community guide the Company towards fulfilling the consistently high standard of Corporate Governance in all facets of the Company’s operations. BOARD OF DIRECTORS Your Board comprises of an optimum combination of independent professionals as well as Company Executives having in-depth Name of Directors knowledge of the business of the Industry. The size and composition of the Board conforms with the requirements of the Corporate Governance Code under the Listing Agreement with the Stock Exchanges. During the financial year under review, five Board Meetings were held on the following dates: 17th December 2002; 26th February 2003; 31st March 2003; 24th June 2003 and 26th September 2003. None of the directors on the Board hold the Office of Director in more than 15 public limited companies in India or memberships in committees of the Board in more than 10 Committees or Chairmanship of more than 5 Committees. Table set below will explain the details: Category of Directorship@ Board Meetings attended Attendance at the last AGM No. of other Directorship held NED (I) 5 Present 14 7/2 Mr. Hocine Sidi Said (Managing Director) WTD 4 Present 1 1/0 Mr. Kewal Handa WTD 5 Present 2 Nil Dr. B. M. Gagrat WTD 5 Present 1 Nil Mr. Pradip Shah NED (I) 5 Present 10 5/3 Mr. Richard Hugh Gane # NED (I) NA NA Nil Nil Mr. Charles L. Sarris % NED (I) Nil Absent Nil Nil Mr. B. Valentini * NED (I) Nil NA Nil Nil Mr. R.W. Norton * NED (I) Nil NA Nil Nil Mr. Daniel Cronin * NED (I) Nil NA Nil Nil Mr. James Hilboldt * NED (I) Nil NA Nil Nil Dr. M.W. Hodin * NED (I) Nil NA Nil Nil Mr. Michael Sweitzer * NED (I) Nil NA Nil Nil Dr. Pierre G. Etienne * NED (I) Nil NA Nil Nil Mr. R. A. Shah (Chairman) @ NED (I) - Non-Executive Director, Independent WTD - Whole-time Director # Appointed w.e.f. October 28, 2003 * Resigned w.e.f. February 26, 2003 % Resigned w.e.f. October 28, 2003 No. of Board Committees of which Member/ Chairman Notes: 1. Number of directorships / memberships held in other companies excludes directorships/memberships in private limited companies, foreign companies, membership of managing committees of various chambers/ bodies and alternate directorships. 2. An Independent Director is a Director who apart from receiving directors remuneration, does not have any material pecuniary relationship or transactions with the Company, its promoters or its management or its subsidiaries, which in the judgement of the Board may affect their independence of judgement. 17 APPOINTMENT / REAPPOINTMENT OF DIRECTOR Mr. Pradip P. Shah retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. A brief profile of the Director retiring by rotation and eligible for reappointment, as required by Clause 49 VI A of the Listing Agreement is as under: Mr. Pradip P. Shah The Board of Directors appointed Mr. Pradip P. Shah as a Director of the Company with effect from December 7, 1999. He was appointed as a Director liable to retire by rotation by the shareholders at the Annual General Meeting held on May 6, 2002. Mr. Shah is due to retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible, offers himself for reappointment. Mr. Shah is 51 years old. He is a qualified Chartered Accountant as well as a Cost Accountant. Mr. Shah is a Director on the Boards of several reputed Companies. He has also been a member of various prestigious committees/commissions. Mr. Shah was instrumental in setting up CRISIL, the largest Credit Rating Agency. He is the Chairman/ Director of the following public limited Companies in India and Chairman/ Member of following Committees: Name of Company Designation Committee Member/ Chairman Asset Reconstruction Company (India) Ltd. Director — — BASF India Limited Director Audit Member Gujrat Positra Port Infrastructure Ltd. Director — — Matsushita Lakhanpal Battery India Ltd. Director Audit Remuneration Member Chairman Prudential ICICI Asset Management Ltd. Director Audit Chairman Patni Computers System Ltd. Director Audit Member Shah Foods Limited Chairman — — Sonata Software Ltd. Director Audit Remuneration Member Member The Shipping Corporation of India Ltd. Director — — Wartsila India Ltd. Director Audit Chairman BOARD COMMITTEES Companies Act, 1956. The Board of Directors has approved the following terms of reference for the Audit Committee: Currently, the Board has two committees viz., the Audit Committee and the Shareholders Committee. The Board decides the terms of reference of these Committees and the assignment of its members thereof. (1) Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible. AUDIT COMMITTEE The Audit Committee comprises of Mr. R.A. Shah as Chairman and Mr. Pradip P. Shah and Mr. Richard Gane as members. Mr. Charles L. Sarris, erstwhile member of the Committee resigned from the Committee effective October 28, 2003 and Mr. Richard Gane was appointed as a member of the Committee effective October 28, 2003. Mr. Pradip P. Shah, Chartered Accountant, fulfills the requirement under the Code that the Audit Committee must have a member with a finance background. Mr. A. Anjeneyan, Company Secretary, acts as the Secretary to the Committee. (2) Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment for any other services. (3) Reviewing with management the annual financial statements before submission to the Board, focusing primarily on: a. Any changes in accounting policies and practices. b. Major accounting entries based on exercise of judgment by management. c. Qualification in draft audit report. d. Significant adjustments arising out of audit. e. The going concern assumption. f. Compliance with accounting standards. g. Compliance with stock exchange and legal requirements concerning financial statements. Terms of reference Terms of reference of the audit committee include the matters specified in clause 49(II) of the Listing Agreement with the Stock Exchanges and also as required under section 292A of the 18 h. Any related party transactions i.e. transactions of the company of material nature, with promoters or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the company at large. (4) Reviewing with the management, external and internal auditors, the adequacy of the internal control systems. (5) Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. (6) Discussion with internal auditors on any significant findings and follow up thereon. Details of remuneration paid to the directors during the year 2002- 2003 are as below: Executive Directors Name of Director Mr. Hocine Sidi Said Mr. K. Handa Dr. B. M. Gagrat Total Mr. A. Anjeneyan, Company Secretary, acts as the Secretary to the Committee and is the Compliance Officer. 347 Complaints were received during the financial year of which 346 have been redressed / answered to the satisfaction of the shareholders. No investor grievance remained unattended/pending for more than 30 days and no request for share transfers and dematerialisation received during the financial year was pending for more than two weeks. REMUNERATION TO DIRECTORS Remuneration Committee being a non-mandatory requirement has not been formed. Remuneration of employees largely consists of fixed pay i.e. Basic pay, allowances, perquisites and variable component i.e. performance incentives which varies with different grades and is related to the qualification, experience and responsibilities handled by the employee, etc. 46.08 53.74 42.26 123.13 18.95 142.08 ii. Employee Stock Option Scheme. The Company does not have any Stock Option Scheme. (10) To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors. The Share Transfer-cum-Shareholders’/Investors’ Grievance Committee comprises of Mr. Richard Gane as the Chairman and Mr. Hocine Sidi Said, Mr. Kewal Handa and Dr. B. M. Gagrat as the members. Mr. Charles L. Sarris, the erstwhile Chairman of the Committee resigned from the Committee effective October 28, 2003 and Mr. Richard Gane was appointed as the Chairman of the Committee effective October 28, 2003. — 12.00 6.95 Service Contracts, Severance Fees and Notice Period. The appointment of the Managing Director and Whole-time Directors is governed by the Articles of Association of the Company and the Resolutions passed by the Board of Directors and the members of the Company. These cover the terms and conditions of such appointment read with the service rules of the Company. A separate Service Contract is not entered into by the Company with the Managing Director and with those elevated to the Board from the management cadre, who already have a prior Service Contract with the Company. There is no separate provision for payment of severance fee under the resolutions governing the appointment of Managing Director and Whole-time Directors. In terms of the Articles of Association, resignation of a Director becomes effective upon its acceptance by the Board. (9) Reviewing the company’s financial and risk management policies. SHAREHOLDERS’ COMMITTEE 46.08 41.74 35.31 i. (8) Discussion with the external auditors before the audit commences, nature and scope of audit as well as have post audit discussion to ascertain any area of concern. All the meetings were attended by Mr. R. A. Shah, Mr. Pradip Shah, Mr. K. Handa – Executive Director-Finance, the Internal Auditors and the Statutory Auditors. Performance Total linked Incentives (Rs. Lakhs) (Rs. lakhs) Notes: (7) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. Three Audit Committee meetings were held during the year, on 26th February 2003; 24th June 2003 and 26th September 2003. Salary and Benefits (Rs. lakhs) iii. Performance linked incentive criteria. The Company has internal norms for assessing the performance of its senior executives including Whole Time Directors. The above performance linked incentives are approved by the Board based on such norms. Non-Executive Directors Name of Director Sitting Fees (Rs. Lakhs) Commission Total (Rs. Lakhs) (Rs. Lakhs) Mr. R.A. Shah Mr. Pradip Shah 0.45 0.45 2.00 2.00 2.45 2.45 Total 0.90 4.00 4.90 Notes: 1. The commission to non-executive directors is decided by the Board of Directors of the Company within the limits stipulated by the Special Resolution passed at the 50th Annual General Meeting held on 26th April, 2001. 2. Mr. R. A. Shah is a senior partner of Crawford Bayley & Co., Solicitors & Advocates, who have a professional relationship with the Company. The professional fees of Rs. 69.74 lakhs that was paid to them during the year is not considered material enough to impinge on the independence of Mr. R. A. Shah. 3. Besides dividend on ordinary shares held, if any, by the directors, no other payments have been made or transactions of a pecuniary nature entered into by the Company with the above non-executive directors. 19 GENERAL BODY MEETINGS The details of the last General Meetings held: Date Venue Time Y. B. Chavan Auditorium General Jagannath Bhosale Marg, Next to Sachivalaya Gymkhana Mumbai 400 021 3.00 PM May 6, 2002 Y. B. Chavan Auditorium General Jagannath Bhosale Marg, Next to Sachivalaya Gymkhana Mumbai 400 021 3.00 PM 50th AGM Apr 26, 2001 Y. B. Chavan Auditorium General Jagannath Bhosale Marg, Next to Sachivalaya Gymkhana Mumbai 400 021 3.00 PM Y. B. Chavan Auditorium General Jagannath Bhosale Marg, Next to Sachivalaya Gymkhana Mumbai 400 021 11.30 AM 52nd AGM Oct 24, 2003 51st AGM EGM Aug 21, 2002 Court Convened General Meeting for approval of Scheme of Amalgamation of Parke-Davis (India) Ltd. with Pfizer Limited Disclosure Practices for Prevention of Insider Trading MEANS OF COMMUNICATION As the results of the Company are published in the newspapers, half- yearly reports are not sent to each household of shareholders. DISCLOSURES b. As required, by the SEBI Regulations, the Company has adopted a “Code for Corporate Disclosure Practices for Prevention of Insider Trading” with effect from June 27, 2002. Mr. A. Anjeneyan, Company Secretary has been appointed as the Compliance Officer for this purpose. This Code is applicable to all the employees as well as Directors of the Company. Half-yearly Reports No resolution was put through postal ballot at any of the above General Meetings. None of the resolutions proposed for the ensuing Annual General Meeting need to be passed by Postal Ballot. a. Pursuant to the above requirements of SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended, the Company has adopted a “Code of Conduct for Prevention of Insider Trading” with effect from June 27, 2002. Mr. A. Anjeneyan, Company Secretary has been appointed as the Compliance Officer for this purpose. The code is applicable to all such employees of the Company who are expected to have access to unpublished price sensitive information relating to the Company as well as all Directors. Quarterly Results The quarterly results are generally published in “Business Standard” and “Sakal”. The results are also displayed on the Company’s website www.pfizerindia.com shortly after its submission to the Stock Exchanges. The official news releases are also displayed on the Company’s website. Presentation to institutional investors or to analysts Two teleconferences were held with Institutional Investors, Analysts and the Press on March 4, 2003 and October 6, 2003. The transcript of the same were put on the Company’s website www.pfizerindia.com Related party transactions The Company has not entered into any materially significant related party transactions with its Promoters, Directors or Management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large. EDIFAR Filing As per the requirements of Clause 51 of the Listing Agreement, all the data relating to quarterly financial results, shareholding pattern etc. are being electronically filed on the EDIFAR website www.sebiedifar.nic.in within the timeframe prescribed in this regard. Transactions with the related parties are disclosed in Note 20 of Schedule 19 to the financial statements in the Annual Report. Management Discussion & Analysis Report The Management Discussion & Analysis Report forms a part of this Annual Report. All matters pertaining to industry structure and developments, opportunities and threats, segment/product wise performance, outlook, risks and concerns, internal control systems and adequacy, discussion on financial and operational performance and material developments in human resources are discussed in the said report. Compliances by the Company The Company has complied with the requirements of the Stock Exchanges, SEBI and other statutory authorities on all matters relating to capital markets during the last three years. No penalties or strictures have been imposed on the Company by the Stock Exchanges, SEBI or other statutory authorities relating to the above. GENERAL SHAREHOLDER INFORMATION Dates of Book Closure: INSIDER TRADING April 20, 2004 to April 29, 2004 (both days inclusive) Code of Conduct for Prevention of Insider Trading The Securities and Exchange Board of India (SEBI) has, effective February 20, 2002 introduced amendments to the existing Insider Trading Regulations of 1992 which ordain new action steps by corporates and other market intermediaries for the purposes of prevention of Insider Trading. Date, time and venue of the Annual General Meeting: April 29, 2004; 3.00 PM Y.B. Chavan Auditorium General Jagannath Bhosale Marg Near Sachivalaya Gymkhana Nariman Point, Mumbai 400 021 20 Dividend payment date: MARKET PRICE DATA The dividend recommended by the Board of Directors, if declared at the ensuing Annual General Meeting, shall be deposited in a separate bank account within 5 days of its declaration and shall be paid/credited on or after May 7, 2004, to the account mandated by the shareholders. The High and Low prices of the Company’s share (of the face value of Rs.10/- each) from December, 2002 till November, 2003 are as given below: Listing on Stock Exchanges: Month The Company is listed on The Stock Exchange, Mumbai and the National Stock Exchange. The annual listing fees have been paid and there is no outstanding payment towards the Exchanges, as on date. Stock Code: Stock Exchange THE STOCK EXCHANGE, THE NATIONAL STOCK MUMBAI EXCHANGE High Low High Low December 2002 401.00 370.05 409.90 374.50 January 2003 386.50 335.00 405.00 334.00 February 2003 370.00 320.00 364.00 320.00 March 2003 352.95 298.05 369.90 301.00 April 2003 325.05 300.00 327.00 299.05 The Stock Exchange, Mumbai – 500680 National Stock Exchange - PFIZER EQ May 2003 416.00 312.00 419.00 317.55 June 2003 409.00 364.60 409.00 362.00 Financial Calendar (tentative): July 2003 479.00 366.00 446.00 367.00 August 2003 440.95 381.25 440.00 358.80 September 2003 478.00 385.50 480.00 377.00 October 2003 435.00 389.00 442.00 388.90 November 2003 482.90 399.90 480.50 420.00 Registered Office: Share transfer system: The Share Transfer-cum-Shareholders’/Investors’ Grievance Committee approves the transfer and transmission of shares, issue of duplicate share certificates and allied matters. The Committee also monitors redressal of investors’ grievances. The Company’s Registrars, Tata Consultancy Services (TCS) have adequate infrastructure to process the share transfers. The share transfers received are processed within 15 days from the date of receipt, subject to the transfer instrument being valid and complete in all respects. In compliance with the Listing Guidelines, every six months, a practising Company Secretary audits the System of Transfer and a Certificate to that effect is issued. The Company’s scrips form part of the SEBI’s Compulsory demat segment bearing ISIN No. INE182A01018. 5500 480 440 4500 420 4000 400 380 3500 360 340 BSE Sensex 5000 460 3000 320 2500 Oct-03 Nov-03 Sep-03 Jul-03 Aug-03 300 Jun-03 Tata Consultancy Services Park West II Raheja Estate, Kulupwadi Road Borivli (East) Mumbai – 400 066 Tel.: 022 566 89898 Fax : 022 566 89799 Email: tcssharac@mumbai.tcs.co.in BSE Sensex 500 Apr-03 Registrar and Transfer Agents: Pfizer Share Price Dec-02 Homepage: www.pfizerindia.com Performance of Pfizer Share Price to broad based index (BSE Sensex) Pfizer Share Price Pfizer Limited Pfizer Centre, Patel Estate S.V. Road, Jogeshwari (W) Mumbai – 400 102 Tel. : 022 5693 2000 Fax : 022 5693 2377 e-mail : sundaresan@pfizer.com May-03 of March, 2004 of June, 2004 of September, 2004 of February, 2005 Feb-03 week week week week Mar-03 Fourth Fourth Fourth Fourth Jan-03 First Quarter Second Quarter/Half-yearly Third Quarter Audited results DISTRIBUTION OF SHAREHOLDING: (a) Class-wise Distribution of Equity Shares as on 30th November, 2003: Number of No. of % of Equity Shares held Shareholders Shareholders 11000 80268 99.00 1001 5000 675 0.83 5001 - 10000 44 0.05 10001 - 50000 63 0.08 50001 - 100000 7 0.01 100001 - 5,00,000 20 0.02 500001 - 50 lakhs 4 0.00 Above 50 lakhs 1 0.00 Total 81082 No. of % of Shares Shareholding 6930126 24.06 1265809 4.40 314784 1.09 1313442 4.56 547850 1.90 3996413 13.88 5053016 17.55 9376100 32.56 100.00 28797540 100.00 21 (b) Shareholding Pattern as on 30th November, 2003: Category No. of Shares Percentage Foreign Collaborators Banks Financial Institutions Foreign Institutional Investors Mutual Funds Domestic Companies Non-Domestic Companies Non-Resident Indians Others 11518996 50666 4352100 361203 2866708 985403 363544 157282 8141638 40.00 0.18 15.11 1.26 9.95 3.42 1.26 0.55 28.27 Total 28797540 100.00 Dematerialization of shareholding: The Company’s scrips form part of the Compulsory demat segment for all investors effective May 31, 1999. The Company has established connectivity with both the Depositories viz., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) through the Registrars, Tata Consultancy Services. As on 30th November, 2003, 50.32% (representing 83.86% of the widely-held shares) of the Company’s paid-up share capital representing 14489859 shares is held in dematerialised form. Outstanding GDRs/ADRs/Warrants or any convertible instruments, etc.: As of date, the Company has not issued these type of securities. Plant Locations: (i) Thane Belapur Road KU Bazar Post Navi Mumbai 400 705 Tel : 022 5591 6161 Fax : 022 5591 6160 (ii) Plot No. 178-178A Industrial Area, Phase I Chandigarh 160 002 Tel : 0172 2650 578/79/80/84 Fax : 0172 2655 178 Bank details for dividend payment: Shareholders desirous of receiving their dividend directly in their bank account through Electronic Clearing System (ECS) are requested to inform their ECS mandate to the Company’s Registrars and Transfer Agent, Tata Consultancy Services. Beneficiaries holding the Company’s scrip in the dematerialised form may intimate the change in their bank details to their Depository Participant (DP) furnishing their details with the correct 9 digit MICR code of their bank. NON-MANDATORY REQUIREMENTS Chairman’s Office The Chairman, Mr R.A. Shah, Solicitor is a Senior Partner of Crawford Bayley & Co. His office is located in Mumbai and, therefore, he has not sought maintenance of the Chairman’s Office at the Company’s Registered Office premises. Shareholders’ Rights The half-yearly financial results are published in the newspapers as mentioned above and also they are displayed on the Company’s website. Therefore, the results were not separately circulated to all shareholders. On behalf of the Board of Directors Mumbai, February 26, 2004 R.A. SHAH Chairman Certificate of Compliance with the Corporate Governance requirements under Clause 49 of Listing Agreement We have examined the compliance of conditions of Corporate Governance by Pfizer Limited (‘the Company’) for the year ended 30 November 2003, as stipulated in Clause 49 of the Listing Agreement of the Company with Stock Exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the Company’s management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion, and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement. Based on the confirmation received from the Company’s share transfer agent, and representations made by the management, we report that no investor grievance is pending for a period exceeding one month against the Company as at 30 November 2003. