2 0 annual report 0 - Sanofi sanofi-aventis annual report 2007 Contents Business Section ... 43 Notes to the Financial Statements ... to it can be found in Pakistan today

2007 rapport annuel

annual report

sanofi-aventis annual report 2007

ContentsBusiness Section

02 Theme

03 Mission & Vision

04 Values

06 Company Information

08 Major Therapeutic Areas

Financial Section

28 Directors' Report to the Shareholders

35 Statement of Compliance with the Code of Corporate Governance

37 Review Report to the Members on Statement of Compliance with Best Practices of Code of Corporate Governance

38 Auditors’ Report to the Members

39 Balance Sheet

40 Profit & Loss Account

41 Cash Flow Statement

42 Statement of Changes in Equity

43 Notes to the Financial Statements

66 Corporate Governance

68 Statement of Value Added and its Distribution

69 Six Years at a Glance

74 Notice of Meeting

75 Proxy Form

01

sanofi-aventis annual report 2007 02

Our 2007 Annual Report features the

legendary Islamic tile work that began in

Iraq before 862 CE (Christian Era) but

flowered in many parts of the Islamic world

from the 11th century onwards. In the hands

of the Mughals, great patrons of the arts, the

tile work flourished in India and monuments

to it can be found in Pakistan today. Often

represented as geometrical shapes and

patterns in shades of blue on or against white

backgrounds, they are timeless in their

simplicity and high aesthetics.

Theme


Our core strategy is to:

Create value by rapidly launching and successfully marketing innovative

pharmaceuticals that satisfy unmet medical needs in large patient

populations.

Focus commercial resources on strategic brands to drive sales growth and

maximize the value of existing and new global brands.

Aggressively recruit and retain top talent, enhancing our capabilities in drug

innovation and commercialization.

To create & sustain value by being recognized as a

Pharmaceutical Industry Leader:

Valued by patients & healthcare providers

Sought-after as an employer

Respected by the scientific community & our competitors

Mission

Vision


Values

RespectThe key human and social component that links

us all together, regardless of ethnic origin, culture

or position, as we work for our mutual growth.

AudacityThe freedom to explore the unknown:

acting with our hearts and not just

our heads, as we bring the future

alive.

CreativityThe capacity for imagination: using our intuition,

making unexpected and productive connections,

innovating in all our actions and communications.


CourageThe power to control risks, the fighting spirit

which helps us to both challenge ourselves

and move forward to reach our objectives.

PerformanceThe basis of our endeavors: a

source of excellence,

achievement and

innovation, the key to our future!

SolidarityThe capacity to rally together as we drive

back disease and give hope a chance: our

mutual sense of responsibility when faced

with adversity.


Board of Directors

Syed Babar Ali Chairman

Tariq Wajid Managing Director

Pir Ali Gohar (Alternate Arshad Ali Gohar)

Tariq Iqbal Khan

Syed Hyder Ali

J. L. Grunwald (Alternate Dr. Amanullah Khan)

Eric Le-Bris (Alternate Dr. Asim Jamal)

Jean-Marc Georges (Alternate Muhammad Amjad)

M. Z. Moin Mohajir

Company Secretary

Muhammad Irfan

Board Audit Committee

Syed Hyder Ali (Chairman) Non-Executive Director

Eric Le-Bris (Member) Non-Executive Director

Dr. Amanullah Khan (Member) Executive Director

Yasir Pirmuhammad (Secretary) Head of Audit & Compliance

Board Share Transfer Committee

Tariq Wajid

M. Z. Moin Mohajir

CompanyInformation


Management CommitteeTariq WajidMuhammad AmjadDr. Amanullah KhanZubair RizviMuhammad A. MajidMasaud AhmedDr. Sohail Manzoor

M. Z. Moin MohajirShakeel MaparaDr. Viqar HaiderMasood A. KhanYasir PirmuhammadMamoona F. NaqviLaila Khan

IS Steering CommitteeTariq WajidM. Z. Moin Mohajir

Yasir Pirmuhammad

Ethics CommitteeYasir PirmuhammadDr. Amanullah KhanSalman Ahmed

Masaud AhmedLaila Khan

ContactsCompany [email protected] [email protected]

[email protected]

AuditorsFord Rhodes Sidat Hyder & Co.

Legal AdvisorsAzfar & AzfarRizvi, Isa, Afridi & AngellHaidermota & Co.

Saadat Yar Khan & Co.Khan & Hafiz Associates

BankersABN AMRO Bank N.V.Citibank, N.A.Deutsche Bank AG

Standard Chartered BankHabib Bank Ltd.MCB Bank Ltd.

Registered OfficePlot 23, Sector 22, Korangi Industrial Area,Karachi - 74900

Postal AddressP.O. Box No. 4962, Karachi - 74000

URLwww.sanofi-aventis.com.pk

Registrars & Share Transfer OfficeFerguson Associates (Pvt.) Ltd.State Life Building No. 2-A,I.I. Chundrigar Road, Karachi - 74000.


CardiovascularDiseasesThe leading cause ofinvalidity and prematuredeath

Worldwide, more than 17 million people die everyyear as a result of cardiovascular diseases. Exposureto tobacco smoke, hypercholesterolemia, diabetes,stress, a sedentary life style and ageing of thepopulation are all factors favoring these diseases.

Although developed countries are the mostaffected, a trend towards convergence of therates of cardiovascular disease may be observeddue to changes in life style throughout the world.Each year, 10 million cases of myocardial infarctionare recorded worldwide, principally among men.Within 5 to 10 years after the menopause, however,women have the same risk of myocardial infarctionas men.

Cardiovascular diseases are the major cause ofdisability and premature death, especially amongmen. During the last 30 years, the progress madeas a result of healthier lifestyles and the prescriptionof prophylactic treatments has led to a decreasein risk factors and consequently in morbidity andmortality rates.

The cause of

30%of human deaths

Progress in managementof these patients has led toa decrease in risk factors

Major therapeutic Areas


Renal insufficiency(dialysis or transplant)

Stroke

Congestive heartfailure Myocardialinfarction

HypertensionHypertension is the most common cardiovasculardisease, affecting 25% of the populationworldwide. Every third patient over the age of 45years in Pakistan suffers from Hypertension. A silent,asymptomatic disease, it presents a real publichealth problem in view of its numerouscomplications, affecting the brain, heart, vascularsystem, kidneys and eyes. Hypertension is definedby an increase in arterial blood pressure abovethe normal value of 140/90 mm/Hg. Even today,less than one-third of the patients treated forhypertension succeed in achieving therecommended blood pressure values. In Pakistan,less than 3% of hypertensive patients are undercontrol.

Our therapeutic responseAprovel®, an angiotensin II receptor antagonist (AIIRA), is the leading treatment for hypertension,with documented renal protective effects.

Aprovel®/CoAprovel®

Irbesartan

Aprovel® is indicated as a first-line treatment for hypertension. It is a member of the antihypertensiveclass showing the most vigorous growth: angiotensin II receptor antagonists (AIIRA). It acts byblocking the effect of angiotensin, the hormone responsible for the contraction of blood vessels,thereby permitting normalization of arterial blood pressure.

Hypertension is defined asan arterial blood pressure of

140/90mm/Hgor above

Leadingcardiovascularrisk factor

Cardiovascular Diseases


Cardiovascular Diseases

Tritace®/Triatec®

Ramipril

Tritace® is an angiotensin converting enzyme (ACE)inhibitor indicated for the treatment ofhypertension, congestive heart failure resultingfrom myocardial infarction and nephropathy. Itsuse has increased considerably since thepublication of the HOPE (Heart OutcomesPrevention Evaluation) trial in 2000. This studydemonstrated the efficacy of Tritace® in reducingthe incidence of stroke, myocardial infarction andcardiovascular mortality in high-risk patients.

Tritace® is the only ACE inhibitor approved for theprevention of stroke, heart attack andcardiovascular mortality in high-risk patients.

In addition to Aprovel®, sanofi-aventis markets CoAprovel®, a fixed-dose combination of irbesartanand hydrochlorothiazide, a diuretic adding to the antihypertensive effect by increasing the excretionof water by the kidneys.

Aprovel® and Co-Aprovel® restore normal arterial blood pressure in over 80% of patients and are verywell tolerated.

Aprovel® is also approved, for the treatment of diabetic nephropathy in hypertensive patients sufferingfrom type 2 diabetes.

In August 2006, the European Medicines Agency (EMEA) approved a new fixed-dose combinationcomprising 300 mg irbesartan and 25 mg hydrochlorothiazide: CoAprovel® 300 mg/25 mg. With thisnew combination, the treatment of hypertensive patients can be optimized and the criteria for bloodpressure normalization more effectively met.

Apart from hereditary factors,sex and age, the principal

risk factors for cardiovasculardisease can be

modified by simple lifestylemeasures, in particular ceasing to smoke, controlling body

weight, practicinga physical activity and adhering

to a balanced diet.