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For Bharat S Raut & Co. Chartered Accountants Mumbai, 26 February 2004 Sanjay Aggarwal Partner Membership no: 40780 22 Auditors’ Report To the Members of Pfizer Limited We have audited the attached Balance Sheet of Pfizer Limited (‘the Company’) as at 30 November 2003 and the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. 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 India. 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. 1. As required by the Manufacturing And Other Companies (Auditor’s Report) Order, 1988 issued by the Central Government in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (‘the Act’), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 2. Further to our comments in the Annexure referred to in paragraph 1 above, we report that: a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of the audit; b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of the books; c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of affairs of the Company as at 30 November 2003; ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarwal Partner Membership No.: 40780 Mumbai , 26 February 2004 Annexure to the Auditors’ Report – 30 November 2003 With reference to the Annexure referred to in paragraph 1 of the report of the Auditors’ to the members of Pfizer Limited on the financial statements for the year ended 30 November 2003, we report that: 1. The Company has maintained proper records showing full particulars including quantitative details and location. The Company has a programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this programme, fixed assets have been physically verified by management during the current year and no material discrepancies were identified on such verification. 2. None of the fixed assets of the Company have been revalued during the year. d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act, to the extent applicable; 3. The inventories of finished goods, stores, spare parts and raw materials have been physically verified by the management during the current year. In our opinion, the frequency of such verification is reasonable. e) on the basis of written representations received from the directors of the Company as at 30 November 2003 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30 November 2003 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; 4. The procedures for the physical verification of inventory followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business. f) 6. On the basis of our examination of inventory records, we are of the opinion that the valuation of inventories is fair and proper, in accordance with generally accepted accounting principles and is on the same basis as in the preceding year. in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Act, in the manner so required and give a true and fair view in 5. The discrepancies noticed on verification between physical inventory and book records were not material and have been properly dealt with in the books of account. 23 7. The Company has not taken any loan, secured or unsecured, from companies, firms, or other parties listed in the register maintained under Section 301 of the Act, or from companies under the same management as defined under Section 370 (1B) of the Act. 8. The Company has not granted any loan, secured or unsecured, to companies, firms, or other parties listed in the register maintained under Section 301 of the Act. In our opinion, the rate of interest and other terms and conditions on which loan has been granted to the company under the same management as defined under Section 370 (1B) of the Act are not, prima facie, prejudicial to the interests of the Company. 9. The parties to whom loans or advances in the nature of loans have been given by the Company are regular in repaying the principal amounts as stipulated and in the payment of interest where applicable. 10. In our opinion, and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of stores, raw materials including components, plant and machinery, equipment and other assets, and for the sale of goods. 11. In our opinion, and according to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs 50,000 or more in respect of each party have been made at prices which are reasonable having regard to the prevailing market prices for such goods, materials or services or the prices at which such transactions for similar goods or services have been made with other parties. 12. The Company has a regular procedure for determination of unserviceable or damaged stores, raw materials and finished goods including traded goods, and adequate provision has been made in the accounts for loss arising on the items so determined. 13. The Company has not accepted any deposits from the public and consequently the provisions of Section 58A of the Act, and the rules made thereunder are not applicable, to the Company. 14. In our opinion, reasonable records have been maintained for sale and disposal of realisable scrap. We are informed by the management that the production process does not generate any by-products. 17. The Company has been regular in depositing Provident Fund dues and Employee’s State Insurance dues with the appropriate authorities during the year. 18. According to the information and explanations given to us, there are no undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty and excise duty which were outstanding at 30 November 2003 for a period of more than six months from the dates they became payable. 19. On the basis of our examination of books of account carried out by us in accordance with generally accepted auditing practices, and according to the information and explanations given to us, no personal expenses of employees or directors were charged to the Profit and Loss Account other than those payable under contractual obligations or in accordance with generally accepted business practice. 20. The Company is not a sick industrial company within the meaning of clause (o) of sub-section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. 21. In our opinion, and according to the information and explanations given to us by management, the service activities of the Company during the year were such that it was not necessary to maintain a system of: ■ allocating man-hours utilised to individual jobs; and ■ authorisation and control over allocation of labour to individual jobs. As regards the Company’s Clinical Research Development service activity, the Company has a reasonable system, commensurate with its size and nature of its business in respect of: ■ recording receipts, issues and consumption of materials and stores and allocating materials consumed to the relative jobs; and ■ authorisation at proper levels, and an adequate system of internal control, over issue and allocation of stores to relative jobs. As regards other services, the nature of services rendered is such that it does not involve consumption of materials and stores. 22. In our opinion, the matters specified in paragraph 4(D) of the Manufacturing and Other Companies (Auditor’s Report) Order, 1988 are not applicable to the Company during the year under audit. 15. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. 16. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules prescribed by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Act, and are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the records for determining whether they are accurate or complete. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarwal Partner Membership No.: 40780 Mumbai , 26 February 2004 24 Balance Sheet as at 30th November, 2003 Rupees in Lakhs Schedule Ref. Sources of Funds Shareholders’ funds Share capital Share capital suspense account Reserves and surplus 1 1A As at 30th Nov 2003 2879.93 — 2879.93 27960.25 2 3 Net block Capital work-in-progress at cost, including advances Investments Deferred tax asset (net) Current Assets, Loans and Advances Inventories Sundry debtors Cash and bank balances Loans and advances 2879.94 27923.01 30840.18 30802.95 30840.18 30802.95 13683.23 (8022.11) 13686.61 (8527.38) 5661.12 5159.23 448.96 536.99 6110.08 324.36 989.03 4 5 6 7 8 9 As at 30th Nov 2002 2344.21 535.73 TOTAL Application of Funds Fixed assets Gross block Depreciation Rupees in Lakhs 8658.23 5882.53 8907.81 8374.62 5696.22 528.31 789.98 8483.84 12341.03 6840.51 7259.95 31823.19 Current Liabilities and provisions Current liabilities Provisions 10 11 34925.33 (9619.39) (4191.43) (11112.45) (5243.70) (13810.82) Net current assets Miscellaneous expenditure (to the extent not written off ) Deferred revenue expenditure Voluntary retirement scheme TOTAL Notes to the Accounts (16356.15) 18012.37 18569.18 5404.34 5219.26 30840.18 30802.95 19 The schedules referred to above form an integral part of the Balance Sheet. In terms of our report of even date. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarwal Partner Membership No: 40780 Mumbai, 26 February, 2004 For Pfizer Limited R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary Mumbai, 26 February, 2004 25 Profit and Loss Account for the year ended 30th November, 2003 Rupees in Lakhs Rupees in Lakhs Year Ended 30th Nov 2003 Year Ended 30th Nov 2002 Schedule Ref. Income Gross sales Less: Excise duty Less: Sales tax Net sales Services Interest income Miscellaneous income 55895.60 3954.06 4478.13 65126.82 5718.90 5165.18 47463.41 2943.72 364.20 743.40 12 13 54242.74 4365.60 634.27 1006.83 51514.73 Expenditure Decrease in stocks of finished goods, work-in-process and own manufactured bulk drugs Cost of materials consumed Personnel costs Interest expense Other expenses Depreciation Royalty Profit before taxation and exceptional items Exceptional items - (expense)/ income 14 15 16 790.42 18946.86 7941.59 38.98 16087.86 1082.69 321.60 17 18 Profit before taxation Less: Taxation Current tax Deferred tax - (credit)/debit Profit after taxation Balance brought forward after adjustments 2 Total available for appropriation Proposed dividend - Regular - Special Tax on dividend Tax on dividend for previous year Tax on dividend for the previous year reversed Transfer to general reserve 283.93 21693.89 8784.20 76.18 17087.89 1063.96 94.97 45210.00 49085.02 6304.73 (1673.26) 11164.42 1518.07 4631.47 12682.49 2080.00 (199.05) 5344.66 (256.27) 2750.52 19410.84 7594.10 14607.84 22161.36 22201.94 2159.82 — 276.73 276.73 — 300.00 Balance carried to Balance Sheet Earning per share (Basic and Diluted) (See Note 13 in the Notes to the Accounts - Schedule 19) Nominal value of share Notes to the Accounts 60249.44 1439.88 719.94 — — (168.72) 800.00 3013.28 2791.10 19148.08 19410.84 Rs 9.55 Rs 26.37 10.00 10.00 19 The schedules referred to above form an integral part of the Profit and Loss Account. In terms of our report of even date. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarwal Partner Membership No: 40780 Mumbai, 26 February, 2004 For Pfizer Limited R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary Mumbai, 26 February, 2004 26 Cash Flow Statement for the year ended November 30, 2003 A Cash flow from Operating Activities : Net Profit before taxation and exceptional items Nov 2003 Nov 2002 6304.73 11164.42 1082.69 6.97 1063.96 0.61 (318.93) (22.57) 26.47 38.98 (609.35) (11.98) 111.65 127.28 (113.98) (359.88) Operating profit before working capital changes 7004.36 11486.71 Adjustments for Trade and other receivables Inventories Trade and other payables Provisions ( Excluding Proposed Dividend,Tax on distributed profits, Income Tax Provision ) Cash generated from operations 6768.49 (174.39) (6317.05) 141.22 (1778.64) 2158.45 628.99 386.67 12448.81 7856.00 Direct taxes paid (Net) (4824.70) (4853.79) 7624.11 3002.21 (1617.76) (6009.76) 6006.35 (3007.55) Purchase of fixed assets ( Net ) Consideration on Termination of Trademark Licenses - exceptional item ( Net) ( Purchase) / Sale of Investments ( Net ) ( includes Time Deposits having maturity (1491.55) 0.00 (1758.95) 3314.01 period greater than or equal to 90 days ) Interest Received (6036.05) 284.96 3219.50 676.38 (7242.64) 5450.94 0.00 (2393.81) (1.92) (1623.27) (45.63) (135.93) (2439.44) (1761.12) (3675.73) 682.27 Opening Cash and Cash Equivalents ( Note 1 ) Cash & Cash equivalents as at 1st December, 2001 taken over on amalgamation 5827.79 0.00 2031.33 3114.19 (refer Note 2 below) Closing Cash and Cash Equivalents ( Note 1 ) 2152.06 5827.79 (3675.73) 682.27 13.53 17.31 1,395.26 1,569.01 31.76 715.00 3.48 800.00 Exceptional Items Compensation paid to employees under Voluntary Retirement Scheme Net cash from / (used in) operating activities after exceptional item (A) Cash flow from Investing Activities : - Net cash ( used in ) / from investing activities C Rs. In Lakhs Adjustments for Depreciation Unrealised Foreign Exchange Loss / ( Gain ) Interest Income Profit on fixed assets sold / discarded Personnel costs - Voluntary Retirement Scheme Interest Expenses Provisions no longer required written back Net cash from operating activities before exceptional items B Rs. In Lakhs (B) Cash flow from Financing Activities :Repayment of borrowings ( Net) Dividend paid ( Including Tax on distributed profits Rs. 276.73 Lakhs, Nov 2002- Rs. Nil ) Interest paid Net cash used in financing activities (C) Net Increase/ (Decrease) in Cash & Cash Equivalents (A)+(B)+(C) Notes : 1. Cash and Cash Equivalents include : Cash on Hand With Scheduled Banks On Current Accounts ( including accounts with overdraft facility ) On Margin Money Accounts On Time Deposit Accounts ( maturity period less than 90 days ) 27 Cash Flow Statement (Continued) Rs. In Lakhs Rs. In Lakhs Nov 2003 Nov 2002 2.26 — 70.70 3,380.01 (5.75) (12.72) 2152.06 5827.79 Cheques on hand Remittance in Transit Unrealised translation gain on foreign currency cash & cash equivalents 2 The amalgamation of Parke - Davis with the Company is a non - cash transaction Consequent to the amalgamation, Cash and Cash Equivalents as at 1 st December, 2001 are taken over. The details are as under : Cash on Hand 1.24 With Scheduled Banks On Current Accounts On Time Deposit Accounts 106.95 3,006.00 3,114.19 3 Interest income on delayed payments from customers and rental income have been shown under ‘Cash Flow from Operating Activities’ as according to the Company these form an integral part of the Operating activities 4 The above Cash Flow Statement has been prepared under the indirect method as set out in Accounting Standard 3 on “Cash Flow Statement” issued by The Institute of Chartered Accountants of India. In terms of out report of even date. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarawal Partner Membership No: 40780 Mumbai, 26 February, 2004 For Pfizer Limited R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary Mumbai, 26 February, 2004 28 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 Schedule 1: Share capital Authorised 2,88,00,180 (Nov 2002: 2,34,42,936) Equity shares of Rs. 10 each 2880.02 2344.29 1,11,99,820 (Nov 2002: 1,65,57,064) Unclassified shares of Rs. 10 each 1119.98 1655.71 4000.00 4000.00 2880.02 2344.29 2879.75 2344.03 0.18 0.18 2879.93 2344.21 (Refer Note 2 in the Notes to the accounts - Schedule 19 — 535.73 TOTAL — 535.73 Issued 2,88,00,180 (Nov 2002: 2,34,42,936) Equity shares of Rs. 10 each Subscribed 2,87,97,540 (Nov 2002: 2,34,40,296) Equity shares of Rs. 10 each fully paid-up Of the above 1,91,08,636 shares were allotted as fully paid - up bonus shares by capitalisation of general reserve Rs.1776.92 lakhs and share premium account Rs.133.94 lakhs. Of the above 93,76,100 Equity shares of Rs.10 each fully paid-up are held by Pfizer Corporation, Panama Of the above 21,42,897 Equity shares of Rs. 10 each in aggregate are held by Warner-Lambert LLC, USA and Parke-Davis & Company LLC, USA Of the above 53,57,244 Equity shares of Rs. 10 each were issued as fully paid up to the shareholders of Park-Davis (India) Limited (pursuant to the Scheme of Amalgamation of Parke-Davis (India) Limited with the Company) (Refer Note 2 in the Notes to the accounts - Schedule 19) Add: Forfeited shares Amount paid up on 2,640 Equity shares forfeited Schedule 1A : Share Capital Suspense Account In terms of the Scheme of Amalgamation of Parke-Davis (India) Limited with the Company, 53,57,244 Equity Shares of Rs. 10 each of Pfizer Limited to be issued as fully paid-up to the shareholders of Parke-Davis (India) Limited Schedule 2: Reserves and surplus General reserve Per last balance sheet Add : Adjustment on account of amalgamation of Parke-Davis(India) Limited Add : Transfer from profit and loss account 8512.17 1750.15 — 5962.02 300.00 800.00 8812.17 8512.17 Profit and loss account Per last balance sheet Add : Transfer from Parke-Davis(India) Limited 19410.84 — 12894.52 1713.32 Less : Transfer to profit and loss account for the year 19410.84 19410.84 14607.84 14607.84 — — Balance as per profit and loss account 19148.08 19410.84 TOTAL 27960.25 27923.01 95.82 Leasehold 1,017.79 6,529.61 3,633.24 Leasehold improvements Machinery & equipment Office equipment, Furniture & fixtures 9,383.34 13,686.61 15.51 4,800.81# 1,740.15 — 109.10 563.45 961.56 0.01 104.64 1.39 — — Additions Cost 497.54 1,743.53 — 97.60 568.19 1,077.74 — — — — — Deductions 13,686.61 13,683.23 15.51 783.32 3,628.50 6,413.43 1,017.80 1,191.86 505.02 95.82 31.97 As at 30th Nov 2003 5,550.12 8,527.38 15.51 326.86 2,638.17 4,086.42 456.42 607.72 320.49 75.79 — As at 30th Nov 2002 3,376.87## 1,082.69 — 179.73 453.45 305.24 115.03 20.69 8.22 0.33 — For the period 399.61 1,587.96 — 77.90 554.37 955.69 — — — — — Deductions Depreciation / Amortisation 8,527.38 8,022.11 15.51 428.69 2,537.25 3,435.97 571.45 628.41 328.71 76.12 — As at 30th Nov 2003 6,110.08 448.96 5,661.12 — 354.63 1,091.25 2,977.46 446.35 563.45 176.31 19.70 31.97 As at 30th Nov 2003 5,696.22 536.99 5,159.23 — 444.96 995.07 2,443.19 561.37 479.50 183.14 20.03 31.97 As at 3oth Nov 2002 Written Down Value Rupees in Lakhs Refer Schedule 19 - Note 15 # Includes adjustments consequent to amalgamation of Parke-Davis (India) Limited aggregating Rs. 1747.99 lakhs ## Includes adjustments consequent to amalgamation of Parke-Davis (India) Limited aggregating Rs. 1862.72 lakhs and estimated loss on assets held for disposal aggregating Rs. 450.19 lakhs @ Buildings include investment in share application money of Rs.500 in a co-operative housing society, representing ownership of two residential flats. The agreement for sale is submitted for registration. ** Buildings include investment in 250 shares of Rs.500 each in a co-operative housing society, representing ownership of two residential flats. Grand Total Construction work-in-progress including capital advances Previous year TOTAL Trademarks 771.82 1,087.22 On leasehold land ** Vehicles 503.63 On freehold land @ BUILDINGS : 31.97 As at 30th Nov 2002 Freehold LAND : Schedule 3: Fixed Assets 29 Schedules 30 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 — — 0.11 0.61 — — 0.25 0.25 Schedule 4: Investments (At cost except where otherwise stated) Long Term Investments Trade (unquoted) Leema Chemicals and Cosmetics Private Limited 24 Equity Shares of Rs. 10 each, fully paid - up (Actual cost Rs.240) Non-Trade (unquoted) Government Securities includes Rs. Nil (Nov 2002 - Rs. 0.50 lakhs) deposited with Excise Authorities Gold Sovereign (Actual cost Rs. 61) The Shamrao Vithal Co-operative Bank Limited 1,000 shares of Rs. 25 each, fully paid-up Nil (Nov 2002 - 10,14,500) Units of Rs 10/- each fully paid up of Unit Trust of India - Unit Scheme 1964 — 150.00 Less : Provision for dimunition in the value of Investments — (46.55) — 103.45 Nil (Nov 2002 - 2,000 ) 11% Bonds of Rs. 5,000 each fully paid up of Industrial Credit and Investment Corporation of India Limited Tax Saving Bonds — 100.00 In Bodies Corporate under the same management (Trade - unquoted) : Duchem Laboratories Limited (a subsidiary company) 3,24,000 Equity Shares of Rs. 100 each, fully paid-up 324.00 324.00 324.36 528.31 TOTAL Schedule 5: Deferred tax asset (net) Deferred tax asset Arising on account