Our other therapeutic responses

Sanofi-aventis continues to market a number of classiccardiovascular products in Pakistan.

Lasix® (furosemide) is still a diuretic treatment of reference. Withsales of over 60 million packs a year, it is one of the Group’sbest-selling products by volume.

35 years after it was first marketed, Cordarone® (amiodarone®)is still an anti-arrhythmic of choice, enjoying steady growthworldwide.

11

ThrombosisOne of the main causesof mortality worldwide

Thrombotic diseases, in their venous or arterialforms, today represent one of the principal causesof mortality worldwide.

Deep-vein thrombosis (DVT, still also known asphlebitis) and its complication, pulmonaryembolism (PE), are responsible for more deaths inEurope every year than breast cancer, prostatecancer, HIV infection and road accidentscombined.

Atherothrombosis is an underlying cause ofmyocardial infarction, stroke and peripheral arterialdisease. Over 20 million deaths from myocardialinfarction and stroke are expected in 2020 andmore than 24 million in 2030. Today, one manin four and one woman in three still die as a resultof their first infarction, even in countries with thehighest levels of healthcare.

12

4 millionpeople worldwide

suffer fromvenous thrombosis

17 millionpeople suffer from disorderscaused by atherothrombosis


Venous thromboembolismA mostly avoidable disease

Blood clots inveins, usually inlower limbs

Risk ofpulmonaryembolism

Venous thrombosis occurs when a blood clot formsin one of the deep veins of the legs. The likelihoodof its occurrence is increased by prolonged bedrest, heart failure, certain types of tumor andreduced mobility. In the absence of treatment,the clot may migrate and cause pulmonaryembolism, an often fatal condition. A third ofdeep-vein thrombosis cases occur outside hospital. 4million

people affectedworldwide


PeripheralArterialDisease(PAD)

Stroke

Heartattack

Our therapeutic responseApproximately 185 million patients in 96 countries have been treated with Clexane® sinceits introduction in 1987. This product is approved for more clinical indications than any otherlow-molecular-weight heparin.

Clexane®

Sodium Enoxaparin

Clexane® is the most extensively studied and most widely used low-molecular-weight heparin inthe world. Numerous studies have demonstrated its advantages with regard to treating or significantlyreducing the incidence of deep-vein thrombosis in a broad spectrum of patients, as well as ineffectively preventing, in conjunction with other treatments, the ischemic complications of unstableangina and myocardial infarction.

Acute coronary syndrome, myocardial infarction,stroke, transient ischemic attack and peripheralarterial disease are all expressions of a singledisease: atherothrombosis, itself a consequenceof atherosclerosis. Atherosclerosis results from thethickening and hardening of the arterial wall dueto accumulation of fat and calcium deposits inthe form a plaque. When the atherothromboticplaque cracks or ruptures, a clot forms in thedamaged artery, reducing blood flow or eventotally blocking the vessel: this condition is knownas atherothrombosis.

17millionpeople suffer from disordersof atherothrombotic origin

1 disease,severalforms

Thrombosis

13 sanofi-aventis annual report 2007

Atherothrombosis

14sanofi-aventis annual report 2007

Plavix®

Clopidogrel

Plavix®, is an antiplatelet agent acting as an adenosine diphosphate receptor antagonist. Itis indicated for the long-term prevention of atherothrombotic events in patients with a recenthistory of myocardial infarction or stroke, or in patients presenting documented peripheralarterial disease. Plavix® is currently the only drug indicated for the secondary prevention ofatherothrombosis, irrespective of the location of the arteries initially affected (heart, brain orlower limbs), on the basis of the results of the CAPRIE trial demonstrating the superior efficacyof Plavix® versus acetylsalicylic acid (ASA: the active ingredient of aspirin) with a comparablesafety profile.

Thrombosis

Metabolic DisordersRisk factors for cardiometabolic disease

Millions of people in the world live with diabetes and more than 3 million die from its consequencesevery year. Type 2 diabetes represents 90 to 95% of diabetes cases. The prevalence of type 1 diabetes,affecting young people in particular, is increasing at an alarming rate throughout the world, progressingby 3% annually. Hypertension, raised levels of “bad cholesterol”, abdominal obesity and inflammationare among the risk factors for cardiometabolic disease. These factors often occur together in thesame patient, the existence of multiple risk factors increasing the overall risk of developing type 2diabetes or cardiovascular disease. The prevalence of these risk factors is high throughout the world.


DiabetesDiabetes is a chronic disorder in which the bodyeither does not synthesize or does not utilize insulin(the action of which facilitates the entry of glucoseinto the cells). In people with diabetes, this problemis manifested by hyperglycemia (raised levels ofblood glucose). There are two types of diabetes.Type 1 diabetes is characterized by a totalabsence of insulin production and secretion. Type2 diabetes is a progressive and evolutive disorderdue to inefficacy of the insulin produced(insulinoresistance) and a decrease in the quantityproduced to a level that is no longer sufficient toadequately control blood glucose levels. Diabetesmonitoring is based on the measurement of bloodglucose levels (which should be as close as possibleto normal values) and assay of HbA1C(glycosylated hemoglobin), enabling an estimationof the mean blood glucose level over the pasttwo or three months. People suffering fromdiabetes should strive to maintain their HbA1clevels at 7% or below (6.5%).

Possible complications

Risk of amputation

Brain damage

Heart attack

Eye complications

Impaired pancreaticfunction

Kidney failure

350millioncases of diabetesare expected

20 years from now



Lantus®

Insulin Glargine

Lantus® is an insulin analog with a prolonged action, administered once a day by subcutaneousinjection. It is indicated in adults presenting type 2 diabetes, and also in adults and children agedover 6 years suffering from type 1 diabetes. Lantus® is the first basal insulin offering 24-hour peakless efficacy.

It can therefore be taken once daily at any time of the day (but at the same time every day). Itpermits dose titration under excellent safety conditions and induces less hypoglycemia than insulinNPH (Neutral Protamin Hagedorn), with an intermediate duration of action.

Lantus® allows patients more freedom to choose their own treatment regimen. This is a majoradvantage as numerous studies have demonstrated the efficacy of simplified treatments thatallow patients with type 2 diabetes a greater role in managing the titration of their insulin dose.In their most recent recommendations, the American Diabetes Association (ADA) and EuropeanAssociation for the Study of Diabetes (EASD) emphasize the importance of achieving and maintainingclose to normal blood glucose levels in patients with type 2 diabetes, first by a change in lifestylecombined with metformin treatment and then by rapid initiation of insulin treatment in patientswho fail to attain these objectives. The randomized 24-week studies assessed the efficacy andsafety of Lantus® in conjunction with oral antidiabetics (OAD) in patients with type 2 diabetes: The24-week TREAT TO TARGET study showed that a significantly higher proportion of patients with type2 diabetes treated with Lantus® attained the objective of an HbA1c level of 7% or less, withoutpresenting nocturnal hypoglycemic episodes, compared to those receiving NPH insulin.

Metabolic Disorders

The overall cardiometabolic risk is the risk ofdeveloping type 2 diabetes or a cardiovasculardisease. Hypercholesterolemia (raised levels ofLDL cholesterol or “bad cholesterol”), hypertension,type 2 diabetes, smoking and insulin resistance(frequently observed in patients presentingabdominal obesity) are the principal risk factors.

Amaryl®

Glimepiride

Amaryl® is a sulfamide hypoglycemic agent administered orally once a day. It is indicated for thetreatment of type 2 diabetes, in conjunction with a dietary regimen and physical exercise.Hypoglycemic sulfamides are recommended in the initial phase of treatment of type 2 diabetes.Studies have also proved the efficacy of Amaryl® combined with Lantus® when an oral treatmentalone does not succeed in achieving sufficient control of diabetes. Amaryl® diminishes bloodglucose levels via a dual mode of action: by helping the body to produce more insulin at mealtimesand between meals, and by reducing insulin resistance. It permits an excellent level of control, witha low risk of hypoglycemia.

Hypothalamus,nucleusaccumbens

Muscles

Adiposetissue

16

OverallCardiometabolic risk

Portfolio ofMedicines

ONCE DAILY

Ramipril

CompaniesIrbesartan

TM

CLEXANE ®

Enoxaparin sodium

Clopidogrel®

®

Injection Concentrate

OXALIPLATIN 5 mg/ml

Fexofenadine HCl

(glimepiride)

TLiquid

ablet®

Sodium Valproate

Stilnox10mg scored tabletsZolpidem

®



OncologyMultiple diseases, an often identical therapeuticapproach

Every year, 10 million people throughout the world develop cancer, the incidence of which couldincrease by 50% by the year 2020. Industrialized countries are particularly concerned in view of thehigh life expectancy. Sanofi-aventis is implicated in the fight against both the most widespread cancers,such as those affecting the colon, breast, lung and prostate, and also rarer or more difficult to treatmalignancies, such as gastric and head and neck cancers, and hematologic malignancies.

Our therapeutic responseTaxotere® is indicated for the treatment of five types of cancer: breast, lung, prostate, gastric, andhead and neck cancers.

Solid tumorsBreast cancer, colorectal cancer, lung cancer,prostate cancer, gastric cancer, and head andneck cancers are responsible for high morbidityand mortality.

The earlier atumor is detected,

the moreeffective is the

treatment

10millionpeople affected

worldwide each year

Non-small celllung cancer (NSCLC)

Breast cancer

Gastric cancer

Prostate cancer

Major theraputic Areas


Colorectal cancer

Taxotere®

Docetaxel

Taxotere® is a member of the taxoid family, a group of compounds inhibiting the division of cancercells (essentially by “freezing” their internal skeleton) and inducing their death. Taxotere® is indicatedin breast cancer, either alone or in combination depending on the situation, for the treatment ofearly tumors as well as advanced and metastatic, including those with a poor prognosis.

Oncology

Eloxatin®

Oxaliplatin

Eloxatin® is a new generation platinum salt. It iscurrently the only treatment indicated for bothearly (stage III) and metastatic colorectal cancer.

Our therapeuticresponseThe development of Eloxatin® in colorectalcancer has led to major advances.

Mammogram Cancerous cells in breast

The third-ranking cancer in terms of its worldwide incidence.

Colorectal cancer


Disorders of CentralNervous SystemComplex disorders which are underdiagnosed andundertreated

Central nervous system (CNS) disorders affect millions of people worldwide and have majorrepercussions on their quality of life and professional activity. The prevalence of these disorders willincrease significantly with prolongation of life expectancy. Insomnia remains under-diagnosed andunder-treated. Alzheimer’s disease is one of the most common serious neurodegenerativedisorders. It accounts for approximately two-thirds of dementia cases and affects from 5% to 7% ofpeople aged over 65 years. Multiple sclerosis, caused by the destruction of the myelin sheath enclosingthe nerves, currently affects 2.5 million people worldwide according to the World Health Organization(WHO). Schizophrenia is a chronic disorder, characterized by delusions, hallucinations, social withdrawaland apathy. It affects approximately 0.5% of the world’s population. Depression may occur in peoplepredisposed to this disorder or be related to life events. Its frequency increases with age. Epilepsy hasa detrimental effect on everyday life, with major physical, psychological and social repercussionsaffecting both people suffering from the disorder and those close to them.

Sleep disorders,trouble fallingasleep, waking upseveral timesduring the night

InsomniaInsomnia may occur occasionally, as a result oflifestyle habits prejudicial to sleep, noise or specificworries. Such episodes often do not last more thanthree weeks and disappear with the underlyingcause of the disorder. This is not the case withchronic insomnia, the cause of which may beeither somatic or psychological.

Without treatment, occasional or transient insomniamay become chronic. People suffering frominsomnia are handicapped in their everyday lifeby problems of alertness, attention, memory,concentration and mood.



Stilnox®

Zolpidem

Thanks to its capacity to bind selectively to brain receptors responsible for hypnotic activity, Stilnox®

rapidly induces sleep of a quality close to that of natural sleep, with a low incidence of side effects.Its action persists for at least six hours and is associated with a low risk of dependence at recommendeddoses and durations of treatment. Stilnox® is one of the most extensively studied hypnotics in theworld: the data concerning its efficacy and tolerability were generated in 160 clinical studiesconducted on a total of approximately 80,000 patients throughout the world. It is currently the onlyhypnotic that has been proved, in a program comprising eight studies with a total enrollment ofapproximately 6,000 patients, to be suitable for an “as needed” administration, i.e. discontinuoususe. This mode of administration presents considerable advantages for people with occasionalinsomnia.

Sudden overactivityof brain cellscharacterized byrecurrent seizures

Our therapeutic responseZolpidem (Stilnox®) is today the best studied hypnotic in the world.

EpilepsyEpilepsy has always tended to elicit curiosity oreven fear. It is characterized by repeatedspontaneous attacks resulting from an excessivedischarge of cerebral neurons. Such repeatedattacks adversely affect everyday life, resulting inmajor physical, psychological and socialrepercussions for people experiencing this disorder,as well as those close to them. Only early diagnosisand appropriate treatment can avoid this sufferingand enable patients to live a normal life.

Central nervous system

Without treatment,occasional insomniamay become chronic

150+millioninsomniacs worldwide


Our therapeutic response

Epilim®

Sodium Valporate

Prescribed for over 39 years, Epilim® is considered as a reference treatment for all types of epilepticattacks and syndromes, inducing no paradoxical exacerbation of seizures. Epilim® is avaliable as asyrup.

Central nervous system

Primarily childrenand people agedover 65 years

0.5%of the world’s

population is affected

Attacks are controlledin 70% to 80%

of new cases


Internal MedicineA wide variety of diseasesdiffering greatly infrequency

100 to 150 million people worldwide suffer fromasthma and this number is increasing to suchan extent that the related costs now exceedthose associated with tuberculosis and HIVinfection combined.

Infections of the respiratory system affecting theupper airways (sinusitis, tonsillitis, pharyngitis) orlower airways (bronchitis, community-acquiredpneumonia) are the most frequent infectiousdiseases.

Benign prostatic hyperplasia, affecting men,hampers everyday activities and leads tonocturnal awakening and fatigue. It may also becomplicated by urinary infections, impaired sexualfunctioning and acute urine retention.

Characterized by a decrease in bone massand deterioration of the micro-architecture ofbone tissue, osteoporosis increases bone fragilityand consequently the r isk of fractures.It predominantly affects post-menopausal women.Men are less often affected.

100 to 150million peopleworldwide

suffer from asthma

40%the risk of an osteoporotic

fracture for a50-year-old woman



Rash

Nasal congestion

Telfast®

Fexofenadine

Telfast® is an effective and potent antihistaminic agent, devoid of sedative effects and with a prolongedduration of action allowing administration once every 12 or 24 hours. It is indicated for the treatmentof hay fever and chronic idiopathic urticaria. The Telfast-D formulation combines this antihistaminicwith a prolonged-release decongestion agent.

AllergyAllergy constitutes a hypersensitivity of the immunesystem to allergenic substances such as pollens,mold, spider mites, animal hairs, skin scales andinsect bites. The inflammatory reaction elicitsvarious disorders, including sneezing, blockednose, cough, watery eyes, itching and rashes.Pollution, excessive hygiene and new dietaryhabits are a few of the possible causes related tochanges in life style.

Allergiesadversely affect the

learning capacities of children

Approximately

500millionpeople suffer from allergies

Nasacort®

Triamcinolone Acetonide

Nasacort® AQ Spray is packaged as a metered-dose spray containing an odorless aqueoussolution of microcrystalline triamcinoloneacetonide. Nasacort® is indicated for the treatmentof seasonal and peri-annual symptoms of allergicrhinitis in adults and children aged over 6 years.

Internal medicine


Benignenlargmentof theprostate withaccompanyingurinaryproblems

Benign prostatichyperplasiaBenign prostatic hyperplasia is characterized byenlargement of the prostate, a small gland locatedbeneath the bladder. As it increases in size,the prostate compresses the canal evacuatingurine from the bladder, leading to difficulties inurinating. If left untreated, this disorder may worsenand in the long term provoke severe complicationssuch as acute urine retention. This complicationis associated with total and extremely painfulobstruction of the urethra, necessitating bladdercatheterization and often surgery. Men aged over50 years with symptomatic benign prostatichyperplasia also have a four-fold greater risk ofdeveloping sexual disorders.

The most common diseasein men aged over

50 years

1 man in 2 overthe age of

70 years55millionmen affected

Our therapeutic responseActive from the first dose onwards, Xatral® achieves rapid and lasting relief of symptoms relatedto benign prostatic hyperplasia, thereby improving the patient’s quality of life.

Xatral® SR and LPAlfuzosin

Xatral® was the first alpha1-blocker to be indicated solely and specifically for the symptomatictreatment of benign prostatic hyperplasia (BPH). It was also the first product developed that wascapable of acting selectively on the urinary system. As a result of its clinical uroselectivity, Xatral®

increases urinary flow from the first dose onwards, achieving rapid (within the first few days oftreatment) and lasting improvement in urinary symptoms and improving the patient’s quality oflife. Xatral® has a good tolerability profile, inducing in particular only very slight variationsin arterial blood pressure, even in elderly people and those suffering from hypertension.Xatral® isalso the only alpha1-blocker indicated for the treatment of acute urinary retention (AUR).

Internal medicine


OsteoporosisOsteoporosis is characterized by a decrease inbone mass and deter iorat ion of themicroarchitecture of bone tissue resulting in a lossof bone strength leading to an increase in bonefragility and greater risk of fracture.

It is always described as a silent disorder, as it isnot expressed by any external symptom prior tofracture. A woman at 50 years of age has a 40%risk of experiencing an osteoporotic fracture duringthe remainder of her life-equivalent to a woman’slifetime risk of developing a cardiovascular disease.