of timing differences in : Amortisation of commercial rights and trade marks Provision for doubtful debts and advances Provision for leave encashment and exgratia Provision for excise duty, custom duty and sales tax Provision for diminution in the value of investments Amortisation of voluntary retirement costs Other provisions, etc. 70.52 567.17 270.03 81.85 — 27.85 167.65 95.49 376.08 231.49 64.20 17.11 27.63 135.05 1185.07 947.05 Deferred tax liability Arising on account of timing difference in: Depreciation/estimated loss on assets held for disposal 196.04 157.07 TOTAL 989.03 789.98 Schedule 6: Inventories Stores and maintenance spares Packing materials Stock-in-trade Raw materials Own manufactured bulk drugs Work-in-process Finished goods 90.16 282.08 128.79 339.18 2501.20 225.92 469.62 5089.25 1440.66 434.70 386.71 5753.80 TOTAL 8658.23 8483.84 31 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 2229.36 5055.06 1378.56 11790.85 Schedule 7: Sundry debtors (Unsecured - Considered good except where otherwise stated) Debts outstanding - Over six months - Other debts 7284.42 13169.41 of which - Considered good - Considered doubtful 5882.53 1401.89 12341.03 828.38 Provision for doubftul debts 7284.42 (1401.89) 13169.41 (828.38) 5882.53 12341.03 Schedule 8: Cash and bank balances Cash on hand With Scheduled Banks On Current Accounts (including accounts with overdraft facility) On Margin Money Accounts On Time Deposit Accounts Cheques on hand/in transit Remittances in Transit 13.53 17.31 1395.26 31.76 7465.00 2.26 — 1569.01 3.48 1800.00 70.70 3380.01 TOTAL 8907.81 6840.51 Schedule 9: Loans and advances (unsecured) (Considered good except where otherwise stated) Advances recoverable in cash or in kind or for value to be received Considered good* Considered doubtful Provision for doubtful advances 5185.67 179.09 6154.69 194.61 5364.76 (179.09) 6349.30 (194.61) Inter Corporate Deposit to Warner-Lambert India Private Limited Inter Corporate Deposit to Pharmacia Healthcare Limited Amounts Recoverable from Warner-Lambert India Private Limited Amounts Recoverable from Pharmacia Healthcare Limited Amounts Recoverable from Pharmacia India Private Limited Amounts Recoverable from Leema Chemicals & Cosmetics Private Limited Balances with Customs, Port Trust and Excise on Current Accounts Interest accrued on investment Interest accrued but not due Income tax payments (net) 5185.67 — 1490.00 69.55 246.66 401.37 0.16 35.79 — 44.73 900.69 6154.69 1000.00 — 15.25 — — 0.16 79.09 6.97 3.79 — TOTAL 8374.62 7259.95 * Includes loans given to employees which are secured by Hypothecation Bonds Rs 8.17 lakhs (Nov 2002 - Rs. 18.50 lakhs) 32 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 Schedule 10: Current liabilities Acceptances Sundry creditors Due to Small Scale Industrial Undertakings + Others Due to Subsidiary Company - Duchem Laboratories Limited Security deposits Interest accrued but not due on loans Dividends - uncashed Unclaimed interest on matured deposits Refundable share application money * Unclaimed interest on matured deposits * 4.75 785.94 303.29 7588.14 31.11 1527.21 — 164.46 0.43 — — 697.02 7936.51 6.53 1539.17 1.34 121.72 1.46 18.91 3.85 TOTAL 9619.39 11112.45 Proposed dividend - Regular - Special Tax on distributed profits Gratuity Leave encashment Excise duty and custom duty (Net of payments) Income tax provisions (net) Wealth tax provision (net) Others 2159.82 — 276.73 740.80 752.69 218.88 — 7.61 34.90 1439.88 719.94 — 390.07 598.85 128.50 1844.01 — 122.45 TOTAL 4191.43 5243.70 18.75 237.87 20.63 319.24 50.64 — 126.34 79.39 4.67 75.90 18.16 3.91 — 11.12 30.20 1.65 364.20 634.27 Rental income Profit on fixed assets sold/discarded (net) Insurance claims Provisions no longer required written back Sundry 539.49 22.57 14.35 113.98 53.01 474.38 11.98 61.80 359.88 98.79 TOTAL 743.40 1006.83 + Refer Note 19 of Notes to the Accounts - (Schedule 19) * Credited to Investor Education and Protection Fund during the year. Schedule 11: Provisions Schedule 12: Interest income Interest (Gross) On staff loans On deposits with banks/company, delayed payments, etc. (Tax deducted at source - Rs.63.99 lakhs, Nov 2002 - Rs. 69.31 lakhs) On Income Tax refunds (Net) On loans to Duchem Laboratories Limited (a subsidiary company) (Tax deducted at source - Rs.Nil, Nov 2002- Rs. 16.74 lakhs) On Inter Corporate Deposits with Warner-Lambert India Private Limited. (Tax Deducted at source - Rs 1.17 lakhs, Nov 2002 - Rs.15.15 lakhs) On Inter Corporate Deposits with Pharmacia Healthcare Limited. On Long-Term Investments (Non-Trade) (Tax deducted at source -Rs.4.89 lakhs, Nov 2002 - Rs 2.31 lakhs) On others TOTAL Schedule 13: Miscellaneous income 33 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 Schedule 14: Decrease in stocks of finished goods, work-in-process and own manufactured bulk drugs Stocks at commencement Finished goods 5753.80 3176.62 Work-in-process 386.71 489.83 Own manufactured bulk drugs 434.70 428.53 6575.21 Add : Stocks taken over after adjustments on amalgamation of Parke-Davis (India) Limited (Refer Note 2 of Notes to the Accounts - Schedule 19) Finished goods Work-in-process — — 4094.98 2724.01 — 40.15 6575.21 2764.16 6859.14 Stocks at close Finished goods 5089.25 5753.80 Work-in-process 469.62 386.71 Own manufactured bulk drugs 225.92 434.70 TOTAL 5784.79 6575.21 790.42 283.93 Schedule 15: Cost of materials consumed Raw materials Stock at commencement Add : Stock taken over after adjustments on amalgamation of Parke-Davis (India) Limited (Refer Note 2 of Notes to the Accounts - Schedule 19) 1440.66 1103.10 — 304.06 Purchases (net) 7618.90 8097.71 — (181.15) 1440.66 Less: Cost of materials sold 1407.16 Net purchases 7618.90 7916.56 9059.56 9323.72 Stock at close (2501.20) (1440.66) 6558.36 7883.06 Packing materials (net) 2772.64 3137.94 Trading activity purchases 9615.86 10672.89 18946.86 21693.89 6009.55 6485.69 TOTAL Schedule 16: Personnel costs Salaries, wages and bonus Company’s contribution to gratuity fund 642.74 531.65 Company’s contribution to provident and other funds 456.47 466.97 Staff welfare expenses 806.36 1,188.24 26.47 111.65 7941.59 8784.20 Voluntary retirement costs TOTAL 34 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 196.82 1181.04 950.76 70.61 167.99 1053.39 1216.35 81.25 Schedule 17: Other expenses Consumption of stores and maintenance spares Processing charges Power and fuel Water Repairs : Buildings Machinery 34.15 293.86 Rent Rates and taxes Insurance Clinical trials Legal and professional charges Equipment rentals, service charges, low cost assets written off Freight, forwarding and transport Travelling (including boarding, lodging, conveyance and other expenses) Postage, telephone and fax Advertising and promotion Exchange loss (Net) Commission Bad debts written off Provision for doubtful debts (Net) Miscellaneous expenses TOTAL 46.06 253.17 328.01 776.78 179.54 180.66 868.00 1053.74 417.42 1178.27 299.23 919.81 280.50 154.77 848.57 1157.43 336.74 1235.46 1713.80 480.81 2616.45 28.74 698.81 — 573.51 2594.09 1588.86 486.81 3406.20 14.72 538.35 24.79 393.68 2882.99 16087.86 17087.89 — 3314.01 Schedule 18: Exceptional items (expense)/income Exceptional income Consideration on termination of trademark licenses (net of expenses) (See Note below) Exceptional expense Estimated loss on assets held for disposal (Refer Note 15 ( c ) of Notes to the Accounts - Schedule 19) Compensation paid to employees under VRS Compensation for termination of contractual arrangements Net exceptional income / (expense) — (1673.26) — (450.19) (1296.29) (49.46) (1673.26) (1795.94) (1673.26) 1518.07 Note: During the previous year, pursuant to the international acquisition of the Trademarks PROTINEX and DUMEX by EAC Nutrition Limited A/S, Denmark (EAC) from its proprietors Pfizer Products Inc, the Company had received a consideration of Rs 3380.01 lakhs (equivalent to US $ 7 million) from EAC for termination of the Trademark License Agreement relating to the said Trademarks. Rs. 3314.01 lakhs as shown above is net of expenses. 35 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 19 Notes to the accounts 1. Significant Accounting Policies (a) Basis of Accounting The financial statements are prepared under the historical cost convention on an accrual basis of accounting in accordance with the provisions of the Companies Act, 1956 and comply with the Accounting Standards issued by the Institute of Chartered Accountants of India, to the extent applicable. (b) Fixed Assets and Depreciation (i) All fixed assets are stated at cost of acquisition less accumulated depreciation. (ii) Assets costing upto Rs. 5000 are written off and those costing more than Rs. 5000 but upto US$ 1000 (equivalent to Rs 0.46 lakhs at the year end rate) are fully depreciated in the year of purchase except that “multiple-like items” the cost of which is over US $10,000 (equivalent to Rs 4.60 lakhs at the year end rate) in the aggregate; and “unlike items of a capital nature within an asset category” for large scale projects the aggregate cost of which exceeds US $ 10,000 (equivalent to Rs 4.60 lakhs at the year end rate) are considered as one asset and depreciated in accordance with the accounting policy stated in (iii) below. (iii) Depreciation for the year has been provided on straight line method at the higher of the rates determined by the Company or the rates specified in Schedule XIV to the Companies Act, 1956. Depreciation on additions other than those stated in (ii) above is provided for a period of six months in the year of purchase. Depreciation on deletions during the year is provided upto the quarter in which the asset is sold / discarded. (iv) Depreciation other than on low cost assets is provided at the following rates per annum (v) (c) Assets Periods / Rate Land : Leasehold Buildings : On Freehold land On Leasehold land Leasehold Improvements Machinery & Equipment Office Equipment, Furniture & Fixture Vehicles Trademarks Amortised over the lease period 3.34% Higher of 3.34% or rate based on leased period 8% to 10% or Amortised over the lease period 8% to 40% 8% to 33.33% 25% Amortised over a period of 3 years Assets identified as retired from active use and held for disposal are stated at the lower of net book value and estimated net realisable value. Foreign Currency Transactions Transactions in foreign exchange which are covered by forward contracts are accounted for at the contracted rate, the difference between the forward rate and the exchange rate at the date of transaction being recognised in the Profit and Loss Account over the life of the contract. Transactions other than those covered by forward contracts are recorded at pre-determined standard exchange rates, which are reviewed periodically. Gains and losses arising on account of such revisions are reflected in the Profit and Loss Account except those relating to acquisition of fixed assets, which are adjusted to the cost of the assets. Monetary assets and liabilities in foreign currency, which are outstanding as at the year end and not covered by forward contracts are translated at the year end market exchange rate. (d) Investments Long-term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments. (e) Inventories Stock-in-trade and packing materials are valued at the lower of average cost and net realisable value. Cost of finished goods and work-in-process includes cost of materials, direct labour and an appropriate portion of overheads. Stores and maintenance spares are valued at average cost. Physicians’ samples are valued at standard cost which approximates actual cost. (f) Sundry Debtors/Loans & Advances These have been stated after making adequate provision for doubtful debts/advances. (g) Revenue Recognition Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to the customers, which is at the point of despatch of goods to the customers. Revenue from services is recognised on rendering of services. Interest income is recognised on time proportion basis. 36 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) (h) Research & Development Revenue expenditure on research and development is written off in the Profit & Loss Account for the year in which it is incurred. Capital expenditure on research and development is treated in the same way as expenditure on Fixed Assets. (i) Retirement Benefits The Company’s contributions to the employees’ Provident Fund and Superannuation Schemes are charged to the Profit & Loss Account each year. The Company has opted for a Group Gratuity-cum Life Assurance Scheme of the Life Insurance Corporation of India (LIC), and contribution towards gratuity liability as determined by LIC is charged to the Profit & Loss account each year. The Company also provides for unutilised leave benefits on retirement available to its employees on the basis of an actuarial valuation done as at the year end. (j) Leases Lease rentals in respect of assets acquired under operating lease are charged off to the Profit & Loss Account as incurred. (k) Voluntary Retirement Schemes (VRS) Liability under the VRS is accounted for based on the acceptance of the applications of the employees under the VRS by the Company. Compensation paid under the VRS upto 30th November, 2001 is charged to the Profit and Loss Account over a period of three years and compensation paid under the VRS effective from 1st December, 2001 is charged to the Profit and Loss Account over a period of five years. (l) Taxation Provision for income– tax is made on the basis of estimated taxable income for the year, in accordance with Income Tax Act, 1961. Deferred tax resulting from timing differences between the book and the tax profits is accounted for, at the current rate of tax, to the extent that the timing differences are expected to crystallise. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date. (m) Proposed Dividend Dividend proposed by the Board of Directors is provided in the books of account pending approval at the Annual General Meeting. (n) Earnings per Share Basic and diluted earnings per share is computed by dividing the net profit attributable to equity shareholders for the year, with the weighted number of equity shares outstanding during the year. (o) Contingencies Loss contingencies arising from claims, litigation, assessment etc. are recorded when it is probable that a liability has been incurred, and the amount can be reasonably estimated. 2. Amalgamation of Parke-Davis (India) Limited with the Company a) The Scheme of Amalgamation (“the Scheme”) of the erstwhile Parke-Davis (India) Limited (hereinafter referred to as “Parke-Davis”) with the Company was sanctioned by the Honourable High Court of Judicature (“The High Court”) at Bombay vide its Order dated February 7, 2003. This Amalgamation is effective from December 1, 2001. Few dissenting shareholders filed an appeal at the High Court against this Order and Stay on implementation of the Scheme was granted by the High Court on March 13, 2003. A Division Bench of the High Court by its judgement dated July 23, 2003 dismissed this appeal. The Special Leave Petition filed by the dissenting shareholders against this dismissal was not admitted by the Supreme Court by its judgement dated September 8, 2003. b) Pursuant to the Scheme, 53,57,244 Equity Shares of Rs.10/- each of the Company were allotted on September 10, 2003 in the ratio of 4 (four) fully paid-up Equity Shares of the Company for every 9 (nine) fully paid-up Equity Shares of Rs.10/- each in Parke-Davis to the shareholders of ParkeDavis. c) Consequently, the amount of Rs.535.73 lakhs shown in Share Capital Suspense Account (Schedule 1A) as on November 30, 2002 is now included in Share Capital (Schedule 1) of Balance Sheet. d) In view of aforesaid amalgamation with effect from December 1, 2001, the figures for the current year are directly comparable to those of the previous year. 3. Estimated amount of contracts on capital account to be executed and not provided for 4. Contingent Liability (a) Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 812.19 1215.38 2400.00 2400.00 — 200.00 In respect of the guarantees given to banks on behalf of : - (i) Its subsidiary company - (ii) Third parties 37 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 1234.18 1153.25 10.51 162.08 76.51 311.84 466.08 193.11 6.53 6.53 — — 69.55 1015.25 Pharmacia Healthcare Limited, a company under the same management [Maximum aggregate amount due during the year Rs. 1736.66 lakhs(Nov 2002- Rs Nil)]. 1736.66 — Pharmacia India Private Limited, a company under the same management [Maximum aggregate amount due during the year Rs. 401.37 lakhs(Nov 2002- Rs Nil)]. 401.37 — 0.16 0.16 Directors of the Company Maximum aggregate amount due during the year Rs.1.83 lakhs (Nov 2002 - Rs. 2.39 lakhs). — — An officer of the Company Maximum aggregate amount due during the year Rs Nil (Nov 2002 – Rs.0.04 lakhs). — 0.04 6. Cost of materials consumed and other expenses include cost of samples distributed. 1042.15 1082.46 7. (a) 21.60 — 5.40 — - for Audit — 28.35 - for Taxation Services — 2.25 - for Company Law matters — 0.08 8.64 18.76 — 1.00 — 5.25 (b) In respect of : (i) Excise Duty (ii) Customs Duty (iii) Sales Tax (iv) Service Tax (c) (d) 5. Demands from Income-tax authorities for the interest on the alleged short deduction of tax at source on perquisites relating to the Assessment Year 1987-88 which have been disputed by the Company and in respect of which the Company has filed an appeal DPEA claims (Refer Note 10) Loans and Advances include amounts due from : Duchem Laboratories Limited, a company under the same management [Maximum aggregate amount due during the year Rs. Nil (Nov 2002 - Rs. 1418.29 lakhs)]. Warner-Lambert India Private Limited, a company under the same management [Maximum aggregate amount due during the year Rs. 1415.25 lakhs (Nov 2002- Rs.1015.25 lakhs)]. Leema Chemicals & Cosmetics Pvt. Ltd., a company under the same management [Maximum aggregate amount due during the year Rs. 0.16 lakhs (Nov 2002 – Rs.0.16 lakhs)]. Auditors’ Remuneration (including taxes, where applicable): For Audit For Other Services (b) Remuneration to the erstwhile auditors of the company (including taxes, where applicable): - for Other Services Reimbursement of out-of-pocket expenses Paid to an Associate Firm : - For Other Services a) Production, Sales and Stocks Tonnes Others Litres Kgs. No. in Millions Litres Kgs. Kgs. Tonnes Tonnes Liquid Parenterals Powder Parenterals Tablets and Capsules Liquids Solids Ointments FOOD PRODUCTS FEED SUPPLEMENTS FORMULATIONS Injectables : KGA(’000s) Unit of Measure Oxytetracycline BULK DRUGS AND DRUG INTERMEDIATES Class of goods 46.19 (53.46) 20.43 (94.25) 7,876.33 (3,875.39) 29,617.98 (30,548.89) 647,276.41 (440,560.47) 120.87 (110.66) 3.73 (185.88) 40,604.70 (23,513.24) 18.58 (6.86) 15.76 (20.43) Quantity STOCKS AT COMMENCEMENT Rupees in lakhs 139.23 (113.82) 45.00 (204.72) 43.88 (24.70) 112.93 (116.56) 1,132.99 (815.80) 853.55 (870.16) 4.45 (206.44) 225.01 (116.26) 125.01 (33.28) 309.69 (395.25) Information required by Paragraphs 3 and 4 of Part II of Schedule VI to the Companies Act, 1956. MANUFACTURING ACTIVITIES 8. 437.46 (411.45) 628.35 (717.82) 10,056.42 (24,819.77) 101,849.60 (135,770.80) 3,376,167.57 (5,852,249.39) 1,183.89 (1,175.49) — (639.25) 217,731.76 (244,565.35) 51.56 (38.22) 57.01 (68.63) Quantity PRODUCTION 419.82 (415.54) 607.46 (789.74) 15,112.73 (22,435.55) 97,389.27 (121,187.43) 3,492,765.15 (6,307,913.01) 1,129.61 (1,265.51) (43.30) (791.09) 229,730.26 (223,572.23) 61.88 (26.50) 0.30 (0.53) Quantity SALES 2196.93 (2,358.29) 1998.73 (2,649.68) 165.03 (230.39) 773.28 (908.33) 9,613.76 (13,763.30) 11,614.99 (12,507.55) (79.02) (1,340.78) 1,324.59 (1,501.90) 382.64 (211.59) 3.30 (6.49) Rupees in lakhs 59.70 (46.19) 38.27 (20.43) 4,146.63 (7,876.33) 19,096.13 (29,617.98) 530,042.30 (647,276.41) 161.94 (120.87) 0.24 (3.73) 28,318.34 (40,604.70) 2.79 (18.58) 0.05 (15.76) Quantity STOCKS AT CLOSE 257.41 (139.23) 93.67 (45.00) 28.17 (43.88) 94.22 (112.93) 946.99 (1,132.98) 1,187.22 (853.55) 0.25 (4.45) 152.30 (225.01) 26.16 (125.01) 199.76 (309.69) Rupees in lakhs 38 Notes to Financial Statement For the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) Kgs. No. in millions Litres Kgs Kgs Tonnes Litres No in Millions Powder Parentals Tablets and Capsules Liquids Solids Ointments FEED SUPPLEMENTS FEED SUPPLEMENTS MISCELLANEOUS 0.73 — 28,200.00 (29,210.00) 54.57 (80.80) 7,213.79 (13,008.45) 2,025.85 (197.45) 1,322,067.51 (9,349.10) 135.02 (7.23) 237.42 0.00 14,968.71 (17,020.04) Quantity 43.33 — 6.55 (6.72) 18.21 (23.85) 30.60 (50.04) 29.84 (4.64) 1515.00 (15.37) 1101.65 (265.19) 244.23 0.00 207.36 (342.35) Rupees in lakhs 6188.50 (3605.15) STOCKS AT COMMENCEMENT 16,150.00 (2,590.00) 3.25 (2.82) 108,280.00 (133,895.00) 176.32 (227.90) 11,698.81 (2,952.21) 6,563.89 (5,328.70) 4,721,828.18 (4,408,075.48) 487.90 (384.55) 1,461.15 (960.23) 14,393.99 (21,613.06) Quantity PURCHASES 9227.45 (10285.73) 1.07 (1.36) 223.22 (192.57) 29.46 (35.54) 53.69 (69.78) 37.19 (12.72) 86.73 (62.89) 4076.85 (5020.87) 2920.36 (3421.89) 1496.77 (1025.76) 302.12 (442.35) Rupees in lakhs 16,150.00 (2,590.00) 3.06 (3.29) 110,005.00 (134,395.00) 165.40 (249.93) 9,877.76 (8,324.90) 6,266.39 (3,418.53) 4,737,303.15 (3,972,763.33) 466.60 (296.98) 1,298.32 (719.37) 22,132.69 (23,294.23) Quantity SALES Notes: 1. Figures of production are inclusive of production for captive consumption and quantities produced in the factories of third parties on loan licences. 