Vertebral fractures

Hip fracture

Actonel®

Monosodium Risedronate

Bone is a living tissue that is continuously renewed. In postmenopausal osteoporosis, the number ofcells responsible for bone resorption exceeds that of cells assuring bone renewal.

This leads to increased bone fragility and eventually to a greater risk of fractures. Actonel® reversesthis trend by diminishing the activity of the cells responsible for bone resorption.

Actonel® 35 mg once weekly and Actonel® 5mg once a day is indicated for the treatment ofpostmenopausal osteoporosis, with the objective of reducing the risk of vertebral fractures, and for thetreatment of documented postmenopausal osteoporosis, to reduce the risk of hip fractures.

OUR OTHER THERAPEUTICRESPONSESSanofi-aventis has always been involved in the research and development of antibiotics and marketsa wide range of products meeting medical needs in this sector: Claforan®, Tarivid®, Targocid® andTavanic®.

In the context of pain relief, the sanofi-aventis portfolio includes Profenid®, and No Spa®.

Our therapeutic responseOsteoporosis that has been shown to reduce the risk of vertebral fracture and hip fracture from thesixth month of treatment onwards.

Internal medicine


We are pleased to present the Annual Report of your company for the year ended December 31, 2007.

1. Overview

Net sales for the period under report were Rs 3,896 million, recording a growth of 2% only, over same periodin 2006, this is all volume growth as we have not received any price increase from the government sinceDecember, 2001. The lower than planned growth is due to various reasons including deregistration ofNovalgin last year, higher than expected time taken for regulatory approvals of new products and lineextensions - which we lanuched this year - as well as for import permit extensions for a couple of existingproducts, strong competition from cheaper generics, negative impact on markets due to the political andsocial environment in the country, etc.

Though sales were disappointing we had good achievements too during the year under report. Welaunched a number of research based internationally known products like Plavix®, Aprovel® and Eloxatin®,as well as the line extension of Lantus Optiset®. No-Spa®, a sanofi-aventis product, previously marketedand sold by a local company was also added in our portfolio.

Profit before tax at Rs 126 million was significantly lower than last year (2006: Rs 355 million). Despite severalcost cutting measures (including reduction in travels, lower than planned headcount, reducedpromotional expenses, reduced clinical trials, lower than planned capital expenditure etc.), we could notoffset the significant impact of several negative factors influencing the profit downturn due to frozenproduct prices since December 2001, to offset even the inflation related cost increases over this period. Thisyear, as you are aware, inflation is in double digits, the Pak Rupee has depreciated against the hardcurrencies and these two factors have contributed to significant increases in all cost categories, includingpetrol, hotels related costs, airfare, forward exchange cover for our imports and interest rates charged bybanks. Delay in new product launches has also negatively impacted profitability.

In 2007 approximately 90% of our sales were on cash before delivery basis to 16 regional distributors. Theremaining 10% sales were made on credit to large hospitals and institutions. Effective credit controls are inplace and once again no bad debts were recorded this year.

2. Industry Leadership

According to the last IMS market report sanofi-aventis is now ranked 4th in the pharmaceutical industry ofPakistan, with a market share of 4.7%. Sanofi-aventis is one of the world's leading pharmaceuticalcompanies and is ranked number one in Europe.

3. Marketing and Medical Activities

The marketing and medical activities focused on four major areas throughout the year namely, CME(Continued Medical Education) with activities for physicians across a wide range of specialities, diagnosticsupport for patients, promotional activities to support brands and formulation of guidelines and SOPs forbetter clinical management. These activities helped us to maintain market leadership position in severaltherapeutic areas in a very competitive environment.

CME opportunities were extended to clinicians in a number of therapeutic areas like diabetes,cardiovascular diseases, infectious diseases, osteoporosis, oncology etc. We provided support foracademic activities at a local and international level. This enabled the medical profession to attendconferences where cutting edge research was presented. It also allowed local clinicians to have ameaningful discussion with leading researchers on current treatment modalities. A number of clinical trialswere conducted, in different therapeutic areas by the Key Opinion Leaders.

The company regularly participates in workshops related to infectious diseases covering wide range oftopics including Urinary Tract Infections, Typhoid fever, Dengue fever and the rationale use of antibiotics ininfections. A number of promotional activities were conducted throughout the year and as part of intensefocus on UTI segment, the UTI expert days and UTI symposia were arranged. Operation theater programsare also proving a useful tool in improving the liaison with surgeons and gynecologists alongwith the benefitfor the patient. Pediatric segment focused on activities like round table discussions and local speakerprograms in the indications like Sepsis, Respiratory Tract Infections and Bacterial Meningitis. Factory visits forcustomers were also arranged to the state-of-the-art Claforan and Haemaccel plants and the uniquefacility of our Drug Information Services.

The continued growth of Flagyl® is supported by innovative marketing initiatives like local speakerprograms, scientific product presentations and intra-venous medication training programs held in differentparts of the country. Scientific product presentations were conducted across the country to highlight thebenefits of the new addition, No-Spa®, to the company's portfolio of products being marketed.

Directors’ Report to the Shareholders

28

For cardiac ailments and Deep Vein Thrombosis (DVT), the company offers products like Clexane®,Plavix®, Aprovel®, CoAprovel®, Tritace® and Triatec®. These ailments are dreaded as they strikesuddenly. The Acute Coronary Syndrome (ACS) Guidelines for Pakistan, formulated with the support ofsanofi-aventis have been appreciated by local consultants and cardiologists. These have also beenadopted by the SAARC region. Key events for the year included hospital ward awareness programs onDVT and ACS including participation in major cardiology conferences.

A clinical study “Heart Asia Registry” is in progress at 150 sites and 3000 patients are participating.Workshops on hypertension management were conducted in collaboration with the Family MedicineDepartment of The Aga Khan University across the country, where state of the art information wasshared.

Sanofi-aventis offers a complete portfolio of anti-diabetic medications which include Lantus® (insulinglargine), Apidra® (insulin glusine), Amaryl® (glimipiride), Daonil® (glibenclamide) and Neodipar®(metformin). The Diabetes Franchise focused on activities that help patients achieve better control oftheir blood sugar. Conferences and Round Table Discussions were held with diabetologists, medicalconsultants, cardiologists and leading General Practitioners to discuss the importance of achievinggood Fasting Blood Sugar Control and HbA1c level. General Practitioners, who are the first contactpoint for the patient, were also trained on clinic management. Educational material was developed inEnglish and Urdu for the benefit of diabetic patients. Customised diet charts for diabetic patients werealso rolled out. Lantus patient guide was also distributed to facilitate Lantus patients in diabetesmanagement. Educational material was developed in English and Urdu for the benefit of diabeticpatients. Customised diet charts for diabetic patients were also rolled out. Lantus patient guide was alsodistributed to facilitate Lantus patients in diabetes management. The company actively participatedin the World Diabetes Day organized by various institutions across the country.

The Oncology Franchise which offers Taxotere® and Eloxatine® regularly arranges various programs toenable oncologists to discuss the most recent research findings in cancer treatment. The remarkableefficacy coupled with a good safety profile makes both Taxotere® and Eloxatine® the agent of choicein the treatment of cancer at every stage of the disease.

Overall, while sanofi-aventis is a business enterprise, we are cognizant of our responsibilities towards thesociety. We endeavour to provide support for academic activities and programs that aim to improvestandards of health care through introduction of new research molecules for treatment of commonand emerging diseases.

During 2007, the Medical Department undertook 13 clinical studies to address various questions of themedical community. These clinical research projects, some of which are ongoing, were in the areas ofdiabetes, osteoporosis, acute urinary retention, breast cancer, hypertension and sore throat.

Nearly four thousand patients for 13 studies were recruited at number of study centers across Pakistanduring the year. The largest study was HEART Asia, in parallel with Aprovel / CoAprovel launch.

Two presentations to Key Opinion Leaders were made during the launch programs for Apidra® inKarachi and Lahore. ADA guidelines on management of Diabetes were presented highlighting the roleof Basal Plus and Basal Bolus therapy. This was followed by presentations on Apidra. Presentations werealso made to leading oncologists highlighting the features of Taxotere®, the original research moleculedocetaxel.

The department, inter-alia focused on disseminating findings of the most current published medicalliterature related to disease areas and new treatment modalities particularly in the fields ofhypertension, cardiology, diabetes, cancer, osteoporosis and Deep Vein Thrombosis.

sanofi-aventis is committed to improving standards of care in Pakistan by relating to latest treatmentoptions available for the management of various diseases. With sparse library facilities available in thecountry, access to cutting edge articles to the medical profession and post-graduate students islimited. Sanofi-aventis through its global network has real-time access to over 1000 peer-reviewedindexed journals which facilitates the academia in their research and keeping abreast with the latestinnovations in the medical field.

Following new products, including line extensions, were added to our portfolio in 2007:

Plavix® (Clopidogrel):Plavix® is an anti-platelet agent indicated for patients suffering from Myocardial Infarction, Stroke andestablished Peripheral Arterial Disease.

Aprovel® and CoAprovel® (Irbesartan):Aprovel® and CoAprovel® belong to the most recent class of anti-hypertensive drugs; angiotensine IIreceptor antagonists (ARB’s).

29


Tritace® 10 mg (Ramipril):Tritace® (Ramipril) 10 mg is a highly effective ACE-inhibitor, with strong inhibitory action on angiotensionconverting enzymes in the tissue of organs involved in diseases like hypertension and cardiac failure.

Triatec® (Ramipril 2.5 mg + HCT and Ramipril 5 mg + HCT):Triatec® is a fixed combination preparation of Ramipril, a potent long acting ACE inhibitor andHydrochlorothiazide, an agent that promotes fluid excretion (diuretic).

Lantus Optiset® / Cartridges (Insulin Glargine):Lantus® (insulin glargine) helps to achieve and maintain a target HbA1c at reasonable cost whilesignificantly reducing hypoglycaemia, the long-term costs from diabetic complications.

The introduction of disposable pen and cartridges in addition to the already available vial will facilitate andease administration of Lantus®.

Apidra® (Insulin Glusine): Insulin glusine is a novel rapid acting insulin analogue. It is indicated in controlling hyperglycaemia in adultswith diabetes. Apidra® is safe and effective for type 1 and 2 diabetic patients.

Eloxatin® (Oxaliplatin):Eloxatin® (oxaliplatin) is a new-generation platinum salt and currently the only treatment indicated for bothmetastatic colorectal cancer and early stage colon cancer.

Xatral® LP 10 mg (Alfuzosin):Once daily Xatral® LP (alfuzosin) 10 mg prolonged released tablets is a line-extension of already registereddrug, Xatral® SR 5 mg Tablets. It is indicated for the management of Benign Prostate Hypertension.

No-Spa® (Drotavarine):As mentioned earlier, No-Spa®, a sanofi-aventis product, previously marketed and sold by a localcompany has been taken over with effect from January 1, 2007.

4. Capital Expenditure

The company's long term commitment to the operations in Pakistan remains steadfast and, therefore, wecontinued with our policy of expansion, modernization, balancing and upgrading of our productionfacilities. In addition to the manufacturing facilities we also invested in technology and infrastructureupgrading, as well as in equipment for improvement of GMP/EHS and security. Total capital expenditure in2007 was Rs. 187 million.

5. Profit, Finance & Taxation

As already mentioned earlier, profitability was lower than last year on account of frozen selling prices,increases in all cost categories including depreciation due to significant capital expenditure. The profit,taxation and proposed appropriations are stated below:

(Rs. in '000')

Profit for the year before taxation 126,085Taxation:

Current - for the year 35,395Current - prior period (20,018)Deferred 25,212

Total 40,589Profit after taxation 85,496Un-appropriated profit brought forward 91,742Actuarial gain/loss recognized directly in

equity - net off deferred taxation (19,035)Profit available for appropriations 158,203Appropriations:

Proposed final dividend @ 44% (42,437) Transfer to Reserve (100,000)

(142,437)Un-appropriated profit carried forward 15,766

The Directors are pleased to recommend a dividend of Rs.4.40 per share of Rs.10 each, for approval by theshareholders, after taking into account the significant capital expenditure planned in 2008.

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6. Cashflow

Despite high proportion of cash sales, the lower profitability for the year, increase in stocks, finance costand capital expenditure and repayment of bank loans etc has resulted in a significant increase of therunning finance utilized under mark-up arrangements at the end of the year under report, as comparedto the end of the previous year.

7. Related Party Transactions

All related party transactions, during 2007, were approved by the Board and these are in line with thetransfer pricing policy with related parties approved by the Board previously. The company maintainsa full record of all such transactions, alongwith the terms and conditions.

8. Financial Statements

The financial statements of the Company have been audited and approved without qualification bythe auditors of the Company, Ford, Rhodes, Sidat, Hyder & Co. Chartered Accountants.

9. Human Resource

The total numbers of permanent employees, at the end of 2007, were 846, one less as compared to lastyear.

An intensive training program of the total sales and marketing teams was done during the year. Codenamed “Impact”, the basic focus was on achievement of excellence in all aspects of our sales andmarketing activities. We also carried out a program for “Sales Certification” of the sales teams toimprove their selling skills.

In addition to the above our regular training programs continued for new hires and existing employeesfor cross product training, advance selling skills and disease training.

As in previous years, performance appraisals for the year were done on a semi-annual basis throughthe scorecards system for the sales force evaluation and on the conventional format for all otheremployees.

10. Contribution to Economy & Social Responsibility

During the year the company paid over Rs 519 million to the government and it's various agencies onaccount of various government levies including custom duty and income tax.

The company also contributed an amount of Rs 0.8 million representing donation to various institutions,primarily supporting health and education in the country. In addition, the company and its employeesgenerously contributed towards the victim of flood which hit certain parts of Pakistan (Sindh &Balauchistan) during the year. A substantial volume of donations of cash and dry food stuffs wascollected from staff members and handed over to the Edhi Foundation for distribution to the affectedpersons.

As a leading player in the health care of the country the company continues to offer medicines atconcessional cost to government and private non-profit making organizations, impart training andmedical knowledge to a cross section of doctors in various therapeutic areas, by arranging lectures ofexperts, sponsorships to medical seminars, responding to doctors queries through our drug informationservice centre, conducting free screening tests to determine diabetes, osteoporosis and other diseases,donations of hospital equipment, contributions to various charities, NGOs, health and communityimprovement projects etc.

11. Information Technology

Regular upgrades of information systems assist the management in continuous improvement ofqualitative and quantitative decision making. In addition to the 5 SAP modules, the company has alsodeveloped in-house systems including the Electronic Territory Management System (ETMS) to assist themanagement in effective analysis of sales related indicators. Being part of the leading pharmaceuticalcompany in the world, we ensure full adherence to intellectual property rights and to create userawareness for security and proper usage of internet facilities. Our employees continue to regularlyattend training programs for use of new softwares introduced at Corporate level for use by allassociated companies.

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12. Website

All our stakeholders and general public can log on to the sanofi-aventis Pakistan limited website atwww.sanofi-aventis.com.pk

13. Environment, Health & Safety

The fire detection system in our Karachi and WAH sites, and fire extinguishers installed at all sales office wereregularly tested during the year. Employees' evacuation drills, fire fighting practices, awareness campaignsregarding office ergonomics, home and motor vehicle safety were also conducted as part of environment,health and safety programs. An awareness campaign for diabetics, aids and cancer were also run duringthe year. Soil and ground water testing of the WAH manufacturing site conducted did not reveal any majorcontamination.

Our commitment to Environment, Health & Safety is manifested in all our activities and over 100 employeesare now trained on first aid, fire fighting and use of personal protective equipments (PPE). Bird flu masks arealso available to face any pandemic situation. No major accident was reported in 2007.

14. Directors

Mr. Carmelo D' Ancona resigned from the Board subsequent to the year end consequent to his resignationfrom his regional position in the company. The casual vacancy has been filled by the nomination of Mr. Jean-Marc Georges, duly approved by the Board. We would like to record our appreciation of thesupport received from Mr. Carmelo D' Ancona during his short tenure.

15. Compliance with the Code of Corporate Governance

The Stock Exchanges have included in their listing rules the Code of Corporate Governance (Code) issuedby the Securities & Exchange Commission of Pakistan. The Company has adopted the Code and isimplementing the same in letter and spirit.

16. Statement of Ethics and Business Practices

The Board has adopted the Statement of Ethics and Business Practices. All employees are informed of thisStatement and are required to observe these rules of conduct in relation to customers, suppliers andregulations. A confirmation that these rules have been followed is obtained from all employees every year.

17. Audit Committee

There was no change in the composition of audit committee during the year. However, after resignation ofMr. Carmelo D' Ancona from the Board of Directors subsequent to the year end, the Audit Committee hasbeen reconstituted and is now composed of the following 2 non-executive directors and one alternateDirector:

1. Mr. Syed Hyder Ali Chairman

2. Mr. Eric Le-Bris

3. Dr Amanullah Khan

Mr. Yasir Pirmuhammad Secretary(Head of Internal Audit)

18. Pattern of Shareholding

A statement of the pattern of shareholding is shown on page 66.

19. Earning Per Share

The earning per share after tax was Rs.8.86.

20. Holding Company

The Company is a subsidiary of Hoechst GmbH and Plasma Investments UK PLC, which are incorporated inGermany and United Kingdom respectively.

21. Auditors

The Audit Committee and Directors recommend retention of the retiring Auditors' Messrs Ford Rhodes SidatHyder and Co., Chartered Accountants, for the year ending on December 31, 2008.

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22. Corporate and Financial Reporting Framework

• The financial statements prepared by the management of the Company present fairly it's state ofaffairs, the result of its operations, cash-flows and changes in equity.

• Proper books of accounts of the Company have been maintained.