2. Figures for Production, Purchases and Closing Stock exclude Physicians’ Sample packs 3. Stocks are after adjustments of write-offs. 4. Figures in brackets are in respect of the previous year. TOTAL kgs Litres Unit of Measure Injectables : Liquid Parenterals FORMULATIONS Class of goods TRADING ACTIVITIES 47463.41 (54242.74) 2.61 (2.55) 417.24 (441.22) 42.02 (50.11) 73.61 (110.64) 134.15 (108.71) 168.18 (82.00) 9709.84 (9959.96) 5381.49 (5038.71) 2519.05 (1407.52) 1020.99 (1563.02) Rupees in lakhs 0.90 (0.73) 17,185.00 (28,200.00) 37.27 (54.57) 4,717.85 (7,213.79) 2,163.62 (2,025.85) 828,551.65 (1,322,067.51) 129.53 (135.02) 386.02 (237.42) 5,994.11 (14,968.71) Quantity STOCKS AT CLOSE 5315.17 (6188.50) 56.43 (43.33) 4.65 (6.55) 12.37 (18.21) 18.95 (30.60) 21.67 (29.84) 861.52 (1515.00) 811.91 (1101.64) 405.41 (244.23) 136.11 (207.36) Rupees in lakhs 39 Notes to Financial Statement For the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 40 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) (b) Raw Materials Consumed Nov 2003 Class of Goods Vitamins Codeine Phosphate Cefoperazone Virginiamycin Coxistac Premix Sugar Propylene Glycol Maize Germ Oil PCBs Urea Others (None of the items individually exceed 10% of the total value of the raw materials consumed) Unit of Measure Tonnes Kgs Kgs Kgs Tonnes Tonnes Tonnes Tonnes Tonnes Nov 2002 Quantity Rupees Quantity Rupees 262.46 4506.88 — 6827.70 190.74 1962.40 189.95 159.23 41.55 1414.72 1558.04 — 281.34 242.16 239.75 115.30 69.02 75.74 230.29 6891.19 383.28 8520.60 183.17 2724.42 211.26 345.03 23.94 1196.16 2377.77 298.81 328.31 255.56 381.84 131.42 112.98 42.87 Total 2562.29 2757.34 6558.36 7883.06 Percentage Whereof Imported—Delivered Cost Indigenously obtained Total Percentage 16 84 1022.75 5535.61 18 82 1455.56 6427.50 100 6558.36 100 7883.06 Note:‘Components’ and ‘Spare Parts’ referred to in para 4 D (C) of Part II of Schedule VI to the Companies Act, 1956 are assumed to be those incorporated in goods produced and not those used for maintenance of Plant and Machinery. (c) Licensed and Installed Capacities Installed Capacity (Three Shift basis) Class of Goods Bulk Drugs and Drug Intermediates Oxytetracycline /Tetracycline Others Formulations Injectables Liquid Parenterals Dry Fills Tablets & Capsules Liquids Solids Ointments Food Products Protein Food Feed Supplements Unit of Measure Nov 2003 Nov 2002 MT MT 140 724 140 724 Litres Mn.Vials Mn. Nos. Litres Kgs Kgs 360000 158.4 5412 3500000 900000 232800 360000 158.4 5412 3500000 900000 232800 MT MT 1000 1577 1000 1577 Notes: A. In terms of Press Note No. 4 (1994 series) dated October 25, 1994 issued by the Department of Industrial Development, Ministry of Industry, Government of India and Notification No. S.O. 137(E) dated 1 March, 1999 issued by the Department of Industrial Policy and Promotion, Ministry of Industry, Government of India, industrial licencing has been abolished in respect of bulk drugs and formulations. B. The installed capacity is as certified by the Management and not verified by the Auditors, this being a technical matter. 41 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) (d) (e) (f) (g) Nov 2003 Nov 2002 1934.70 0.26 36.09 1426.62 5.69 1433.30 2.65 142.66 1818.62 — 141.73 260.78 3.03 97.49 77.55 3.97 27.71 28.73 100.97 28.98 3 11518996 3 14197618 863.92 — — 370.36 163.93 Total 863.92 534.29 Earnings in foreign currency Total Exports (On FOB) basis Earnings in Indian Rupees Earnings in Foreign currency 311.50 837.29 363.23 575.53 1148.79 1870.79 — 57.49 — 938.76 1656.69 3380.01 203.60 6.82 91.61 18.71 31.75 0.90 4.00 112.64 22.59 33.50 1.15 6.00 146.97 175.88 Value of imports calculated on CIF basis Raw Materials Spare Parts for Maintenance of Machinery and Laboratory Chemicals Capital Goods Finished Goods Packing Materials Expenditure in Foreign Currency Travel Royalty Interest Professional Charges [including amount capitalised Rs.Nil, (Nov 2002 – Rs. 7.57 lakhs)] Others (Exchange Loss, etc) Remittance made on account of dividends in foreign currency Number of shareholders Number of shares held (includes 48,21,518 shares of Parke-Davis held by 2 (two) shareholders) Net amount of dividends remitted in foreign currency Dividend in respect of the year ended 30thNovember, 2002 Dividend in respect of the year ended 30th November, 2001 Dividend in respect of Parke-Davis for the eight months ended 30th November, 2001 Total Service Income Consideration on termination of Trademarks Licenses Expenses Recovered Others 9a. Managerial remuneration under Section 198 of the Companies Act, 1956 Salaries, Bonus & Commission Contribution to PF and Other Funds Perquisites Sitting Fees Commission to Non-Whole time Directors Total Note:In respect of year ended November 30, 2002, the above excludes remuneration paid to Directors of Parke-Davis who were not on the Board of the Company – Rs 28.18 lakhs (including Directors sitting fees Rs 0.95 lakhs and commission to non-whole time Directors Rs 4.40 lakhs). 9b. Computation of net profits for commission payable to the Directors Net Profit per Profit and Loss Account Income-tax Remuneration to Directors Net Profit/(Loss) on sale of fixed assets per Section 349 of the Companies Act, 1956 (Estimated) Provision for doubtful debts/advances Net (Profit)/Loss on sale of fixed assets per accounts Consideration on termination of Trademark Licenses (net of expenses) Total 2750.52 1880.95 146.97 22.57 573.51 7594.10 5088.39 175.88 11.98 393.68 5374.52 13264.03 (22.57) — (11.98) (3314.01) 5351.95 9938.04 Commission to two Directors, who are not in whole time employment and who are resident in India, the aggregate not being in excess of 1% of net profits as computed above. The Company has been legally advised that this payment does not require the approval of the Central Government. 4.00 6.00* Commission approved by the Board of Directors at 4.00 6.00* “*” This includes commission to one non-whole time Director, who was also on the Board of Parke-Davis (India) Limited during the year 2002-Rs 2.00 Lakhs 42 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 10. Drugs Prices Equalisation Account (DPEA). (a) Oxytetracycline & Other Formulations In respect of certain price fixation Orders of 1981 of the Government of India, the Supreme Court vide its Order of 22nd March, 1993, held that, pending disposal of the Company’s Writ Petition in the High Court of Mumbai, the Company may deposit 50% of the impugned amount of Rs. 87.61 lakhs, less Rs. 19.90 lakhs already deposited, with the Union of India before 15th May, 1993, which has been done. In the event that the Company succeeds before the High Court of Mumbai, this amount will be returned within one month from the date of the decision of the High Court with interest at the rate of 15% per annum. However, if the Company loses the Writ Petition, the balance amount of Rs. 43.80 lakhs with interest at the rate of 15% per annum will have to be paid to the Government. (b) Multivitamin Formulations In respect of a certain price fixation Order of 1986 of the Government of India, the Supreme Court vide its Order dated 3rd December, 1992, held that, pending disposal of the Company’s Writ Petition in the High Court of Mumbai, the Company may deposit 50% of the impugned amount of Rs.98.00 lakhs with the Union of India before 31st January, 1993, which has been done.In the event that the Company succeeds before the High Court of Mumbai, this amount will be returned within one month from the date of the decision of the High Court with interest at the rate of 15% per annum. However, if the Company loses the Writ Petition, the balance amount of Rs 49.00 lakhs with interest at the rate of 15% per annum will have to be paid to the Government. (c) Protinex* In yet another case, the Company had challenged in 1986 a price fixation Order of the Government of India by a Writ Petition before the High Court of Mumbai. The Honourable Court passed an ad interim and interim order staying the impugned order. The Petition, while it was still pending for hearing and final disposal, was withdrawn in 1989 on redressal of the Company’s grievances. After protracted correspondence on the subject, in 1993 the Government raised a demand of Rs 81.83 lakhs on the Company for the period April 1986 to July 1989 and directed the Company to deposit the same into the DPEA. Thereafter, the Drug Prices Liability Review (DPLR) Committee sent a letter dated 15th February, 1996 seeking the Company’s submission/ representation against the reduced claim amount of Rs 33.87 lakhs for the period April 1986 to August 1987 as intimated to the DPLR Committee by the Government of India. The Company has made its submissions to the DPLR Committee vide its letter of 29th March, 1996 claiming that no amount whatsoever is due and payable having regard to the facts and relevant material of the case. In the meantime, the Department of Chemicals and Petrochemicals vide their letter dated 11th February, 1997, raised an additional demand of Rs 178.56 lakhs for the earlier period of February 1984 to March 1986 over and above the revised claim of Rs. 33.87 lakhs for the period April 1986 to August 1987. Thus, the total demand raised now stands revised to Rs. 212.43 lakhs. The DPLR Committee had, vide its letter dated 24th February 1997 invited the Company to make its submissions/ representations against the above said claim. The Company has made its submissions to the DPLR Committee vide its letter dated 14th May, 1997 claiming that no amount whatsoever is due and payable having regard to the facts and relevant material of the case. Pursuant to the submissions made by the Company, the DPLR Committee directed by an Order on November 17, 1998 that clarifications should be obtained from the Mumbai High Court on whether the Interim Stay granted in the Civil Writ Petition Number 2368 of 1996 is applicable to this matter. (This Writ Petition is filed by OPPI and IDMA jointly against any Notice issued by the Government of India after August 25, 1987 to any member of the OPPI or IDMA, initiating proceedings for recovery of an amount demanded in respect of a period prior to that date). On a Notice of Motion filed by the Company in the said Writ Petition, the Mumbai High Court has granted ad interim Order that “pending the hearing and final disposal of this Notice of Motion, further proceedings in the said Case No 49/1996 pending before the said Drug Prices Liability Review Committee be stayed.” * Regd. Trademark (d) Vitamin and Other Formulations The Government has arbitrarily determined the liability of the Company at Rs 1466 lakhs being the difference in price in respect of Vitamin and other formulations sold by the Company during the years 1983 to 1989. The Company has repudiated the liability on this account. The Company’s Solicitors have advised that the repudiation by the Company is legally sustainable. The Government has pursued the matter. The Company maintains its position that the claim by the Government is not legally sustainable. (e) Chloramphenicol The Government has arbitrarily determined the liability of the Company at Rs 145 lakhs and Rs. 14 lakhs being the difference between the price of bulk drug Chloramphenicol powder and Chloramphenicol Palmitate respectively allowed in the formulation price and actual procurement price for the period 1979 to 1988. The Company has repudiated the liability on this account as advised by the Company’ s Solicitors. The Company has also obtained a Stay order from the Honourable High Court of Mumbai against the demand. Pursuant to the submissions made by the Company, the DPLR Committee directed by an Order on November 17, 1998 that clarifications should be obtained from the Mumbai High Court on whether the Interim Stay granted in the Civil Writ Petition Number 2368 of 1996 is applicable to this matter. (This Writ Petition is filed by OPPI and IDMA jointly against any Notice issued by the Government of India after August 25, 1987 to any member of the OPPI or IDMA, initiating proceedings for recovery of an amount demanded in respect of a period prior to that date). On a Notice of Motion filed by the Company in the said Writ Petition, the Mumbai High Court has granted ad interim Order that “pending the hearing and final disposal of this Notice of Motion, further proceedings in the said Case No 23/95 pending before the said Drug Prices Liability Review Committee be stayed. 43 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) (f) Pursuant to the repeal of DPCO 1970, erstwhile Warner-Hindustan Limited (merged with Parke-Davis (India) Limited in 1988 and Parke – Davis (India) Limited merged with Pfizer Limited in 2003) had classified ISOKIN TABLETS, ISOKIN LIQUID AND PYRIDIUM TABLETS as decontrolled products under the DPCO 1979. The categorization was, however, challenged by the Government in 1984 and a demand of Rs.113 lakhs was raised against the Company. Against this demand an excise duty set off of Rs.7 lakhs was allowed to the Company and a final demand of Rs.106 lakhs was raised in 1987. The Company had deposited an amount of Rs.30 lakhs in February 1987 and Rs.25 lakhs in May 1990 totaling to an aggregate of Rs.55 lakhs in full and final settlement of the demand, as per the arguments set forth by the Company. The Government subsequently raised a demand of Rs.117 lakhs towards interest on principal demands (ie interest of Rs.43 lakhs for Pyridium for the period 1982 to August1995 and Rs.74 lakhs for Isokin for the period 1982 to June 1997). The Company filed a Writ Petition in the Andhra Pradesh High Court in September 1997 for staying all further proceedings against the Company. The High Court stayed the demand in respect of collection of interest but directed the Company to deposit the balance demand of Rs.51 lakhs (which amount was deposited in November, 1997). Pursuant to a Transfer Petition (Civil) no 475-496 of 2003 filed under Article 139A(1) of the Constitution of India, all pending writ petitions in respect of DPEA liabilities are now to be transferred to the Supreme Court to be heard and finally decided by the Supreme Court of India. Consequently as a result of the said transfer petition, Writ Petitions referred to in (a), (b), (c), (e) and (f) above will now be heard and disposed off by the Supreme Court. In view of matters (a), (b), (c), (e) and (f) being subjudice, the legal opinion being in favour of the Company, and based on the assessment of the Management, no further provision is considered necessary over and above the sum of Rs.48.21 lakhs that has already been made in the accounts in earlier years. The Company would continue to seek legal recourse in all the above matters. 11. The Company has opted for the Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India (LIC). The Company’s contribution to this scheme is charged to the Profit and Loss Account for the year. LIC has confirmed that the contributions taken together with the funds available with LIC in the corpus, cover adequately the actuarially valued gratuity liability of the Company. LIC would however seek replenishment of funds, should the funds get depleted due to abnormal withdrawals in any year. 12. Expenditure on Research & Development during the year Capital expenditure Revenue expenditure charged to the Profit and Loss Account Nov 2003 Nov 2002 147.72 95.04 1970.60 1763.26 2118.32 1858.30 2750.52 7594.10 2,87,97,540 2,34,40,296 — 53,57,244 2,87,97,540 2,87,97,540 Rs.9.55 Rs. 26.37 13. Earnings per Share Earnings per share has been computed as under: (a) Profit after Taxation and Exceptional items (Rs. Lakhs) (b) Number of Equity Shares outstanding (c) Number of Shares in Share Capital Suspense (d) Total (b) + (c) (e) Earnings per share (Face value Rs. 10/- per share) (a) / (d) (Basic and diluted) 14. Disclosure for operating leases under Accounting Standard 19 – “Leases” (a) The Company’s significant leasing arrangements are in respect of residential / godowns / office premises (including furniture and fittings, therein as applicable) taken on leave and license basis. The aggregate lease rentals payable are charged as Rent and shown under ‘Other Expenses’ (Schedule 17). These leasing arrangements, which are cancellable, range between 11 months and 5 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. Under these arrangements, generally refundable interest free deposits have been given. Further, in the case of one leasing arrangement, the Company has the option to purchase within the lease period, the licensed premises at a price to be decided as per the Valuation Report of independent valuers appointed by the Company subject to a minimum of Rs.1100 lakhs and a maximum of Rs.1150 lakhs. On exercising the above option the amount of deposit given will be adjusted against the purchase consideration decided and the balance would be payable with interest @ 12% p.a. from the date of agreement. Upon exercising the above option the Company would also be entitled to a reduction in the purchase price at the rate of Rs.6 lakhs per annum from the date of agreement till the date of payment of balance amount with interest or the date of completion of the lease period whichever is earlier. In respect of one of the leasing arrangements a non refundable deposit of Rs.60 lakhs has been given during the year and in another case Rs.30 lakhs has been reimbursed to the lessor towards repairs and renovation carried out at the licensed premises. (b) Sub-lease income recognised in the Profit and Loss Account for the year – Rs.539.49 (November 2002– Rs.474.38 lakhs). 44 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 15. (a) In an earlier year, the Company ceased its manufacturing operations at its Ankleshwar Plant and re-evaluated the useful life of the fixed assets. Additional depreciation amounting to Rs.614.74 lakhs was charged to the Profit and Loss Accounts in earlier years. (b) Fixed Assets (Schedule 3) include fixed assets lying at the Ankleshwar Plant as on 30 November, 2003 at their respective book values which are as follows: Original Cost Freehold Land Leasehold Land Accumulated Depreciation Written Down Value Nov 2003 Nov 2002 Nov 2003 Nov 2002 Nov 2003 Nov 2002 20.28 20.28 — — 20.28 20.28 63.25 63.25 63.25 63.25 — — Freehold Building 165.82 165.82 136.48 136.48 29.34 29.34 Leasehold Building 506.66 506.66 426.33 426.33 80.33 80.33 Machinery & Equipment 898.88 898.88 820.49 820.49 78.39 78.39 Office Equipment, Furniture & Fixtures Total 37.85 37.85 33.68 33.68 4.17 4.17 1692.74 1692.74 1480.23 1480.23 212.51 212.51 Subsequent to the year ended November 30, 2003 the Company has entered into an agreement to sell the assets other than freehold land and freehold building at Rs. 450 lakhs. (c) During the previous year, the Company ceased its manufacturing operations at Hyderabad plant of Parke-Davis and also vacated office premises of Parke-Davis at Mumbai. In view of this, these fixed assets were stated at lower of net book value and estimated net realisable value. Consequent to this, an estimated loss of Rs.450.19 lakhs was charged and shown under “Exceptional Items” as on November 30, 2002. These assets were stated at their respective book values as follows : Machinery & Equipment Office Equipment, Furniture & Fixtures Total Original Cost Accumulated Depreciation Written Down Value Nov 2002 Nov 2002 Nov 2002 1072.58 950.92 121.66 572.09 556.75 15.34 1644.67 1507.67 137.00 During the current year ended November 30, 2003, certain assets with net book values of Rs.2.78 lakhs are transferred to Company’s plant at Mumbai and all remaining assets are sold at Rs.142.99 lakhs. (d) The Company has ceased its manufacturing operations of bulk drugs at Chandigarh plant and filed an application under Section 25-O of the Industrial Disputes Act, 1947 with the Government of Maharashtra for closure of the plant. The fixed assets situated at the plant are stated at net book value Rs.657.97 lakhs – (original cost Rs.2079.92 lakhs). In the opinion of the Company the realizable value of these assets is at least equal to the values at which these are stated. 16. Stock of Physicians’ samples is included under ‘Loans and Advances’ (Schedule 9 ) Rs 20.80 lakhs (Nov 2002 - Rs 29.61 lakhs). 17. Income tax provision – current tax includes Rs.178.00 lakhs (Nov 2002 – Rs 74.00 lakhs) on account of interest demanded by the tax authorities on completion of earlier years’ assessments/appeals decided during the year and is net of write back of excess tax provision for earlier years amounting to Rs Nil (Nov 2002 – Rs 49.67 lakhs). 18. Interest expense represents interest payable on loans other than fixed period. It includes interest payable to its wholly owned subsidiary company – Duchem Laboratories Limited – Rs Nil (Nov 2002 – Rs 0.97 lakhs). 45 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 19. The names of the Small Scale Industrial Undertakings to whom the Company owes a sum which is outstanding for more than 30 days:Nov 2003 Amijal Chemicals Ambika Trading Co Award Packaging Anushree Polypack Award Offset Printers Aerochem Silvassa Amoli Organics Ltd Bharat Industries Bescoat Bharat Rubber Works Bajaj Health & Nutrit Bajaj Healthcare Pvt Ltd Crown Paper Products Creative Cartons Chandra & Co Everest Industrial Co Emcure Pharmaceutical Fineprint Pvt Ltd Gharda Chemicals Ltd Geno Pharmaceuticals Ganesh Benzoplast Limited Heniel Pack Impact Containers Ltd Indica Chemical Inds Kopran Ltd Kaveri Lime Industries Keshava Organics Pvt Ltd Lubri Chem Industries Metapaks Engineering Mipak Industries Mipak Plastics Pvt Ltd Nirmal Chemicals Neel Print n Pack Patel Papain Industries Paper Kraft Inds Purna Packaging Patel Remedies Pvt Ltd Plastopack Preema Packaging Royale Impex Ramdev Chemicals Rank Organics Savita Chemicals Ltd Suraj Paper Box works Sunil Chemicals Sai Vignesh Packaging Shri Dutt Enterprises Surya Packaging Shree Krishna Agencies Transchem Limited Techno Drugs & Uce projects Vinamax Organics Pvt Ltd Ven Petrochem Vial Seal Veer Chemie & Aromatic Vel Pack Vishwanath Packaging M/s Western Cans Pvt Ltd Nov 2002 Amijal Chemicals Anushree Polypack Aerochem Silvassa Award Packaging Bharat Industries Chandra & Co. Corropack Industries Creative Cartons Crown Paper Products Heniel Pack Kavari Lime Industries Keshava Organics Pvt. Ltd Lactose India Ltd Lubri Chem Industries Matrix Laboratories Nahar’s Agro Products Nirmal Chemicals Omni Protech Drugs Pvt. Ltd PD Fine Chem Savita Chemicals Ltd Shree Samarth Agro Sunil Chemicals Suraj Paper Box Works Transchem Ltd UCE Project Veer-Chemie & Aromatic Shri Dutt Enterprises Tilrode Chemical Pvt. Ltd. Uday Packaging Bharat Rubber Works Daya Industries Kaisha Mfg. Pvt. Ltd Motani Industries Paperpack Industries Press & Pack Industries Preema Packaging Pharmapack Pvt. Ltd. Perfect Packings South India Printers The above information and that given in Schedule 10 – Current Liabilities regarding small scale industrial undertakings has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors. 46 Notes to Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 20. Disclosures as required by the Accounting Standard - 18 on “Related Party Disclosures” are given below: I. Names of Related Parties and description of Relationships A. Parties where control exists : Companies collectively exercising Pfizer Corporation, Panama significant influence Warner-Lambert Company, LLC, USA Parke-Davis & Company, LLC, USA [Collectively holding 40% of the aggregate of equity share capital of the Company] Subsidiary Company: Duchem Laboratories Limited (100% Shares are held by the Company as at the year end) Ultimate Holding Company: Pfizer Inc., New York Fellow Subsidiaries B. Key Management Personnel : Warner-Lambert India Private Limited, India Pharmacia India Private Limited, India Pharmacia Healthcare Limited, India Pfizer Overseas Inc., Exports Division, Brussels Pfizer Export Company, Ireland Pfizer Overseas Inc., New York Pfizer International Inc., New York Pfizer Products Inc. Pfizer Overseas Inc. Export Division, Hongkong Pfizer Limited, U.K. Pfizer Labs Ltd., South Africa Pfizer Service Company S.A. (Belgium) Pfizer Italiana SpA Pfizer Egypt, SAE Pfizer Inc. Philippines Warner-Lambert Pharmaceuticals, South Africa Mr. Hocine Sidi Said Mr. Kewal Handa Dr. B.M. Gagrat Mr. S. Madhok Dr. S. Mukherjee Dr. Chitra Lele Dr. C.N. Potkar Mr. H. Walder Mr. S. Ramkrishna Mr. Arun Gupta 47 II. Transactions during the year and Balances Outstanding as at the year end with the Related Parties are as follows : Related Parties where control exists : Rs. in Lakhs Nov 2003 Nature of Transactions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Sale of finished goods (net of returns) Sale of bulk materials Service income Interest income on Loans given Recovery of expenses Purchase of finished goods Purchase of raw/bulk materials Royalty expense Service charges paid Interest expense on Loans taken Expenses reimbursed Dividend in respect of the year/ period ended 30th November, 2002 / November 2001 Loans given Loans taken Outstanding as at the year end – Due from Outstanding as at the year end – Due to Guarantees given to Banks on behalf of Subsidiary Company, outstanding as at the year end Nov 2002 Ultimate Holding Company Companies exercising significant influence Subsidiary Fellow Company Subsidiaries Ultimate Holding Company Companies exercising significant influence Subsidiary Company Fellow Subsidiaries — — 1812.85 — 33.94 — — 16.85 — — — — — — — — 59.83 84.64 — — — — — — — — — — — — — — — 325.41 382.64 57.94 22.83 728.73 1676.93 151.42 243.93 — 6.26 48.39 — — 1649.18 — — — — 30.80 — — — — — — — — 41.41 182.25 — — — — — — — 79.39 — 1.52 — — — 0.97 — 157.28 211.59 63.16 75.91 207.14 1760.70 109.75 46.76 1.94 — 16.26 — — — 863.92 — — — 2148.15 2179.75 — 1890.00 1250.00 — — — 661.67 — — — 2531.99 329.11 — 3000.00 — 423.24 — — 2407.93 706.68 — — 1116.57 5.73 0.76 31.11 1249.84 8.31 11.76 6.53 861.53 2400.00 2400.00 Key Management Personnel & their Relatives : Rs. in Lakhs Nov 2003 Nature of Transactions 1 2 3 4 5 6 7 8 III Remuneration Rent paid for residential flats Interest income on Loans given Sale of Fixed Assets Deposits paid Amounts paid on behalf and recovered Deposits outstanding as at the year end Loans outstanding as at the year end Nov 2002 Key Relative of Management Key Personnel Management Personnel 360.91 49.89 0.01 — 68.21 0.45 159.44 — Key Relative of Management Key Personnel Management Personnel — — — — — — — — 362.49 27.48 0.03 0.57 39.75 8.46 137.07 0.25 — 1.10 — — — — — — Others * Services are rendered to the subsidiary company by providing resources like manpower, assets, etc. for which no amount is recovered from the subsidiary company. * Under the terms of the agreement between Pfizer Inc. (Ultimate Holding Company) and the Company for conducting clinical trials and studies in India, Pfizer Inc., has agreed to indemnify, defend and hold the Company and its directors, employees and agents harmless against any and all liability, loss or damage they may suffer as a result of any claims, demands, costs, penalties, fines or judgments incurred or imposed against it arising out of any clinical trial and study or otherwise pursuant to the agreement * Amount written off or written back in respect of debts due from or to related parties is Rs. Nil 48 21 Segment Information for the year ended 30th November , 2003 Business Segments (see Note 1 below) Rs.in Lakhs Nov 2003 Pharmace uticals Segment Revenue External sales and services to customers 43185.13 Total Segment Revenue 43185.13 Segment Results 6187.09 Unallocated corporate (expenses) / Income (Net) Operating profit Interest expenses and Bank charges Interest income Income Tax Exceptional Items (Net of expenses) (1238.04) Unallocated Exceptional Items Nov 2002 Animal Health Services Total Pharma ceuticals Animal Health Services Total 5351.21 5351.21 471.43 1870.79 1870.79 185.17 50407.13 50407.13 6843.69 51189.81 51189.81 12243.41 5762.93 5762.93 595.82 1655.60 1655.60 169.36 58608.34 58608.34 13008.59 (622.95) 6220.74 (268.29) 352.28 (1880.95) (1.20) (1239.24) (434.02) Net profit / (Loss) Other Information Segment Assets Unallocated corporate assets 22608.25 3761.90 773.90 7382.87 695.20 159.17 (1.20) 1878.79 (360.72) 27144.05 17702.99 7594.10 29031.97 4407.37 954.33 9281.82 1096.70 256.29 44847.04 Total Liabilities Capital Expenditure Depreciation/Amortisation Amortisation of Voluntary retirement cost Other Non-cash ExpensesEstimated Loss on assets held for Disposal 1879.99 2750.52 Total Assets Segment Liabilities Unallocated corporate Liabilities (2196.40) 10812.19 (257.12) 609.35 (5088.39) 8237.24 5769.62 34393.67 12922.50 47316.17 14006.86 10634.81 5878.41 16513.22 1487.59 541.38 5.98 71.82 108.17 104.34 1383.77 494.30 77.11 114.21 69.23 94.51 26.47 — — 111.65 — — — — — 284.39 — — Geographic Segment (see Note 2 below) Nov 2003 Segment Revenue-External sales to customers Carrying amount of segment assets Capital Expenditure Nov 2002 India Other Countries Total India Other Countries Total 47387.55 44206.26 1740.15 3019.58 640.78 — 50407.13 44847.04 1740.15 56012.89 33443.13 1530.11 2595.45 950.54 — 58608.34 34393.67 1530.11 Notes: 1 Business Segments : The business operations of the Company comprise Pharmaceuticals, Animal Health and Services. The business segments have been identified and reported taking into account, the nature of products and services, the differing risks and returns and the internal financial reporting systems. The Pharmaceuticals business comprises of manufacturing and trading of bulk drugs and formulations and also includes rendering of marketing services. The Animal Health business has a presence primarily in the large animal health and poultry market segments, and also includes rendering of marketing services. Services - Clinical Development Operations primarily include conducting clinical trials and undertaking comprehensive data management for new drug development. 2 Geographical Segments : For the purpose of geographical segments the consolidated sales are divided into two segments - India and other countries. 3 The accounting policies of the segments are the same as those described in the summary of significant accounting policies as r eferred to in Note 1 in the Notes to the Accounts - Schedule 19. 49 Notes to Financial Statement For the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 22. The figures of the previous year have been regrouped/reclassified wherever necessary to conform to the figures of the current year. For Pfizer Limited Mumbai, 26 February, 2004 R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary 50 23. Balance sheet abstract and Company’s general business profile I Registration details Registration No 8311 State code Balance sheet date II III 30 11 11 2003 Capital raised during the year (Amount in Rupees thousand) Public issue NIL Rights issue NIL Bonus issue Private placement NIL NIL Position of mobilisation and deployment of funds (Amount in Rupees thousand) Total liabilities Total assets 3084018 3084018 Share Capital Reserves and surplus 287993 2796025 Secured loans Unsecured loans NIL NIL Source of funds Application of funds Net fixed assets IV V Investments 611008 32436 Deferred tax asset Net current assets 98903 1801237 Miscellaneous expenditure Accumulated losses 540434 Nil Performance of the Company (Amount in Rupees thousand) Turnover (including other income) Total expenditure 5151473 4521000 Profit/ loss before tax Profit/ loss after tax + 463147 + 275052 Earnings per share (Rupees) Dividend rate 9.55 75% Generic names of three principal products of the Company (as per monetary terms) Item code No (ITC Code) Product description Item code No (ITC Code) Product description Item code No (ITC Code) Product description 30044005 Syrup based on codeine phosphate 30042002 Tetracycline of derivates in capsules, injections, ointments etc. 30049011 Other anti-inflammatory (non-steroid) formulations For Pfizer Limited R A Shah Chairman Hocine Sidi Said Managing Director P Shah Director K Handa Executive Director-Finance B M Gagrat (Dr.) Executive Director - Technical Operations A Anjeneyan Secretary 51 Accounts of the Subsidiary Company Duchem Laboratories Limited Directors’ Report read with the Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1998 in respect of Conservation of Energy & Technology Absorption are not applicable. The Directors have pleasure in presenting the Forty-fifth Annual Report together with the audited statement of accounts of the Company for the year ended 30th November 2003: The Foreign Exchange earnings during the year were Rs. Nil as against Rs. 45.05 Lakhs for the previous year. FINANCIAL RESULTS DIRECTORS’ RESPONSIBILITY STATEMENT Rupees in Lakhs Particulars Year ended November 30, 2003 Year ended November 30, 2002 The Profit/(loss) for the year amounted to (402) 16 Less: Tax provision-Current and deferred tax debit/(credit) (20) 18 (382) (2) (Loss) After Tax After adjusting thereto the balance Of Profit from prior years Transfer from General Reserve (Nov ’03 - Rs. 0.23 Lakhs) The Profit and Loss Account shows a balance Profit/ (loss) which has been carried forward 152 154 — — (230) 152 OPERATIONS The Net Sales of the Company for the year under review is Rs. 1516 Lakhs as compared to Rs. 7593 Lakhs for the previous year. The operations for the period reflect a Net Loss of Rs. 382 Lakhs as against Net Loss of Rs. 2 Lakhs for the previous year. The reduction in turnover is consequent to change in product portfolio of the Company. Pursuant to section 217 (2AA) of the Companies Act, 1956 (the Act), your Directors confirm the following: 1. In the preparation of the Annual Accounts, the applicable accounting standards had been followed; 2. Your Directors have selected such accounting policies and applied them consistently and made estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period; 3. Your Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of the company and for preventing and detecting fraud and other irregularities; 4. Your Directors have prepared the attached Statement of Accounts for the year ended November 30, 2003 on a going concern basis. AUDITORS M/s Bharat S Raut & Co., Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. On behalf of the Board of Directors KEWAL HANDA Chairman DIVIDEND The Directors do not recommend any dividend for the year ended 30th November 2003. DIRECTORS In accordance with the Articles of Association of the Company, Dr. Bomi M. Gagrat, Director will retire by rotation at the forthcoming Annual General Meeting and being eligible offers himself for re-appointment. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Since the operations of the Company is restricted to trading, the requirement of Section 217 (1) (e) of the Companies Act, 1956 Mumbai, February 25, 2004 52 Auditors’ Report To the Members of Duchem Laboratories Limited conformity with the accounting principles generally accepted in India: i) We have audited the attached Balance Sheet of Duchem Laboratories Limited (‘the Company’) as at 30 November 2003 and the related Profit and Loss Account of the Company for the year ended on that date, annexed thereto. 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 India. 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. 1. As required by the Manufacturing And Other Companies (Auditor’s Report) Order, 1988 issued by the Central Government in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (‘the Act’), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 2. Further to our comments in the Annexure referred to in paragraph 1 above, we report that: a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of the audit; b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of the books; c) the Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account; d) in our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act, to the extent applicable; e) on the basis of written representations received from the directors of the Company as at 30 November 2003 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30 November 2003 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; f) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Act, in the manner so required and give a true and fair view in in the case of the Balance Sheet, of the state of affairs of the Company as at 30 November 2003; and ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date. For Bharat S Raut & Co. Chartered Accountants Mumbai, February 25, 2004 Sanjay Aggarwal Partner Membership No.: 40780 Annexure to the Auditors’ Report – 30 November 2003 With reference to the Annexure referred to in paragraph 1 of the report of the Auditors’ to the members of Duchem Laboratories Limited on the financial statements for the year ended 30 November 2003, we report that: 1. According to the information and explanations given to us, the Company did not have fixed assets at any time during the year. Accordingly, clauses (i) and (ii) of the Manufacturing And Other Companies (Auditor’s Report) Order, 1988 are not applicable to the Company. 2. The inventories of traded finished goods have been physically verified by the management during the current year. In our opinion, the frequency of such verification is reasonable. 3. The procedures of physical verification of inventory followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business. 4. The discrepancies noticed on verification between physical inventory and book records were not material and have been properly dealt with in the books of account. 5. On the basis of our examination of inventory records, we are of the opinion that the valuation of inventories is fair and proper, in accordance with generally accepted accounting principles and is on the same basis as in the preceding year. 6. According to the information and explanations given to us, the Company has not taken/granted any loans, secured or unsecured, from/to companies, firms, or other parties listed in the register maintained under Section 301 of the Act, or from companies under the same management as defined under Section 370 (1B) of the Act. 7. According to the information and explanations given to us, no loans or advances in the nature of loans have been given by the Company during the year. 8. In our opinion, and according to the information and explanations given to us, there are adequate internal control 53 procedures commensurate with the size of the Company and the nature of its business, for the purchase and sale of finished goods. 9. According to the information and explanations given to us, there are no purchases of goods and materials from or sale of goods, materials and services to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. 10. The Company has not accepted any deposits from the public and consequently the provisions of Section 58A of the Act, and the rules made thereunder are not applicable, to the Company. 11. According to the information and explanations given to us, the operations of the Company do not generate scrap or byproducts. 12. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. 13. According to the information and explanations given to us, the Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 for any of the Company’s product. tax, wealth tax, sales tax, customs duty and excise duty which were outstanding at 30 November 2003 for a period of more than six months from the dates they became payable. 16. On the basis of our examination of books of account carried out by us in accordance with generally accepted auditing practices, and according to the information and explanations given to us, no personal expenses of directors were charged to the Profit and Loss Account other than those payable under contractual obligations or in accordance with generally accepted business practice. 17. In our opinion and according to the information and explanations given to us, the Company is not an industrial undertaking and accordingly the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, is not applicable to the Company. 18. As explained to us, in respect of the trading activities of the Company, damaged goods have been determined and adequate provision has been made for the loss arising on the items so determined. 19. In our opinion, matters specified in the clauses (i), (ii), (xii) and (xvii) of sub paragraph 4(A) and matters specified in sub paragraph 4(B) and 4(D) of the Manufacturing and Other Companies (Auditor’s Report) Order, 1988, are not applicable to the Company for the year under audit. 