• Accounting policies have been consistently applied in the accounts, in preparation of financialstatements and accounting estimates are based on reasonable and prudent judgment.

• International Accounting Standards, as applicable in Pakistan, have been followed in preparationof financial statements and any departure therefrom has been adequately disclosed.

• The system of internal control which is in place, is being continuously reviewed by internal audit andother such procedures. The process of review will continue and any weakness in controls will beremoved.

• There are no significant doubts upon the Company's ability to continue as a going concern.

• There has been no material departure from the best practices of Corporate Governance asdetailed in the listing regulations.

• Key operating and financial data for the last 6 years is shown on page 69.

• The value of investments of provident, gratuity and pension funds based on their accounts as onDecember 31, 2007 (audit in progress) was as follows :

Provident Fund Rs.173,435,931Gratuity Fund Rs.148,441,679Pension Fund Rs 170,716,204

• The outstanding duties, statutory charges and taxes, if any, have been duly disclosed in thefinancial statements.

• During the last business year four meetings of the Board of Directors were held. Attendance byeach Director was as follows :

Name of Director No.of Meetings AttendedMessrs :

1. Syed Babar Ali 42. Tariq Wajid 43. Pir Ali Gohar 24. Syed Hyder Ali 25. Tariq Iqbal Khan none6. Jean Louis Grunwald none7. Carmelo D'Ancona none8. Eric Le-Bris none9. M. Z. Moin Mohajir 4

Arshad Ali Gohar 1(Alternate for Mr. Pir Ali Gohar)

Mohammad Amjad 3(Alternate for Carmelo D'Ancona / Jean- Marc Georges)

Dr Asim Jamal 2(Alternate for Mr. Eric Le-Bris)

Dr Amanullah Khan 3(Alternate for Mr. J.L. Grunwald)

Leave of absence was granted to Directors who could not attend the Board Meetings and theywere represented by their respective alternates.

• No trade in the shares of the Company was carried out by the Directors, CEO, CFO, CompanySecretary, Executives their spouses & minor childrens.

• Statement of Ethics and Business Practices has been approved by the Board and signed by allDirectors and employees of the Company as per the requirement in the Code of CorporateGovernance.

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23. Future Outlook

a) New line of business, product launches and line extensions in 2008

Vaccine Business integration:

The vaccines business of sanofi pastuer, the subsidiary company of sanofi-aventis group, has beenintegrated with sanofi-aventis in Pakistan with effect from 2008. Previously, this business was handled by alocal company in Pakistan. The vaccines division of sanofi-aventis Group is the largest in the world devotedentirely to human vaccines protecting against 20 bacterial and viral diseases, including pertussis,diphtheria, typhoid fever, poliomyelitis, influenza and mumps.

Generic Business:

We launched Xerosec® (Omeprazole) in January 2008. Omeprazole is a later generation specific inhibitorof the gastric proton pump in the parietal cells indicated for the treatment of Acid Peptic Disease. Due todietary habits and life style in Pakistan, acid reflux and Gastro duodenal ulcers incidence are on rise.

Beside the above additions, which will contribute significantly to our top line, we propose to launch a fewmore generics and add some line extension to our existing portfolio of products in 2008

b) Capital Expenditure

The company has planned a capital expenditure of over Rs 1 billion starting from 2008. Most of theexpenditure relates to expansion, modernization, balancing and upgrading of our production facilities. Thecontinuously high level of capital expenditure every year demonstrates a vote of confidence of the mainshareholders of the company to the country and its economic management.

c) Sales & Profitability

Our performance in 2007 was quite disappointing; partly due to external factors beyond our control, butmainly due to complacency at various levels after four successful years of sales and profitability growth.However, we are confident that the short to medium term outlook of your company is quite positive. Wehave planned a significant volume increase in sales in 2008 mainly due to integration of vaccines businessand by entry into generics business in Pakistan. The new launches and line extensions of 2007 and 2008 willalso contribute significantly to this growth. Although the sales volume growth is expected to contributepositively to the bottom line, growth in profitability will be largely dependent on the Government grantingprice increases, stability of the Pak Rupee and control over inflationary trend in the country.

24. General

We would like to thank all the employees for their efforts in 2007 and expect their full hearted support torealize our plans for the year 2008.

By order of the Board

Karachi: 13th February, 2008

34


Syed Babar AliChairman

Tariq WajidChief Executive

This statement is being presented to comply with the Code of Corporate Governance contained inRegulation No. 37, 43 and 36 of listing regulations of the Karachi Stock Exchange (Guarantee) Limited,Lahore Stock Exchange (Guarantee) Limited and Islamabad Stock Exchange (Guarantee) Limitedrespectively, for the purpose of establishing a framework of good governance, whereby a listed companyis managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in the following manner:

1) The Company encourages representation of independent non-executive directors and directorsrepresenting minority interest on its Board of Directors. At present the Board includes 7 non-executiveDirectors, out of which 4 directors represent minority shareholders.

2) The directors have confirmed that none of them is serving as a Director in more than ten listedcompanies including this Company, except for one director, who has been given special relaxationby SECP in this matter.

3) All the resident Directors of the Company are registered as tax payers and none of them hasdefaulted in payment of any loan to a banking company, DFI or an NBFI or, being a member of astock exchange, has been declared as a defaulter by that stock exchange.

4) There were no casual vacancies occurring in the Board during the financial year ended December31, 2007.

5) The Company has prepared a “Statement of Ethics and Business Practices”, which has been signedby all the directors and employees of the Company.

6) The Board has developed a vision / mission statement, overall corporate strategy and significantpolicies of the Company. A complete record of particulars of the significant policies along with thedates on which they were approved or amended has been maintained.

7) All the powers of Board have been duly exercised and decisions on material transactions, includingappointment and determination of remuneration and terms and conditions of employment of theCEO and other executive Directors, have been taken by the Board.

8) The meetings of the Board were presided over by the Chairman and, in his absence, by the Directorelected by the Board for this purpose and the Board met atleast once in every quarter. Written noticesof the Board meetings, along with the agenda and working papers, were circulated atleast sevendays before the meetings. The minutes of the meetings were appropriately recorded and circulated.

9) Members of the Board are well aware of their duties and responsibilities.

10) The Board has approved appointment of Company Secretary during the year including remunerationand terms and conditions of appointment, as determined by the CEO. There was no newappointment of CFO and Head of Internal Audit during the year.

11) The Directors Report for this year has been prepared in compliance with the requirements of the Codeand fully describes the salient matters required to be disclosed.

12) The financial statements of the Company were duly endorsed by CEO and CFO before approval ofthe Board.

13) The Directors, CEO and executives do not hold any interest in the shares of the Company other thanthat disclosed in the pattern of shareholding.

14) The Company has complied with all the corporate and financial reporting requirements of the Code.

15) The Board has formed an audit committee. It comprises of four members. In 2007 three members werenon-executive directors including the Chairman of the Audit Committee. Subsequent to the year end,one of the non- executive director has resigned.

Statement of Compliance with the Code ofCorporate GovernanceFor the year ended December 31, 2007

35


16) The meetings of the audit committee were held once in every quarter prior to approval of interim andfinal results of the Company and as required by the Code. The terms of reference of the committee hasbeen formed and advised to the committee for compliance.

17) The Board has set-up an effective internal audit function.

18) The statutory auditors of the Company have confirmed that they have been given a satisfactory ratingunder the quality control review programme of the Institute of Chartered Accountant of Pakistan, thatthey or any of the partners of the firm, their spouses and minor children do not hold shares of theCompany and that the firm and all its partners are in compliance with International Federation ofAccountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountant ofPakistan.

19) The statutory auditors or the persons associated with them have not been appointed to provide otherservices except in accordance with the listing regulations and the auditors have confirmed that theyhave observed IFAC guidelines in this regard.

20) We confirm that all other material principles contained in the code have been complied with.

By order of the Board

Dated: 13th February, 2008

36

Corporate Governance



We have reviewed the Statement of Compliance with the best practices contained in the Code ofCorporate Governance prepared by the Board of Directors of sanofi-aventis Pakistan limited to comply withthe Listing Regulation No. 37, 43 and 36 of Karachi, Lahore and Islamabad Stock Exchanges, respectively,where the Company is listed.

The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directorsof the Company. Our responsibility is to review, to the extent where such compliance can be objectivelyverified, whether the Statement of Compliance reflects the status of the Company's compliance with theprovisions of the Code of Corporate Governance and report if it does not. A review is limited primarily toinquiries of the Company personnel and review of various documents prepared by the Company to complywith the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accountingand internal control systems sufficient to plan the audit and develop an effective audit approach. We havenot carried out any special review of the internal control system to enable us to express an opinion as towhether the Board's statement on internal control covers all controls and the effectiveness of such internalcontrols.

Based on our review, nothing has come to our attention which causes us to believe that the Statement ofCompliance does not appropriately reflect the Company's compliance, in all material respects, with thebest practices contained in the Code of Corporate Governance as applicable to the Company for the yearended December 31, 2007.