14. According to the information and explanations given to us, the Company did not have any employees at any time during the year, hence clause (xvii) of the Manufacturing And Other Companies (Auditor’s Report) Order, 1988 is not applicable to the Company 15. According to the information and explanations given to us, there are no undisputed amounts payable in respect of income For Bharat S Raut & Co. Chartered Accountants Mumbai, February 25, 2004 Sanjay Aggarwal Partner Membership No.: 40780 54 Balance Sheet as at 30th November, 2003 Rupees in Lakhs Schedule Sources of Funds Shareholders’ funds Share capital Reserves and surplus As at 30th Nov 2003 1 2 3 4 5 6 7 As at 30th Nov 2002 324.00 — Total Application of Funds Deferred tax asset Current Assets, loans and advances Inventories Sundry debtors Cash and bank balances Loans and advances Rupees in Lakhs 324.00 151.95 324.00 475.95 324.00 475.95 60.26 40.43 259.17 33.41 36.53 177.72 652.86 318.15 124.86 101.54 506.83 Current Liabilities and Provisions Current liabilities Provisions 8 9 1197.41 (472.79) — (760.68) (1.21) (472.79) Net Current Assets Profit and Loss Account Total Notes to the accounts (761.89) 34.04 229.70 435.52 — 324.00 475.95 14 The schedules referred to above form an integral part of the Balance Sheet. In terms of our report of even date. For BHARAT S RAUT & CO. Chartered Accountants For Duchem Laboratories Limited SANJAY AGGARWAL Partner Membership No: 40780 K. HANDA B.M. GAGRAT (Dr.) HAROLD WALDER M. G. SUBRAMANIAM Mumbai, February 25, 2004 Mumbai, February 25, 2004 Chairman } Directors Secretary 55 Profit and Loss Account for the year ended 30th November, 2003 Rupees in Lakhs Rupees in Lakhs Year Ended 30th Nov 2003 Year Ended 30th Nov 2002 Schedule Income Sales (gross) Less: Sales tax Sales (net) Interest income Miscellaneous income Expenditure Decrease in stocks of finished goods Purchases Interest Expense Other expenses 1639.44 123.26 10 11 12 8178.12 585.20 1516.18 0.42 0.83 7592.92 10.24 63.04 1517.43 7666.20 393.69 1352.40 0.80 172.02 13 1158.73 5993.56 82.64 415.51 1918.91 Profit/(Loss) before Taxation Current tax Deferred tax debit/(credit) 7650.44 (401.48) — (19.83) 15.76 1.42 16.58 Loss After Taxation Balance of Profit and Loss Account brought forward Transfer from General Reserve (19.83) (381.65) 151.72 0.23 18.00 (2.24) 153.96 - Balance of Profit and Loss Account carried forward (229.70) 151.72 Earnings per share of Rs.100 each (Basic and Diluted) Rs. (117.79) Rs. (0.69) Notes to the accounts 14 The schedules referred to above form an integral part of the Profit and Loss Account. In terms of our report of even date. For BHARAT S RAUT & CO. Chartered Accountants For Duchem Laboratories Limited SANJAY AGGARWAL Partner Membership No: 40780 K. HANDA B.M. GAGRAT (Dr.) HAROLD WALDER M. G. SUBRAMANIAM Mumbai, February 25, 2004 Mumbai, February 25, 2004 Chairman } Directors Secretary 56 Schedules Rupees in Lakhs Rupees in Lakhs 30th Nov 2003 30th Nov 2002 476.00 476.00 24.00 24.00 Total 500.00 500.00 Issued, subscribed and paid up 3,24,000 Equity shares of Rs. 100 each fully paid up 324.00 324.00 Total 324.00 324.00 Schedule 1: Share capital Authorised 4,76,000 Equity shares of Rs. 100 each 24,000 Nine per cent non-cumulative Redeemable preference shares of Rs. 100 each (All the above shares are held by the Holding Company — Pfizer Limited and its nominees) Schedule 2: Reserves and surplus General reserve Per last balance sheet Less: Transfer to Profit and Loss Account 0.23 0.23 0.23 — — Profit and loss account Per last balance sheet Less: Transfer to Profit and Loss Account 151.72 151.72 0.23 153.96 153.96 — — — 151.72 — 151.95 60.26 40.43 60.26 40.43 Stock-in-Trade Finished goods 259.17 652.86 Total 259.17 652.86 170.53 30.88 203.91 224.24 201.41 (168.00) 428.15 (110.00) 33.41 318.15 Balance as per Profit and Loss Account Schedule 3: Deferred tax asset Arising on account of timing differences in: Provision for doubtful debts Total Schedule 4: Inventories Schedule 5: Sundry debtors (Unsecured - considered good except where otherwise stated) (Considered doubtful Rs. 168.00 lakhs, Nov 2002 : Rs. 110.00 lakhs) Debts outstanding for a period exceeding six months Other debts Provision for doubtful debts Total 57 Schedules Rupees in Lakhs Rupees in Lakhs 30th Nov 2003 30th Nov 2002 With scheduled banks On current account Cheques on hand 36.53 — 124.64 0.22 Total 36.53 124.86 97.42 31.11 95.01 6.53 49.19 — 177.72 101.54 Sundry creditors Due to small scale industrial undertakings Others 403.78 69.01 678.91 81.77 Total 472.79 760.68 — 1.21 — 1.21 0.42 — — 1.56 7.71 0.97 0.42 10.24 — — 0.22 0.61 13.35 49.68 0.01 — 0.83 63.04 652.86 259.17 1811.59 652.86 (393.69) (1158.73) 7.08 3.00 2.50 14.35 43.67 — 58.00 10.01 16.86 8.55 3.21 4.79 8.28 4.89 14.22 111.15 113.91 77.64 — 38.49 12.31 14.79 5.84 13.99 172.02 415.51 Schedule 6: Cash and bank balances Schedule 7: Loans and advances (Unsecured - considered good) Advances recoverable in cash or in kind or for value to be received Due from the Holding Company — Pfizer Limited (Maximum balance outstanding during the year Rs. 31 lakhs, Nov 2002 — Rs.129 lakhs) Income tax payments Total Schedule 8: Current liabilities Schedule 9: Provisions Taxation Total Schedule 10: Interest income Interest (Gross): On delayed payments On income tax refunds On loans to the Holding Company - Pfizer Limited (Tax deductible at source - Rs.Nil, Nov 2002 - Rs.0.20 lakhs) Total Schedule 11: Miscellaneous income Old credit balance written back Provision for Doubtful Debts/Advances written back (Net) Insurance claims Others Total Schedule 12: Decrease in stocks of finished goods Stocks at commencement Stocks at close Total Schedule 13: Other expenses Insurance Rates and taxes Rent Freight, forwarding and transport Commission Bad debts Provision for doubtful debts Bank charges Accounting and professional fees Sales tax Postage, telephone and fax Miscellaneous expenses Total 58 Schedule 14: Notes to accounts for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) 1. Significant Accounting Policies Basis of accounting The financial statements are prepared under the historical cost convention on an accrual basis of accounting in accordance with the provisions of the Companies Act, 1956 and comply with the Accounting Standards issued by the Institute of Chartered Accountants of India, to the extent applicable. Going concern The Company depends on Pfizer Limited, its holding Company for support to implement its business plans. The business plans and cash flows prepared by management for the foreseeable future indicate that the Company will be able to meet all its obligations as they fall due. Accordingly, these financial statements have been prepared on a going concern basis. Inventories Inventories are valued at lower of cost and net realisable value. Cost is arrived at using the First-in-First out method and includes other related expenses. Sundry Debtors These have been stated after making adequate provision for doubtful debts. Revenue Recognition Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to the customers, which is at the point of despatch of goods to the customers. Taxation Provision for income- tax is made on the basis of estimated taxable income for the year, in accordance with Income Tax Act, 1961 Deferred tax resulting from timing differences between the book and the tax profits is accounted for, at the current rate of tax, to the extent that the timing differences are expected to crystallise. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date. 2. 3. 4. 5. Nov 2003 Nov 2002 17.82 5.25 17.82 5.25 Contingent liabilities In respect of the guarantee given to the bank on behalf of a third party Others 23.07 23.07 Earnings in Foreign Exchange Total Exports (on FOB) — In Indian rupees — 45.05 Auditors’ Remuneration (including taxes, where applicable) For Audit Reimbursement of out-of-pocket expenses 5.40 0.04 5.25 0.26 381.65 324,000 2.24 324,000 117.79 0.69 Earnings per share Net loss after tax Weighted average number of equity shares of Rs 100 each Basic and Diluted Loss per share (Rs) 6. Information required by paragraphs 3 and 4 of parts II and III of Schedule VI to the Companies Act, 1956 Stock at commencement Purchases Sales Stock at close Class of goods Unit of Measure Quantity Rupees In Lakhs Quantity Rupees In Lakhs Quantity Rupees In Lakhs Quantity Rupees In Lakhs Tablets and capsules No. in Millions 34.03 (127.12) 553.25 (1,536.60) 56.30 (517.04) 1,176.50 (5,413.85) 48.77 (606.35) 1,353.15 (6,923.87) 8.81 (34.03) 184.88 (553.25) Liquids Litres — (68,246.46) — (78.09) — (271,113.60) — (306.20) (9,397.80) (319,827.42) (10.95) (390.04) — — — — Injectables : Powder Parenterals Kgs. 191.97 (291.91) 35.91 (164.57) 788.41 (922.63) 150.47 (169.58) 671.60 (914.46) 117.80 (215.88) 217.53 (191.97) 42.88 (35.91) Solids Kgs. 5,905.50 (3,159.00) 63.70 (32.33) 2,247.00 (9,778.00) 25.43 (103.93) 4,993.45 (5,809.35) 56.18 (63.13) 2,853.50 (5,905.50) 31.41 (63.70) 652.86 (1,811.59) Notes : 1. Stocks are after adjustment of write-offs. 2. Figures in brackets are in respect of the previous year. 1,352.40 (5,993.56) 1,516.18 (7,592.92) 259.17 (652.86) 59 Schedules Schedule 14: Notes to accounts For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) 7. The names of the small scale industrial undertakings to whom the Company owes a sum which is outstanding for more than 30 days: 2003 Emil Pharmaceuticals Inds.(P) Ltd. Medibos Laboratories Pvt.Ltd. Astral Pharmaceuticals 2002 Omni-Protech Drugs Ltd. Emil Pharmaceuticals Inds.(P) Ltd. Medibos Laboratories Pvt.Ltd. Astral Pharmaceuticals The above information and that given in Schedule 8 – “Current Liabilities” regarding small scale industrial undertakings has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors. 8. The figures of the previous year have been regrouped / reclassified wherever necessary to conform to the figures of the current year.. For Duchem Laboratories Limited Kewal Handa Chairman B M Gagrat (Dr.) Director Harold Walder Director M.G.Subramaniam Secretary Mumbai, February 25, 2004 60 23. Balance sheet abstract and Company’s general business profile I Registration details Registration No 11117 State code Balance sheet date II III 30 11 11 2003 Capital raised during the year (Amount in Rupees thousand) Public issue NIL Rights issue NIL Bonus issue Private placement NIL NIL Position of mobilisation and deployment of funds (Amount in Rupees thousand) Total liabilities Total assets 32400 32400 Share Capital Reserves and surplus Source of funds 32400 NIL Secured loans Unsecured loans NIL NIL Application of funds Net fixed assets Deferred Tax Asset NIL 6026 Net Current Assets Miscellaneous Expenditure 3404 NIL Accumulated losses 22970 IV V Performance of the Company (Amount in Rupees thousand) Turnover (including other income) Total expenditure 5151473 191891 + Profit/- - loss before tax + Profit/ loss after tax - 40148 - 38165 Earnings per share Dividend rate -117.79 NIL Generic names of three principal products of the Company (as per monetary terms) Item code No (ITC Code) Product description Item code No (ITC Code) Product description Item code No (ITC Code) Product description 30045005 b Group vitamins (B-Complex) with Vitamin C 30042012 Doxycycline Tablets 30042019 Other Antibiotics For Duchem Laboratories Limited Kewal Handa Chairman B M Gargat Director Harold Walder Director M G Subramaniam Secretary Mumbai, February 25, 2004 61 Auditors’ Report To the Board of Directors of Pfizer Limited We have audited the attached Consolidated Balance Sheet of Pfizer Limited and its subsidiary, Duchem Laboratories Limited (collectively referred to as ‘The Group’) as at 30 November 2003 and the consolidated Profit and Loss Account and the consolidated Cash Flow Statement of the Group for the year ended on that date, annexed thereto. These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are prepared, in all material respects, in accordance with the financial reporting framework generally accepted in India and are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. We report that, the consolidated financial statements have been prepared by the Group’s management in accordance with the requirements of Accounting Standard 21 – Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India. In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Group as at 30 November 2003; ii) in the case of the Consolidated Profit and Loss Account, of the consolidated results of operation of the Group for the year ended on that date; and iii) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Group for the year ended on that date. For Bharat S Raut & Co. Chartered Accountants Mumbai, 25 February 2004 Sanjay Aggarwal Partner Membership No.: 40780 62 Consolidated Balance Sheet as at 30th November, 2003 Rupees in Lakhs Schedule Ref. Sources of Funds Shareholders’ funds Share capital Share capital suspense account Reserves and surplus 1 1A As at 30th Nov 2003 2879.93 — 2879.93 27730.55 2 3 Net block Capital work-in-progress at cost, including advances Investments Deferred tax asset (net) Current Assets, Loans and Advances Inventories Sundry debtors Cash and bank balances Loans and advances 2879.94 28074.96 30610.48 30954.90 30610.48 30954.90 13683.23 (8022.11) 13686.61 (8527.38) 5661.12 5159.23 448.96 536.99 6110.08 0.36 1049.29 4 5 6 7 8 9 As at 30th Nov 2002 2344.21 535.73 TOTAL Application of Funds Fixed assets Gross block Depreciation Rupees in Lakhs 8917.40 5915.94 8944.34 8521.23 5696.22 204.31 830.41 9136.70 12659.18 6965.37 7354.96 32298.91 Current Liabilities and provisions Current liabilities Provisions 10 11 36116.21 (10061.07) (4191.43) (11866.60) (5244.91) (14252.50) (17111.51) Net current assets Miscellaneous expenditure (to the extent not written off) Deferred revenue expenditure Voluntary retirement scheme 18046.41 19004.70 5404.34 5219.26 TOTAL 30610.48 30954.90 Notes to the Accounts 19 The schedules referred to above form an integral part of the Balance Sheet. In terms of our report of even date. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarwal Partner Membership No: 40780 Mumbai, 26 February, 2004 For Pfizer Limited R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary Mumbai, 26 February, 2004 63 Consolidated Profit and Loss Account for the year ended 30th November, 2003 Rupees in Lakhs Rupees in Lakhs Year Ended 30th Nov 2003 Year Ended 30th Nov 2002 Schedule Ref. INCOME Gross sales Less: Excise duty Less: Sales tax Net sales Services Interest income Miscellaneous income 57535.04 3954.06 4601.39 73303.42 5718.90 5750.38 48979.59 2943.72 364.62 744.23 12 13 61834.14 4365.60 564.15 1020.19 53032.16 EXPENDITURE Decrease in stocks of finished goods, work-in-process and own manufactured bulk drugs Cost of materials consumed Personnel costs Interest expense Other expenses Depreciation Royalty PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS Exceptional items - (expense)/income 14 15 16 1184.11 20449.98 7941.59 39.78 16109.16 1082.69 321.60 17 18 PROFIT BEFORE TAXATION Less: Taxation Current tax Deferred tax - (credit)/debit PROFIT AFTER TAXATION Balance brought forward after adjustments 2 TOTAL AVAILABLE FOR APPROPRIATION Proposed dividend - Regular - Special Tax on dividend Tax on dividend for previous year Tax on dividend for the previous year reversed Transfer from General Reserve Transfer to general reserve 1442.66 27685.93 8784.20 78.46 17453.72 1063.96 94.97 47128.91 56603.90 5903.25 (1673.26) 11180.18 1518.07 4229.99 12698.25 2080.00 (218.88) 5346.08 (239.69) 2368.87 19562.56 7591.86 14761.80 21931.43 22353.66 2159.82 — 276.73 276.73 — (0.23) 300.00 BALANCE CARRIED TO BALANCE SHEET EARNING PER SHARE (BASIC AND DILUTED) (See Note 13 in the Notes to the Accounts - Schedule 19) NOMINAL VALUE OF SHARE Notes to the Accounts 67784.08 1439.88 719.94 — — (168.72) — 800.00 3013.05 2791.10 18918.38 19562.56 Rs 8.23 Rs 26.36 10.00 10.00 19 The schedules referred to above form an integral part of the Profit and Loss Account In terms of our report of even date. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarwal Partner Membership No: 40780 Mumbai, 26 February, 2004 For Pfizer Limited R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary Mumbai, 26 February, 2004 64 Consolidated Cash Flow Statement for the year ended November 30, 2003 Particulars A Rs. In Lakhs Rs. In Lakhs Nov 2003 Nov 2002 5903.25 11180.18 1082.69 1063.96 6.97 0.61 (318.13) (537.67) Cash flow from Operating Activities : Net Profit before taxation and exceptional items Adjustments for Depreciation Unrealised Foreign Exchange Loss / (Gain) Interest Income Profit on fixed assets sold / discarded (22.57) (11.98) Personnel costs - Voluntary Retirement Scheme 26.47 111.65 Interest Expenses 38.98 129.56 (113.98) (373.23) 6603.68 11563.08 6995.13 (6917.76) 219.30 1299.95 (2035.42) 1718.25 628.99 386.67 Cash generated from operations 12411.68 8050.19 Direct taxes paid (Net) (4875.10) (4869.59) 7536.58 3180.60 (1617.76) (6009.76) 5918.82 (2829.16) (1491.55) (1758.95) — 3314.01 (Purchase) / Sale of Investments (Net) (includes Time Deposits having maturity period greater than or equal to 90 days) (6,036.05) 3219.50 Provisions no longer required written back Operating profit before working capital changes Adjustments for Trade and other receivables Inventories Trade and other payables Provisions (Excluding Proposed Dividend,Tax on distributed profits, Income Tax Provision) Net cash from operating activities before exceptional items Exceptional Items Compensation paid to employees under Voluntary Retirement Scheme Net cash from / (used in) operating activities after exceptional items B (A) Cash flow from Investing Activities : Purchase of fixed assets (Net) Consideration on Termination of Trademark Licenses - exceptional item (Net) Interest Received Net cash (used in) / from investing activities C (B) 284.96 593.47 (7242.64) 5368.03 — (1.92) (2393.81) (1623.27) (46.43) (150.32) (2440.24) (1775.51) (3764.06) 763.36 Cash flow from Financing Activities :Repayment of borrowings (Net) Dividend paid (Including Tax on distributed profits Rs. 276.73 Lakhs, Nov 2002- Rs. Nil) Interest paid Net cash used in financing activities (C) Net Increase/ (Decrease) in Cash & Cash Equivalents (A)+(B)+(C) Opening Cash and Cash Equivalents (Note 1) Cash & Cash equivalents as at 1st December, 2001 taken over on amalgamation (refer Note 2 below) Closing Cash and Cash Equivalents (Note 1) 5952.65 2075.10 — 3,114.19 2188.59 5952.65 (3764.06) 763.36 65 Consolidated Cash Flow Statement (Continued) Rs. In Lakhs Rs. In Lakhs Nov 2003 Nov 2002 13.53 17.31 1431.79 1693.65 31.76 715.00 2.26 3.48 800.00 70.92 — (5.75) 3380.01 (12.72) 2188.59 5952.65 — 1.24 — — 106.95 3006.00 — 3114.19 Notes: 1. Cash and Cash Equivalents include : Cash on Hand With Scheduled Banks On Current Accounts (including accounts with overdraft facility) On Margin Money Accounts On Time Deposit Accounts ( maturity less than 90 days ) Cheques on hand Remittance in Transit Unrealised translation gain on foreign currency cash & cash equivalents 2 The amalgamation of Parke - Davis with the Company is a non - cash transaction Consequent to the amalgamation, Cash and Cash Equivalents as at 1 st December, 2001 are taken over. The details are as under : Cash on Hand With Scheduled Banks On Current Accounts On Time Deposit Accounts 3 Interest income on delayed payments from customers and rental income have been shown under ‘Cash Flow from Operating Activities’ as according to the Company these form an integral part of the Operating activities 4 The above Cash Flow Statement has been prepared under the indirect method as set out in Accounting Standard 3 on “Cash Flow Statement” issued by The Institute of Chartered Accountants of India. In terms of our report of even date. For Bharat S Raut & Co. Chartered Accountants Sanjay Aggarwal Partner Membership No: 40780 Mumbai, 26 February, 2004 For Pfizer Limited R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary Mumbai, 26 February, 2004 66 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 Schedule 1: Share capital Authorised 2,88,00,180 (Nov 2002: 2,34,42,936) Equity shares of Rs. 10 each 1,11,99,820 (Nov 2002: 1,65,57,064) Unclassified shares of Rs. 10 each 2880.02 1119.98 2344.29 1655.71 4000.00 4000.00 Issued 2,88,00,180 (Nov 2002: 2,34,42,936) Equity shares of Rs. 10 each 2880.02 2344.29 Subscribed 2,87,97,540 (Nov 2002: 2,34,40,296) Equity shares of Rs. 10 each fully paid-up 2879.75 2344.03 0.18 0.18 2879.93 2344.21 — 535.73 — 535.73 Of the above 1,91,08,636 shares were allotted as fully paid - up bonus shares by capitalisation of general reserve Rs.1776.92 lakhs and share premium account Rs.133.94 lakhs. Of the above 93,76,100 Equity shares of Rs.10 each fully paid-up are held by the Holding Company - Pfizer Corporation, Panama Of the above 21,42,897 Equity shares of Rs. 10 each in aggregate are issued to fellow subsidiaries i.e.Warner-Lambert LLC, USA and Parke-Davis & Company LLC, USA Of the above 53,57,244 Equity shares of Rs.10 each were issued as fully paid up to the shareholders of Parke-Davis (India) Limited (pursuant to the Scheme of Amalgamation of Parke-Davis (India) Limited with the Company) (Refer Note 2 in the Notes to the accounts - Schedule 19) Add: Forfeited shares Amount paid up on 2,640 Equity shares forfeited Schedule 1A : Share Capital suspense account In terms of the Scheme of Amalgamation of Parke-Davis (India) Limited with the Company, 53,57,243 Equity Shares of Rs. 10 each of Pfizer Limited to be issued as fully paid-up to the shareholders of Parke-Davis (India) Limited (Refer Note 2 in the Notes to the accounts - Schedule 19) TOTAL Schedule 2: Reserves and Surplus General reserve Per last balance sheet Add : Adjustment on account of amalgamation of Parke-Davis (India) Limited Add : Transfer from profit and loss account Less : Transfer to profit and loss account 8512.40 1750.38 — 300.00 (0.23) 5962.02 800.00 — 8812.17 8512.40 Profit and loss account Per last balance sheet Add : Transfer from Parke-Davis (India) Limited 19562.56 — 13048.48 1713.32 Less : Transfer to profit and loss account for the year 19562.56 19562.56 14761.80 14761.80 Balance as per profit and loss account — 18918.38 — 19562.56 TOTAL 27730.55 28074.96 95.82 Leasehold 9,383.34 497.54 1,743.53 — 97.60 568.19 1,077.74 — — — — — Deductions 13,686.61 13,683.23 15.51 783.32 3,628.50 6,413.43 1,017.80 1,191.86 505.02 95.82 31.97 As at 30th Nov 2003 5,550.12 8,527.38 — 326.86 2,638.17 4,086.42 456.42 607.72 320.49 75.79 — As at 30th Nov 2002 3,376.87## 1,082.69 — 179.73 453.45 305.24 115.03 20.69 8.22 0.33 — For the period 8,527.38 8,022.11 15.51 428.69 2,537.25 3,435.97 571.45 628.41 328.71 76.12 — As at 30th Nov 2003 6,110.08 448.96 5,661.12 — 354.63 1,091.25 2,977.46 446.35 563.45 176.31 19.70 31.97 As at 30th Nov 2003 5,696.22 536.99 5,159.23 — 444.96 995.07 2,443.19 561.37 479.50 183.14 20.03 31.97 As at 3oth Nov 2002 Written Down Value Refer Schedule 19 - Note 10. Includes adjustments consequent to amalgamation of Parke-Davis (India) Limited aggregating Rs. 1747.99 lakhs. ## Includes adjustments consequent to amalgamation of Parke-Davis (India) Limited aggregating Rs. 1862.72 lakhs and estimated loss on assets held for disposal aggregating Rs. 450.19 lakhs. # 399.61 1,587.96 — 77.90 554.37 955.69 — — — — — Deductions Depreciation / Amortisation Rupees in Lakhs Buildings include investment in share application money of Rs.500 in a co-operative housing society, representing ownership of two residential flats. The agreement for sale is submitted for registration. 4,800.81# 1,740.15 — 109.10 563.45 961.56 0.01 104.64 1.39 — — Additions Cost ** Buildings include investment in 250 shares of Rs.500 each in a co-operative housing society, representing ownership of two residential flats. @ Grand Total Construction work-in-progress including capital advances Previous year 13,686.61 15.51 Trademarks TOTAL 771.82 Vehicles Furniture & fixtures 3,633.24 6,529.61 Machinery & equipment Office equipment, 1,017.79 1,087.22 On leasehold land ** Leasehold improvements 503.63 On freehold land @ BUILDINGS : 31.97 As at 30th Nov 2002 Freehold LAND : Schedule 3: Fixed Assets CONSOLIDATED 67 Schedules 68 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 — — 0.11 0.61 — — 0.25 0.25 Schedule 4: Investments (At cost except where otherwise stated) Long Term Investments Trade (unquoted) Leema Chemicals and Cosmetics Private Limited 24 Equity Shares of Rs. 10 each, fully paid - up (Actual cost Rs.240) Non-Trade (unquoted) Government Securities (includes Rs. Nil deposited with Excise Authorities, Nov. 2002 - Rs. 0.50 lakhs) Gold Sovereign (Actual cost Rs. 61) The Shamrao Vithal Co-operative Bank Limited 1,000 shares of Rs. 25 each, fully paid-up Nil (Nov 2002 - 10,14,500) Units of Rs 10/- each fully paid up of Unit Trust of India - Unit Scheme 1964 — 150.00 Less : Provision for dimunition in the value of Investments — (46.55) Nil (Nov 2002 - 2,000 ) 11% Bonds of Rs. 5,000 each fully paid up of Industrial Credit and Investment Corporation of India Limited Tax Saving Bonds TOTAL — 103.45 — 100.00 0.36 204.31 Schedule 5: Deferred tax asset (net) Deferred tax asset Arising on account of timing differences in : Amortisation of commercial rights and trade marks Provision for doubtful debts and advances Provision for leave encashment and exgratia Provision for excise duty, custom duty and sales tax Provision for diminution in the value of investments Amortisation of voluntary retirement costs Other provisions, etc. Deferred tax liability Arising on account of timing difference in: Depreciation / estimated loss on assets held for disposal TOTAL 70.52 627.43 270.03 81.85 — 27.85 167.65 95.49 416.51 231.49 64.20 17.11 27.63 135.05 1245.33 987.48 196.04 157.07 1049.29 830.41 Schedule 6: Inventories Stores and maintenance spares Packing materials Stock-in-trade Raw materials Own manufactured bulk drugs Work-in-process Finished goods 90.16 282.08 128.79 339.18 2501.20 225.92 469.62 5348.42 1440.66 434.70 386.71 6406.66 TOTAL 8917.40 9136.70 69 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 2399.89 5085.94 1582.47 12015.09 Schedule 7: Sundry debtors (Unsecured - Considered good except where otherwise stated) Debts outstanding - Over six months - Other debts 7485.83 13597.56 of which - Considered good - Considered doubtful 5915.94 1569.89 12659.18 938.38 Provision for doubftul debt 7485.83 (1,569.89) 13597.56 (938.38) 5,915.94 12,659.18 Schedule 8: Cash and bank balances Cash on hand With Scheduled Banks On Current Accounts (including accounts with overdraft facility) On Margin Money Accounts On Time Deposit Accounts Cheques on hand / in transit Remittances in Transit 13.53 17.31 1431.79 31.76 7465.00 2.26 — 1693.65 3.48 1800.00 70.92 3380.01 TOTAL 8944.34 6965.37 Schedule 9: Loans and advances (unsecured) (Considered good except where otherwise stated) Advances recoverable in cash or in kind or for value to be received Considered good* Considered doubtful Provision for doubtful advances 5283.09 179.09 6249.70 194.61 5462.18 (179.09) 6444.31 (194.61) Inter Corporate Deposit to Warner-Lambert India Private Limited Inter Corporate Deposit to Pharmacia Healthcare Limited 5283.09 — 1490.00 6249.70 1000.00 0.00 Amounts Recoverable from Warner-Lambert India Private Limited Amounts Recoverable from Pharmacia Healthcare Limited Amounts Recoverable from Pharmacia India Private Limited 69.55 246.66 401.37 15.25 — — Amounts recoverable from Leema chemicals Pvt. Limited Balance with Customs,Port Trust and Excise on Current Accounts Interest accrued on investment 0.16 35.79 — 0.16 79.09 6.97 44.73 949.88 3.79 — 8521.23 7354.96 Interest accrued but not due Income tax payments (net) TOTAL * Includes loans given to employees which are secured by Hypothecation Bonds Rs 8.17 lakhs (Nov 2002 — Rs. 18.50 lakhs) 70 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 4.75 785.94 707.07 7657.15 1527.21 — 164.46 0.43 — — 1375.93 8018.28 1539.17 1.34 121.72 1.46 18.91 3.85 10061.07 11866.60 Proposed dividend -Regular -Special Tax on distributed profits Gratuity Leave encashment Excise duty and custom duty (Net of payments) Income tax provisions (net) Wealth tax provision (net) Others 2159.82 — 276.73 740.80 752.69 218.88 — 7.61 34.90 1439.88 719.94 — 390.07 598.85 128.50 1845.22 — 122.45 TOTAL 4191.43 5244.91 18.75 237.87 20.63 319.24 50.64 4.67 134.05 75.90 18.16 3.91 — 11.12 30.62 3.21 364.62 564.15 Rental income Profit on fixed assets sold/discarded (net) Insurance claims Provisions no longer required written back Sundry 539.49 22.57 14.57 113.98 53.62 474.38 11.98 61.81 359.88 112.14 TOTAL 744.23 1020.19 Schedule 10: Current liabilities Acceptances Sundry creditors Due to Small Scale Industrial Undertakings Others Security deposits Interest accrued but not due on loans Dividends - uncashed Unclaimed interest on matured deposits Refundable share application money * Unclaimed interest on matured deposits * TOTAL * Credited to Investor Education and Protection Fund during the year. Schedule 11: Provisions Schedule 12: Interest income Interest (Gross) On staff loans On deposits with banks/company, delayed payments, etc. (Tax deducted at source — Rs. 63.99 lakhs, Nov 2002 — Rs. 69.31 lakhs) On Income Tax refunds (Net) On Inter Corporate Deposits with Warner-Lambert India Private Limited. (Tax Deducted at source — Rs 1.17 lakhs, Nov 2002 — Rs.15.15 lakhs) On Inter Corporate Deposits with Pharmacia Healthcare Limited. On Long-Term Investments (Non-Trade) (Tax deducted at source -Rs. 4.89 lakhs, Nov 2002 - Rs 2.31 lakhs) On others TOTAL Schedule 13: Miscellaneous income 71 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 Schedule 14: Decrease in stocks of finished goods, work-in-process and own manufactured bulk drugs Stocks at commencement Finished goods 6406.66 4988.21 Work-in-process 386.71 489.83 Own manufactured bulk drugs 434.70 428.53 7228.07 5906.57 Add : Stocks taken over after adjustments on amalgamation of Parke-Davis (India) Limited (Refer Note 3 of Notes to the Accounts - Schedule 19) Finished goods — Work-in-process — 2724.01 — 40.15 7228.07 2764.16 8670.73 Stocks at close Finished goods 5348.42 Work-in-process 469.62 386.71 Own manufactured bulk drugs 225.92 434.70 TOTAL 6406.66 6043.96 7228.07 1,184.11 1,442.66 Schedule 15: Cost of materials consumed Raw materials Stock at commencement 1440.66 1103.10 — 304.06 Add : Stock taken over after adjustments on amalgamation of Parke-Davis (India) Limited (Refer Note 3 of Notes to the Accounts - Schedule 19) 1440.66 Purchases (net) Less: Cost of materials sold 1407.16 7618.90 8097.71 — (181.15) Net purchases 7618.90 9059.56 9323.72 Stock at close (2501.20) (1440.66) 6558.36 7883.06 Packing materials (net) Trading activity purchases TOTAL 7916.56 2772.64 3137.94 11118.98 16664.93 20,449.98 27685.93 6009.55 6485.69 642.74 531.65 Schedule 16: Personnel costs Salaries, wages and bonus Company’s contribution to gratuity fund Company’s contribution to provident and other funds 456.47 466.97 Staff welfare expenses 806.36 1,188.24 26.47 111.65 7941.59 8784.20 Voluntary retirement costs TOTAL 72 Schedules Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 Schedule 17: Other expenses Consumption of stores and maintenance spares Processing charges Power and fuel Water Repairs 196.82 167.99 1181.04 1053.39 950.76 1216.35 70.61 : Buildings 34.15 Machinery 293.86 Rent 81.25 46.06 328.01 253.17 779.28 299.23 934.03 Rates and taxes 182.54 285.39 Insurance 187.74 163.05 Clinical trials Legal and professional charges Equipment rentals, service charges, low cost assets written off Freight, forwarding and transport 868.00 848.57 1070.60 1169.74 417.42 336.74 1192.62 1346.61 1713.80 1588.86 Travelling (including boarding, lodging, conveyance and other expenses) Postage, telephone and fax 484.02 492.65 Advertising and promotion 2616.45 3406.20 Exchange loss (Net) Commission Bad debts written off Provision for doubtful debts (Net) Miscellaneous expenses TOTAL 28.74 14.72 742.48 652.26 — 102.43 631.51 393.68 2466.72 2900.58 16109.16 17453.72 — 3314.01 Schedule 18: Exceptional items (expense)/income Exceptional income Consideration on termination of trademark licenses (net of expenses) (See Note below) Exceptional expense Estimated loss on assets held for disposal Compensation paid to employees under VRS Compensation for termination of contractual arrangements Net exceptional income / (expense) — (450.19) (1673.26) (1296.29) — (49.46) (1673.26) (1795.94) (1673.26) 1518.07 Note: During the previous year, pursuant to the international acquisition of the Trademarks PROTINEX and DUMEX by EAC Nutrition Limited A/S, Denmark (EAC) from its proprietors Pfizer Products Inc, the Company has received a consideration of Rs 3380.01 lakhs (equivalent to US $ 7 million) from EAC for termination of the Trademark License Agreement relating to the said Trademarks. Rs. 3314.01 lakhs as shown above is net of expenses. 73 Notes to the Consolidated Financial Statement for the year ended 30 November 2003 (Currency: Indian Rupee in Lakhs) Schedule 19: Notes to the Accounts 1. Basis of preparation (a) The Consolidated Financial Statements have been prepared in accordance with Accounting Standard 21 (AS 21) – ‘Consolidated Financial Statements’ issued by The Institute of Chartered Accountants of India (ICAI). These financial statements comprise Pfizer Limited (‘the Company’) and it’s wholly owned subsidiary Duchem Laboratories Limited (‘DLL’) collectively referred to as the group. The financial statements of each of these companies are prepared using uniform accounting policies in accordance with the generally accepted accounting principles in India. (b) The company has one subsidiary company (which alongwith Pfizer Limited, the parent, constitute the Group) which has been considered in the preparation of these consolidated financial statements. The particulars of the subsidiary company are: Name Country of Incorporation Percentage of voting power held as at 30th November, 2002 : 2. : : : Duchem Laboratories Ltd. India 100% Significant Accounting Policies (a) Basis of Accounting The consolidated financial statements are prepared under the historical cost convention on an accrual basis of accounting in accordance with the provisions of the Companies Act, 1956 and comply with the Accounting Standards issued by the Institute of Chartered Accountants of India, to the extent applicable. (b) Fixed Assets and Depreciation (i) All fixed assets are stated at cost of acquisition less accumulated depreciation. (ii) Assets costing upto Rs. 5000 are written off and those costing more than Rs. 5000 but upto US$ 1000 (equivalent to Rs 0.46 lakhs at the year end rate) are fully depreciated in the year of purchase except that “multiple-like items” the cost of which is over US $10,000 (equivalent to Rs 4.60 lakhs at the year end rate) in the aggregate; and “unlike items of a capital nature within an asset category” for large scale projects the aggregate cost of which exceeds US $ 10,000 (equivalent to Rs 4.60 lakhs at the year end rate) are considered as one asset and depreciated in accordance with the accounting policy stated in (iii) below. (iii) Depreciation for the year has been provided on straight line method at the higher of the rates determined by the Company or the rates specified in Schedule XIV to the Companies Act, 1956. Depreciation on additions other than those stated in (ii) above is provided for a period of six months in the year of purchase. Depreciation on deletions during the year is provided upto the quarter in which the asset is sold / discarded. (iv) Depreciation other than on low cost assets is provided at the following rates per annum (v) (c) Assets Periods / Rate Land : Leasehold Buildings : On Freehold land On Leasehold land Leasehold Improvements Machinery & Equipment Office Equipment, Furniture & Fixture Vehicles Trademarks Amortised over the lease period 3.34% Higher of 3.34% or rate based on leased period 8% to 10% or Amortised over the lease period 8% to 40% 8% to 33.33% 25% Amortised over a period of 3 years Assets identified as retired from active use and held for disposal are stated at the lower of net book value and estimated net realisable value. Foreign Currency Transactions Transactions in foreign exchange which are covered by forward contracts are accounted for at the contracted rate, the difference between the forward rate and the exchange rate at the date of transaction being recognised in the Profit and Loss Account over the life of the contract. Transactions other than those covered by forward contracts are recorded at pre-determined standard exchange rates, which are reviewed periodically. Gains and losses arising on account of such revisions are reflected in the Profit and Loss Account except those relating to acquisition of fixed assets, which are adjusted to the cost of the assets. Monetary assets and liabilities in foreign currency, which are outstanding as at the year end and not covered by forward contracts are translated at the year end market exchange rate. (d) Investments Long-term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments. (e) Inventories Stock-in-trade and packing materials are valued at the lower of average cost and net realisable value. Cost of finished goods and work-in-process includes cost of materials, direct labour and an appropriate portion of overheads. Stores and maintenance spares are valued at average cost. Physicians’ samples are valued at standard cost which approximates actual cost. (f) Sundry Debtors/Loans & Advances These have been stated after making adequate provision for doubtful debts/advances. 74 Notes to the Consolidated Financial Statement For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) (g) Revenue Recognition Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to the customers, whic h is at the point of despatch of goods to the customers. Revenue from services is recognised on rendering of services. Interest income is recogni sed on time proportion basis. (h) Research & Development Revenue expenditure on research and development is written off in the Profit & Loss Account for the year in which it is incurred. Capital expenditure on research and development is treated in the same way as expenditure on Fixed Assets. (i) Retirement Benefits The Company’s contributions to the employees’ Provident Fund and Superannuation Schemes are charged to the Profit & Loss Account each year. The Company has opted for a Group Gratuity-cum Life Assurance Scheme of the Life Insurance Corporation of India (LIC), and contribution towards gratuity liability as determined by LIC is charged to the Profit & Loss account each year. The Company also provides for unutilised leave benefits on retirement available to its employees on the basis of an actuarial valuation done as at the year end. (j) Leases (k) Voluntary Retirement Schemes (VRS) Lease rentals in respect of assets acquired under operating lease are charged off to the Profit & Loss Account as incurred. Liability under the VRS is accounted for based on the acceptance of the applications of the employees under the VRS by the Company. Compensation paid under the VRS upto 30th November, 2001 is charged to the Profit and Loss Account over a period of three years and compensation paid under the VRS effective from 1st December, 2001 is charged to the Profit and Loss Account over a period of five years. (l) Taxation Provision for income– tax is made on the basis of estimated taxable income for the year, in accordance with Income Tax Act, 1961. Deferred tax resulting from timing differences between the book and the tax profits is accounted for, at the current rate of tax, to the extent that the timing differences are expected to crystallise. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date. (m) Proposed Dividend Dividend proposed by the Board of Directors is provided in the books of account pending approval at the Annual General Meeting. (n) Earnings per Share Basic and diluted earnings per share is computed by dividing the net profit attributable to equity shareholders for the year, with the weighted number of equity shares outstanding during the year. (o) Contingencies Loss contingencies arising from claims, litigation, assessment etc. are recorded when it is probable that a liability has been incurred, and the amount can be reasonably estimated. 3. Amalgamation of Parke-Davis (India) Limited with the Company a) The Scheme of Amalgamation (“the Scheme”) of the erstwhile Parke-Davis (India) Limited (hereinafter referred to as “Parke-Davis”) with the Company was sanctioned by the Honourable High Court of Judicature (“The High Court”) at Bombay vide its Order dated February 7, 2003. This Amalgamation is effective from December 1, 2001. Few dissenting shareholders filed an appeal at the High Court against this Order and Stay on implementation of the Scheme was granted by the High Court on March 13, 2003. A Division Bench of the High Court by its judgement dated July 23, 2003 dismissed this appeal. The Special Leave Petition filed by the dissenting shareholders against this dismissal was not admitted by the Supreme Court by its judgement dated September 8, 2003. b) Pursuant to the Scheme, 53,57,244 Equity Shares of Rs.10/- each of the Company were allotted on September 10, 2003 in the ratio of 4 (four) fully paid-up Equity Shares of the Company for every 9 (nine) fully paid-up Equity Shares of Rs.10/- each in Parke-Davis to the shareholders of ParkeDavis. c) Consequently, the amount of Rs. 535.73 lakhs shown in Share Capital Suspense Account (Schedule 1A) as on November 30, 2002 is now included in Share Capital (Schedule 1) of Balance Sheet. d) In view of aforesaid amalgamation with effect from December 1, 2001, the figures for the current year are directly comparable to those of the previous year. Rupees in Lakhs Rupees in Lakhs 4. Estimated amount of contracts on capital account to be executed and not provided for 5. Contingent Liability (a) In respect of the guarantees given to banks on behalf of : - Third parties (b) In respect of : (i) Excise Duty (ii) Customs Duty (iii) Sales Tax (iv) Service Tax Nov 2003 Nov 2002 812.19 1215.38 23.07 223.07 1234.18 10.51 76.51 466.08 1153.25 162.08 311.84 193.11 75 Notes to the Consolidated Financial Statement For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) 6. (c) Demands from Income-tax authorities for the interest on the alleged short deduction of tax at source on perquisites relating to the Assessment Year 1987-88 which have been disputed by the Company and in respect of which the Company has filed an appeal (d) DPEA claims (Refer Note 7) Managerial remuneration under Section 198 of the Companies Act, 1956 Salaries, Bonus & Commission Contribution to PF and Other Funds Perquisites Sitting Fees Commission to Non- Whole time Directors Total Rupees in Lakhs Rupees in Lakhs Nov 2003 Nov 2002 6.53 6.53 91.61 18.71 31.75 0.90 4.00 112.64 22.59 33.50 1.15 6.00 146.97 175.88 Note: In respect of year ended November 30, 2002, the above excludes remuneration paid to Directors of Parke-Davis who were not on the Board of the Company – Rs 28.18 lakhs (including Directors sitting fees Rs 0.95 lakhs and commission to non- whole time Directors Rs 4.40 lakhs). 