Ford Rhodes Sidat Hyder & Co.Chartered Accountants


Review Report to the Members on Statement ofCompliance with Best Practices of Code of CorporateGovernance

37

We have audited the annexed balance sheet of SANOFI-AVENTIS PAKISTAN LIMITED as at December 31, 2007and the related profit and loss account, cash flow statement and statement of changes in equity together withthe notes forming part thereof for the year then ended and we state that we have obtained all the informationand explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the company's management to establish and maintain a system of internal control, andprepare and present the above said statements in conformity with the approved accounting standards and therequirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statementsbased on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the above saidstatements are free of any material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the above said statements. An audit also includes assessing theaccounting policies and significant estimates made by management, as well as, evaluating the overallpresentation of the above said statements. We believe that our audit provides a reasonable basis for our opinionand, after due verification, we report that:

(a) in our opinion, proper books of account have been kept by the company as required by the CompaniesOrdinance, 1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up inconformity with the Companies Ordinance, 1984, and are in agreement with the books of account andare further in accordance with accounting policies consistently applied;

(ii) the expenditure incurred during the year was for the purpose of the company's business; and

(iii) the business conducted, investments made and the expenditure incurred during the year were inaccordance with the objects of the company;

(c) in our opinion and to the best of our information and according to the explanations given to us, thebalance sheet, profit and loss account, cash flow statement and statement of changes in equity togetherwith the notes forming part thereof conform with approved accounting standards as applicable inPakistan, and, give the information required by the Companies Ordinance, 1984, in the manner sorequired and respectively give a true and fair view of the state of the company's affairs as at December31, 2007 and of the profit, its cash flows and changes in equity for the year then ended; and

(d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), wasdeducted by the company and deposited in the Central Zakat Fund established under Section 7 of thatOrdinance.

Ford Rhodes Sidat Hyder & Co.Chartered Accountants


Auditors' Report to the Members

38

December 31, December 31,Note 2007 2006

Rupees in '000

ASSETS

NON-CURRENT ASSETSFixed assets 4 792,008 702,001

Long-term loans 5 8,513 12,078Long-term deposits 6 3,425 3,322

CURRENT ASSETSStores and spares 7 42,278 39,560Stock-in-trade 8 1,077,021 797,286Trade debts 9 137,920 147,093Short term loans and advances 10 24,974 21,432Trade deposits and short-term prepayments 11 26,789 47,743Other receivables 12 100,136 116,893Taxation - payment less provision 212,887 96,715Cash and bank balances 13 2,102 3,879

1,624,107 1,270,601

TOTAL ASSETS 2,428,053 1,988,002

EQUITY AND LIABILITIESSHARE CAPITAL AND RESERVES

Share Capital 14 96,448 96,448Reserves

Capital reserve 23,935 23,935Revenue reserves 15 993,741 995,758

1,017,676 1,019,6931,114,124 1,116,141

NON-CURRENT LIABILITIESDeferred taxation 16 73,087 15,104

CURRENT LIABILITIESTrade and other payables 17 688,130 527,001Accrued mark-up 18 10,527 7,876Short - term borrowings 19 542,185 259,380Current maturity of long - term financing - 62,500

1,240,842 856,757

CONTINGENCIES AND COMMITMENTS 20

TOTAL EQUITY AND LIABILITIES 2,428,053 1,988,002

The annexed notes 1 to 37 form an integral part of these financial statements.

Balance SheetAs at December 31, 2007

39





Rupees in '000

NET SALES 21 3,896,267 3,818,425

Cost of sales 22 2,810,195 2,572,866

GROSS PROFIT 1,086,072 1,245,559

Distribution and marketing expenses 22 752,967 665,194

Administrative expenses 22 99,890 125,009

Other operating expenses 23 19,469 42,185

872,326 832,388

213,746 413,171

Other operating income 24 21,638 18,325

OPERATING PROFIT 235,384 431,496

Finance costs 25 109,299 75,928

PROFIT BEFORE TAXATION 126,085 355,568

Taxation 26 40,589 128,546

NET PROFIT FOR THE YEAR 85,496 227,022

BASIC EARNINGS PER SHARE (Rs. per share) 27 8.86 23.54


Profit and Loss AccountFor the year ended December 31, 2007

40





Rupees in '000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 28 253,382 775,187

Finance cost paid (91,849) (78,484)

Income tax paid (132,309) (174,412)

Retirement benefits paid (2,616) (13,035)

Long-term loans and advances (net) 3,565 1,182

Long-term deposits (net) (103) (25)

Net cash generated from operating activities 30,070 510,413

CASH FLOW FROM INVESTING ACTIVITIES

Capital expenditure (186,824) (140,448)

Sale proceeds from disposals of fixed assets 1,947 4,816

Interest received 1,003 3,504

Net cash used in investing activities (183,874) (132,128)

CASH FLOW FROM FINANCING ACTIVITIES

Repayment of long-term finances (62,500) (125,000)

Repayment of short-term loans (100,000) (170,000)

Dividends paid (68,278) (83,624)

Net cash used in financing activities (230,778) (378,624)

NET DECREASE IN CASH AND CASH EQUIVALENTS (384,582) (339)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR (155,501) (155,162)

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 29 (540,083) (155,501)


Cash Flow StatementFor the year ended December 31, 2007

41




Capital Reserves Revenue ReservesDifference ofshare capital

Issued, under schemesubscribed and Long term of arrangementpaid-up share liabilities for General Unappropriated

capital forgone Amalgamation reserve profit TotalRupees in '000

Balance as at January 01, 2006 96,448 5,935 18,000 485,538 334,796 940,717

Actuarial gains / (losses) taken directly to equity

[note 12.3] - - - - 32,313 32,313

Net profit for the year ended

December 31, 2006 - - - - 227,022 227,022

Final dividend for the year ended

December 31, 2005 - - - - (83,911) (83,911)

Transfer to general reserve - - - 200,000 (200,000) -

Balance as at December 31, 2006 96,448 5,935 18,000 685,538 310,220 1,116,141

Actuarial gains / (losses) taken directly to equity

[note 12.3] - - - - 13,736 13,736

Deferred tax on actuarial gain recognized - - - - (32,771) (32,771)

Net profit for the year ended

December 31, 2007 - - - - 85,496 85,496

Final dividend for the year ended

December 31, 2006 - - - - (68,478) (68,478)

Transfer to general reserve - - - 150,000 (150,000) -

Balance as at December 31, 2007 96,448 5,935 18,000 835,538 158,203 1,114,124


Statement of Changes in EquityFor the year ended December 31, 2007

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1. THE COMPANY AND ITS OPERATIONS

The company was incorporated in Pakistan in 1967 under the Companies Act, VII of 1913, as a publiclimited company. The shares of the company are listed on Karachi, Lahore and Islamabad StockExchanges. It is engaged in the manufacturing and selling of pharmaceutical products.

The registered office of the company is located at Plot 23, Sector 22, Korangi Industrial Area, Karachi.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of Compliance

These financial statements have been prepared in accordance with approved accounting standardsas applicable in Pakistan and the requirements of the Companies Ordinance, 1984. Approvedaccounting standards comprise of such International Financial Reporting Standards as notified underthe provisions of the Companies Ordinance, 1984. Wherever, the requirements of the CompaniesOrdinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ withthe requirements of these standards, the requirements of Companies Ordinance, 1984 or therequirements of the said directives take precedence.

2.2 Significant accounting judgements and estimates

The preparation of financial statements in conformity with approved accounting standards requiresthe use of certain critical accounting estimates. It also requires management to exercise its judgementin the process of applying the company's accounting policies. The matters involving a higher degreeof judgement or complexity, or areas where assumptions and estimates are significant to the financialstatements are as follows:

(i) Provision for doubtful debts and stocks

The company has used judgements, based on the history of the transactions, for making provisions forthe doubtful debts whereas provision for stocks is based on the current market conditions.Management believes that the changes in the outcome of estimates will not have significant effecton the financial statements.

(ii) Post retirement benefits

The company has post retirement benefit obligations, which are determined through actuarialvaluations using various assumptions as disclosed in note 12.3 below. Management believes that thechanges in assumptions will not have significant effect on the financial statements.

(iii) Taxation

The company takes into account the current income tax laws and decisions taken by appellateauthorities while recognising provision for income tax. The amounts are not provided for matters,disclosed in note 20.1(c) below, where the company's view differs from the view taken by the incometax department at the assessment stage and where the company considers that the matters inappeals will be decided in favour of the company. Management believes that if the final outcome ofthe cases differs from the management's assessment, such differences will impact the income taxprovision in the period in which such determination is made.

Estimates and judgments are continually evaluated and are based on historical experience and otherfactors, including expectations of future event that are believed to be reasonable under thecircumstances.

There have been no critical judgements made by the company's management in applying theaccounting policies that would have the most significant effect on the amounts recognised in thefinancial statements.