7. Drugs Prices Equalisation Account (DPEA). (a) Oxytetracycline & Other Formulations In respect of certain price fixation Orders of 1981 of the Government of India, the Supreme Court vide its Order of 22nd March, 1993, held that, pending disposal of the Company’s Writ Petition in the High Court of Mumbai, the Company may deposit 50% of the impugned amount of Rs. 87.61 lakhs, less Rs. 19.90 lakhs already deposited, with the Union of India before 15th May, 1993, which has been done. In the event that the Company succeeds before the High Court of Mumbai, this amount will be returned within one month from the date of the decision of the High Court with interest at the rate of 15% per annum. However, if the Company loses the Writ Petition, the balance amount of Rs. 43.80 lakhs with interest at the rate of 15% per annum will have to be paid to the Government. (b) Multivitamin Formulations In respect of a certain price fixation Order of 1986 of the Government of India, the Supreme Court vide its Order dated 3rd December, 1992, held that, pending disposal of the Company’s Writ Petition in the High Court of Mumbai, the Company may deposit 50% of the impugned amount of Rs.98.00 lakhs with the Union of India before 31st January, 1993, which has been done.In the event that the Company succeeds before the High Court of Mumbai, this amount will be returned within one month from the date of the decision of the High Court with interest at the rate of 15% per annum. However, if the Company loses the Writ Petition, the balance amount of Rs 49.00 lakhs with interest at the rate of 15% per annum will have to be paid to the Government. (c) Protinex* In yet another case, the Company had challenged in 1986 a price fixation Order of the Government of India by a Writ Petition before the High Court of Mumbai. The Honourable Court passed an ad interim and interim order staying the impugned order. The Petition, while it was still pending for hearing and final disposal, was withdrawn in 1989 on redressal of the Company’s grievances. After protracted correspondence on the subject, in 1993 the Government raised a demand of Rs 81.83 lakhs on the Company for the period April 1986 to July 1989 and directed the Company to deposit the same into the DPEA. Thereafter, the Drug Prices Liability Review (DPLR) Committee sent a letter dated 15th February, 1996 seeking the Company’s submission/ representation against the reduced claim amount of Rs 33.87 lakhs for the period April 1986 to August 1987 as intimated to the DPLR Committee by the Government of India. The Company has made its submissions to the DPLR Committee vide its letter of 29th March, 1996 claiming that no amount whatsoever is due and payable having regard to the facts and relevant material of the case. In the meantime, the Department of Chemicals and Petrochemicals vide their letter dated 11th February, 1997, raised an additional demand of Rs 178.56 lakhs for the earlier period of February 1984 to March 1986 over and above the revised claim of Rs. 33.87 lakhs for the period April 1986 to August 1987. Thus, the total demand raised now stands revised to Rs. 212.43 lakhs. The DPLR Committee had, vide its letter dated 24th February 1997 invited the Company to make its submissions/ representations against the above said claim. The Company has made its submissions to the DPLR Committee vide its letter dated 14th May, 1997 claiming that no amount whatsoever is due and payable having regard to the facts and relevant material of the case. Pursuant to the submissions made by the Company, the DPLR Committee directed by an Order on November 17, 1998 that clarifications should be obtained from the Mumbai High Court on whether the Interim Stay granted in the Civil Writ Petition Number 2368 of 1996 is applicable to this matter. (This Writ Petition is filed by OPPI and IDMA jointly against any Notice issued by the Government of India after August 25, 1987 to any member of the OPPI or IDMA, initiating proceedings for recovery of an amount demanded in respect of a period prior to that date). On a Notice of Motion filed by the Company in the said Writ Petition, the Mumbai High Court has granted ad interim Order that “pending the hearing and final disposal of this Notice of Motion, further proceedings in the said Case No 49/1996 pending before the said Drug Prices Liability Review Committee be stayed.” * Regd. Trademark (d) Vitamin and Other Formulations The Government has arbitrarily determined the liability of the Company at Rs 1466 lakhs being the difference in price in respect of Vitamin and other formulations sold by the Company during the years 1983 to 1989. The Company has repudiated the liability on this account. The Company’s Solicitors have advised that the repudiation by the Company is legally sustainable. The Government has pursued the matter. The Company maintains its position that the claim by the Government is not legally sustainable. 76 Notes to the Consolidated Financial Statement For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) (e) Chloramphenicol The Government has arbitrarily determined the liability of the Company at Rs 145 lakhs and Rs. 14 lakhs being the difference between the price of bulk drug Chloramphenicol powder and Chloramphenicol Palmitate respectively allowed in the formulation price and actual procurement price for the period 1979 to 1988. The Company has repudiated the liability on this account as advised by the Company’ s Solicitors. The Company has also obtained a Stay order from the Honourable High Court of Mumbai against the demand. Pursuant to the submissions made by the Company, the DPLR Committee directed by an Order on November 17, 1998 that clarifications should be obtained from the Mumbai High Court on whether the Interim Stay granted in the Civil Writ Petition Number 2368 of 1996 is applicable to this matter. (This Writ Petition is filed by OPPI and IDMA jointly against any Notice issued by the Government of India after August 25, 1987 to any member of the OPPI or IDMA, initiating proceedings for recovery of an amount demanded in respect of a period prior to that date). On a Notice of Motion filed by the Company in the said Writ Petition, the Mumbai High Court has granted ad interim Order that “pending the hearing and final disposal of this Notice of Motion, further proceedings in the said Case No 23/95 pending before the said Drug Prices Liability Review Committee be stayed. (f) Pursuant to the repeal of DPCO 1970, erstwhile Warner-Hindustan Limited (merged with Parke-Davis (India) Limited in 1988 and Parke – Davis (India) Limited merged with Pfizer Limited in 2003) had classified ISOKIN TABLETS, ISOKIN LIQUID AND PYRIDIUM TABLETS as decontrolled products under the DPCO 1979. The categorization was, however, challenged by the Government in 1984 and a demand of Rs.113 lakhs was raised against the Company. Against this demand an excise duty setoff of Rs.7 lakhs was allowed to the Company and a final demand of Rs.106 lakhs was raised in 1987. The Company had deposited an amount of Rs.30 lakhs in February 1987 and Rs.25 lakhs in May 1990 totaling to an aggregate of Rs.55 lakhs in full and final settlement of the demand, as per the arguments set forth by the Company. The Government subsequently raised a demand of Rs.117 lakhs towards interest on principal demand (ie interest of Rs.43 lakhs for Pyridium for the period 1982 to August 1995 and Rs.74 lakhs for Isokin for the period 1982 to June 1997.) The Company filed a Writ Petition in the Andhra Pradesh High Court in September 1997 for staying all further proceedings against the Company. The High Court stayed the demand in respect of collection of interest but directed the Company to deposit the balance demand of Rs.51 lakhs (which amount was deposited in November, 1997). Pursuant to a Transfer Petition (Civil) no 475-496 of 2003 filed under Article 139A(1) of the Constitution of India, all pending writ petitions in respect of DPEA liabilities are now to be transferred to the Supreme Court to be heard and finally decided by the Supreme Court of India. Consequently as a result of the said transfer petition, Writ Petitions referred to in (a), (b), (c), (e) and (f) above will now be heard and disposed off by the Supreme Court. In view of matters (a), (b), (c), (e) and (f) being subjudice, the legal opinion being in favour of the Company, and based on the assessment of the Management, no further provision is considered necessary over and above the sum of Rs.48.21 lakhs that has already been made in the accounts in earlier years. The Company would continue to seek legal recourse in all the above matters. 2003 8. 2002 Earnings per Share Earnings per share has been computed as under: 9. (a) Profit after Taxation and Exceptional items (Rs. Lakhs) (b) Number of Equity Shares outstanding (c) Number of Shares in Share Capital Suspense (d) Total (b) + (c) (e) Earnings per share (Face value Rs. 10/- per share) (a) / (d) (Basic and diluted) 2368.87 7591.86 28797540 23440296 — 5357244 28797540 28797540 Rs.8.23 Rs. 26.36 Disclosure for operating leases under Accounting Standard 19 – “Leases” (a) The Company’s significant leasing arrangements are in respect of residential / godowns / office premises (including furniture and fittings, therein as applicable) taken on leave and license basis. The aggregate lease rentals payable are charged as Rent and shown under ‘Other Expenses’ (Schedule 17). These leasing arrangements, which are cancellable, range between 11 months and 5 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. Under these arrangements, generally refundable interest free deposits have been given. Further, in the case of one leasing arrangement, the Company has the option to purchase within the lease period, the licensed premises at a price to be decided as per the Valuation Report of independent valuers appointed by the Company subject to a minimum of Rs.1100 lakhs and a maximum of Rs.1150 lakhs. On exercising the above option the amount of deposit given will be adjusted against the purchase consideration decided and the balance would be payable with interest @ 12% p.a. from the date of agreement. Upon exercising the above option the Company would also be entitled to a reduction in the purchase price at the rate of Rs.6 lakhs per annum from the date of agreement till the date of payment of balance amount with interest or the date of completion of the lease period whichever is earlier. In respect of one of the leasing arrangements a non refundable deposit of Rs.60 lakhs has been given during the year and in another case Rs.30 lakhs has been reimbursed to the lessor towards repairs and renovation carried out at the licensed premises. (b) 10. (a) Sub-lease income recognised in the Profit and Loss Account for the year – Rs.539.49 lakhs (November 2002– Rs.474.38 lakhs). In an earlier year, the Company ceased its manufacturing operations at its Ankleshwar Plant and re-evaluated the useful life of the fixed assets. Additional depreciation amounting to Rs.614.74 lakhs was charged to the Profit and Loss Accounts in earlier years. 77 Notes to the Consolidated Financial Statement For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) (b) Fixed Assets (Schedule 3) include fixed assets lying at the Ankleshwar Plant as on 30 November, 2003 at their respective book values which are as follows: Original Cost Freehold Land Leasehold Land Freehold Building Leasehold Building Machinery & Equipment Office Equipment, Furniture & Fixtures Total Accumulated Depreciation Written Down Value Nov 2003 Nov 2002 Nov 2003 Nov 2002 Nov 2003 Nov 2002 20.28 63.25 165.82 506.66 898.88 20.28 63.25 165.82 506.66 898.88 — 63.25 136.48 426.33 820.49 — 63.25 136.48 426.33 820.49 20.28 — 29.34 80.33 78.39 20.28 — 29.34 80.33 78.39 37.85 37.85 33.68 33.68 4.17 4.17 1692.74 1692.74 1480.23 1480.23 212.51 212.51 Subsequent to the year ended November 30, 2003 the Company has entered into an agreement to sell the assets other than freehold land and freehold building at Rs.450 lakhs. (c) (d) During the previous year, the Company ceased its manufacturing operations at Hyderabad plant of Parke-Davis and also vacated office premises of Parke-Davis at Mumbai. In view of this, these fixed assets were stated at lower of net book value and estimated net realisable value. Consequent to this, an estimated loss of Rs.450.19 lakhs was charged and shown under “Exceptional Items” as on November 30, 2002. These assets were stated at their respective book values as follows : Original Cost Nov 2002 Accumulated Depreciation Nov 2002 Written Down Value Nov 2002 Machinery & Equipment Office Equipment, Furniture & Fixtures 1072.58 572.09 950.92 556.75 121.66 15.34 Total 1644.67 1507.67 137.00 During the current year ended November 30, 2003, certain assets with net book values of Rs.2.78 lakhs are transferred to Company’s plant at Mumbai and all remaining assets are sold at Rs.142.99 lakhs. The Company has ceased its manufacturing operations of bulk drugs at Chandigarh plant and filed an application under Section 25-O of the Industrial Disputes Act, 1947 with the Government of Maharashtra for closure of the plant. The fixed assets situated at the plant are stated at net book value Rs.657.97 lakhs – (original cost Rs.2079.92 lakhs). In the opinion of the Company the realisable value of these assets is at least equal to the values at which these are stated. 11. Disclosures as required by the Accounting Standard - 18 on “Related Party Disclosures” are given below: I. Names of Related Parties and description of Relationships A. Parties where control exists : Companies collectively exercising significant influence Pfizer Corporation, Panama Warner-Lambert Company, LLC, USA Parke-Davis & Company, LLC, USA [Collectively holding 40% of the aggregate of equity share capital of the Company] Ultimate Holding Company: Pfizer Inc., New York Fellow Subsidiaries : Warner-Lambert India Private Limited, India Pharmacia Healthcare Limited, India Pharmacia India Pvt. Limited, India Pfizer Overseas Inc., Exports Division, Brussels Pfizer Export Company, Ireland Pfizer Overseas Inc., New York Pfizer International Inc., New York Pfizer Products Inc. Pfizer Overseas Inc. Export Division, Hongkong Pfizer Limited, U.K. Pfizer Labs Ltd., South Africa Pfizer Service Company S.A. (Belgium) Pfizer Italiana SpA Pfizer Egypt, SAE Pfizer Inc. Philippines Warner-Lambert Pharmaceuticals, South Africa B. Key Management Personnel Mr. Hocine Sidi Said Mr. Kewal Handa Dr. B.M. Gagrat Mr. S. Madhok Dr. S. Mukherjee Dr. Chitra Lele Dr. C.N. Potkar Mr. H. Walder Mr. S. Ramkrishna Mr. Arun Gupta 78 Notes to the Consolidated Financial Statement For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) II. Transactions during the year and Balances Outstanding as at the year end with the Related Parties are as follows : Related Parties where control exists : Rs. in Lakhs Nov 2003 Nature of Transactions Nov 2002 Ultimate Holding Company Companies exercising significant influence Fellow Subsidiaries Ultimate Holding Company Companies exercising significant influence Fellow Subsidiaries 1 Sale of finished goods (net of returns) — — 325.41 — — 157.28 2 Sale of bulk materials — — 382.64 — — 211.59 1812.85 — 57.94 1649.18 — 63.16 — — 22.83 — — 75.91 33.94 — 728.73 — — 207.14 — 59.83 1676.93 — 41.41 1760.70 3 Service income 4 Interest income on Loans given 5 Recovery of expenses 6 Purchase of finished goods 7 Purchase of raw/bulk materials 8 Royalty expense 9 — 84.64 151.42 — 182.25 109.75 16.85 — 243.93 30.80 — 46.76 Service charges paid — — — — — 1.94 10 Interest expense on Loans taken — — 6.26 — — — 11 Expenses reimbursed — — 48.39 — — 16.26 12 Dividend in respect of the year/ period ended 30th November, 2002 / November 2001 — 863.92 — — 661.67 — 13 Loans given — — 1890.00 — — 3000.00 14 Loans taken — — 1250.00 — — — 15 Outstanding as at the year end – Due from 423.24 — 2407.93 706.68 — 1116.57 16 Outstanding as at the year end – Due to 5.73 0.76 1249.84 8.31 11.76 861.53 Key Management Personnel & their Relatives : Rs. in Lakhs Nov 2003 Nature of Transactions 1 Remuneration 2 Rent paid for residential flats 3 Interest income on Loans given 4 Sale of Fixed Assets 5 Deposits paid 6 Amounts paid on behalf and recovered 7 Deposits outstanding as at the year end 8 Loans outstanding as at the year end III Others Nov 2002 Key Relative of Management Key Personnel Management Personnel Key Relative of Management Key Personnel Management Personnel 360.91 — 362.49 — 49.89 — 27.48 1.10 0.01 — 0.03 — — — 0.57 — 13.21 — 39.75 — 0.45 — 8.46 — 159.44 — 137.07 — — — 0.25 — * Under the terms of the agreement between Pfizer Inc. (Ultimate Holding Company) and the Company for conducting clinical trials and studies in India, Pfizer Inc., has agreed to indemnify, defend and hold the Company and its directors, employees and agents harmless against any and all liability, loss or damage they may suffer as a result of any claims, demands, costs, penalties, fines or judgments incurred or imposed against it arising out of any clinical trial and study or otherwise pursuant to the agreement * Amount written off or written back in respect of debts due from or to related parties is Rs. Nil 79 Notes to the Consolidated Financial Statement For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) 12 Segment Information for the year ended 30th November, 2003 Business Segments (see Note 1 below) Rs.in Lakhs Nov 2003 Nov 2002 Pharmace uticals Animal Health Services Total Pharma ceuticals Animal Health Services Total Segment Revenue External sales and services to customers 44470.86 5581.66 1870.79 51923.31 58491.05 6054.61 1655.60 66201.26 Total Segment Revenue 44470.86 5581.66 1870.79 51923.31 58491.05 6054.61 1655.60 66201.26 5845.16 430.33 185.17 6460.66 12398.84 561.04 169.36 13129.24 Segment Results Unallocated corporate (expenses) / Income (Net) Operating profit Interest expenses and Bank charges Interest income Income Tax Exceptional Items (Net of expenses) Unallocated Exceptional Items (1238.04) (641.02) 5819.64 (269.09) 352.70 (1861.12) (1239.24) (434.02) (1.20) Net profit / (Loss) Other Information Segment Assets Unallocated corporate assets (1.20) 2368.87 22881.81 3869.37 773.90 Total Assets Segment Liabilities Unallocated corporate Liabilities 1879.99 (2228.89) 10900.35 (339.76) 619.59 (5106.39) 1878.79 (360.72) 27525.08 17758.73 7591.86 29908.98 4587.71 954.33 45283.81 7781.63 757.54 159.17 Total Liabilities 8698.34 5974.99 48263.61 9914.97 1213.88 256.29 14673.33 Capital Expenditure 1487.59 Depreciation/Amortisation 541.38 Amortisation of Voluntary retirement cost 26.47 Other Non-cash Expenses-Estimated Loss on assets held for Disposal — 35451.02 12812.59 11385.14 5923.57 17308.71 5.98 71.82 — 108.17 104.34 — 1383.77 494.30 111.65 77.11 114.21 — 69.23 94.51 — — — 284.39 — — Geographic Segment (see Note 2 below) Nov 2003 India Segment Revenue-External sales to customers Carrying amount of segment assets Capital Expenditure 48903.73 44998.14 1740.15 Other Countries Nov 2002 Total India Other Countries Total 3019.58 51923.31 640.78 45638.92 — 1740.15 63560.76 34500.17 1530.11 2640.50 950.85 — 66201.26 35451.02 1530.11 Notes: 1 Business Segments : The business operations of the Company comprise Pharmaceuticals, Animal Health and Services. The business segments have been identified and reported taking into account, the nature of products and services, the differing risks and returns and the internal financial reporting systems. The Pharmaceuticals business comprises of manufacturing and trading of bulk drugs and formulations and also includes rendering of marketing services. The Animal Health business has a presence primarily in the large animal health and poultry market segments, and also includes rendering of marketing services. Services - Clinical Development Operations primarily include conducting clinical trials and undertaking comprehensive data management for new drug development. 2 Geographical Segments : For the purpose of geographical segments the consolidated sales are divided into two segments - India and other countries. 3 The accounting policies of the segments are the same as those described in the summary of significant accounting policies as referred to in Note 1 in the Notes to the Accounts - Schedule 19. 80 Notes to the Consolidated Financial Statement For the year ended 30 November 2003 (continued) (Currency: Indian Rupee in Lakhs) 13. The figures of the previous year have been regrouped/reclassified wherever necessary to conform to the figures of the current year. For Pfizer Limited Mumbai, 26 February, 2004 R.A. SHAH Chairman HOCINE SIDI SAID Managing Director P. SHAH Director K. HANDA Executive Director – Finance B.M. GAGRAT (Dr.) Executive Director – Technical Operations A. ANJENEYAN Secretary

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