Notes to the Financial StatementsFor the year ended December 31, 2007

43

2.3 Accounting standards not yet effective

The following revised standards and interpretations with respect to approved accounting standards asapplicable in Pakistan would be effective from the dates mentioned below against the respectivestandard or interpretations.

Standard or Interpretation Effective date (accounting periods beginning on or after)

IAS 1 - Presentation of Financial Statements January 01, 2009

IAS 23 - Borrowings Costs January 01, 2009

IAS 27 - Consolidated and Separate Financial Statements January 01, 2009

IFRS 3 - Business Combinations January 01, 2009

IFRIC 11 - Group and Treasury Share Transactions March 01, 2007

IFRIC 12 - Service Concession Arrangements January 01, 2008

IFRIC 13 - Customer Loyalty Programs July 01, 2008

IFRIC 14 - The Limit on Defined Benefit Asset, January 01, 2008Minimum Funding Requirements and their Interactions

IAS 41 - Agriculture May 22, 2007

The Company expects that the adoption of the above standards and interpretations will have no materialimpact on the Company's financial statements in the period of initial application.

In addition to the above, the following new standards have been issued by the IASB but have not yetbeen adopted by the Institute of Chartered Accountants of Pakistan or notified by the SECP and hencepresently do not form part of the local financial reporting framework:

IFRS 4 - Insurance Contracts

IFRS 7 - Financial Instruments: Disclosures

IFRS 8 - Operating Segments

2.4 Basis of measurement

These financial statements have been prepared under the historical cost convention except as disclosedin the accounting policies herein below.

2.5 Fixed assets

(i) Property, plant and equipment

Owned

These are stated at cost less accumulated depreciation, except for freehold land and capital work-in-progress, which are stated at cost.

Cost of leasehold land is amortised over the period of the lease. Depreciation on all other assets ischarged to profit and loss account applying the straight-line method whereby the cost of an asset lessresidual value, if not insignificant, is written off over its estimated useful life. The rates used are stated innote 4.1 to the financial statements.

In respect of additions depreciation is charged from the month in which asset is put to use and on disposalup to the month the asset is in use. Additional depreciation at the rate of fifty percent of the normal rateis charged on such machinery which is operated on double shift during the year.

The assets' residual values, useful lives and methods are reviewed, and adjusted if appropriate, at eachfinancial year end.

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Notes to the Financial Statements

The carrying values of property, plant and equipment are reviewed for impairment when events orchanges in circumstances indicate that the carrying value may not be recoverable. The companyaccounts for impairment by reducing its carrying value to the recoverable amount.

An item of property, plant and equipment is derecognised upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset isincluded in the profit and loss account in the year the asset is derecognised.

Maintenance and normal repairs are charged to profit and loss account as and when incurred.

(ii) Intangible assets - computer software

Computer software licenses acquired by the company are stated at cost less amortization. Costrepresents the cost incurred to acquire the software licenses and bring them to use. The cost ofcomputer software is amortized over the estimated useful life as disclosed in note 4.1 to the financialstatements.

Cost associated with maintaining computer software's are charged to profit and loss account.

(iii) Capital work-in-progress

Capital work-in-progress is stated at cost less impairment in value. It consists of expenditure incurredand advances made in respect of tangible fixed assets in the course of their construction andinstallation.

2.6 Long term loans and deposits

Long term loans and deposits are stated at cost.

2.7 Stores and spares

These are valued at cost less provision for slow moving and obsolete stores and spares. Cost isdetermined on moving average basis except for the stores and spares in transit which are stated atinvoice price plus other charges incurred thereon up to the balance sheet date. Value of items arereviewed at each balance sheet date to record provision for any slow moving items, wherenecessary.

2.8 Stock-in-trade

These are valued at lower of cost and net realisable value. Goods in transit are valued at cost,comprising invoice values plus other charges incurred thereon accumulated to the balance sheetdate. Cost signifies standard costs adjusted by variances.

Cost in relation to work-in-process and finished goods represent direct cost of materials, direct wagesand appropriate manufacturing overheads.

Net realisable value signifies the estimated selling price in the ordinary course of business lessestimated costs necessarily to be incurred to make the sale. Provision is made for slow moving andexpired stock where necessary.

2.9 Trade debts and other receivables

These are recognised and carried at original invoice amount, being the fair value, less an allowancefor any uncollectible amounts, if any. An estimate for doubtful debts is made when collection is nolonger probable. Bad debts are written-off when identified.

2.10 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flowstatement, cash and cash equivalents comprise cash in hand, balances with banks on current anddeposit account and outstanding balance of running finance facilities availed by the company.

45


2.11 Trade and other payables

Liabilities for trade and other amounts payable are carried at cost which is the fair value of theconsideration to be paid in the future for goods and services received, whether or not billed to thecompany.

2.12 Provisions

Provisions are recognized when the company has a present legal or constructive obligation as a result ofa past event and it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of obligation.

2.13 Employees benefits

Defined benefit plans

The company operates an approved funded gratuity scheme and an approved funded non-contributorypension scheme in respect of all permanent employees and senior management staff respectivelyexcluding expatriates. The schemes define the amounts of benefit that an employee will receive on orafter retirement subject to a minimum qualifying period of service under the schemes. The amounts ofretirement benefits are usually dependent on one or more factors such as age, years of service andsalary.

The liabilities recognised in respect of gratuity and pension schemes are the present values of the definedbenefit obligations under each scheme at the balance sheet date less the fair value of respective planassets.

The gratuity and pension obligations are calculated annually by independent actuaries using theProjected Unit Credit Method. The most recent valuation in this regard was carried out as at December31, 2007. The present values of the obligations are determined by discounting the estimated future cashoutflows using interest rates of high quality government securities that have terms to maturityapproximating to the terms of the related obligations.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions arerecognised directly in equity in the statement of changes in equity in the period in which they arise.

Defined contribution plan

The company also operates a recognised provident fund scheme for all permanent employees excludingexpatriates. Equal monthly contributions are made, both by the company and the employees, to thefund at the rate of 10 percent of basic salary.

2.14 Compensated absences

The company provides for compensated absences of its employees on unavailed leave balances in theperiod in which the leave is earned on the basis of accumulated leaves and the last drawn pay.

2.15 Taxation

Current

Provision for current taxation is based on taxable income at the current rates of taxation after taking intoaccount tax credits and tax rebates available, if any, and under the final tax regime. The tax charge ascalculated above is compared with turnover tax under Section 113 of the Income Tax Ordinance, 2001,and whichever is higher is provided in the financial statements.

Deferred

Deferred tax is recognised using the liability method, on all major temporary differences at the balancesheet date between the tax base of assets and liabilities and their carrying amounts for financial reportingpurposes.

Deferred income tax assets are recognised for all deductible temporary differences and carry-forward ofunused tax losses, to the extent that it is probable that taxable profit will be available against which thedeductible temporary differences and / or carry-forward of unused tax losses can be utilised.

46


The carrying amount of all deferred tax assets is reviewed at each balance sheet date and reducedto the extent that it is no longer probable that sufficient taxable profits will be available to allow all orpart of the deferred tax assets to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply tothe period when the asset is realised or the liability is settled, based on tax rates (and tax laws) thathave been enacted or substantively enacted at the balance sheet date.

Deferred tax is charged or credited in the profit and loss account except for deferred tax arising onrecognition of actuarial loss or gain which is charged or directly credited to equity.

2.16 Foreign currency translation

The financial statements are presented in Pak Rupee, which is the company's functional andpresentation currency. Foreign currency transactions during the year are recorded at the exchangerates approximating those ruling on the date of the transaction. Monetary assets and liabilities inforeign currencies are translated at the rates of exchange which approximate those prevailing on thebalance sheet date. Gains and losses on translation are taken to income currently. Non-monetaryitems that are measured in terms of historical cost in a foreign currency are translated using theexchange rates as at the dates of the initial transactions. Non-monetary items measured at fair valuein a foreign currency are translated using the exchange rates at the date when the fair value wasdetermined.

2.17 Revenue recognition

- Sales and toll manufacturing income are recorded on despatch of goods;- Return on deposits is recognised on accrual basis; and- License fee is recognised on accrual basis.

2.18 Borrowing Cost

Borrowing cost is recognised as an expense in the period in which it is incurred.

2.19 Financial Instruments

All the financial assets and financial liabilities are recognised at the time when the company becomesa party to the contractual provisions of the instrument. Financial assets are derecognised at the timewhen the company loses control of the contractual rights that comprise the financial assets. Allfinancial liabilities are derecognised at the time when they are extinguished that is, when theobligation specified in the contract is discharged, cancelled, or expires. Any gains or losses onderecognition of financial assets and financial liabilities are taken to profit and loss account currently.

2.20 Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into andare subsequently re-measured at their fair value at each reporting date. The company enters intoderivative transactions mainly to hedge foreign currency liabilities or firm commitments and these aredesignated as fair value hedge.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges arerecorded in the profit and loss account, together with any changes in the fair value of the hedgedliability that are attributable to the hedged risk.

2.21 Off-setting of financial instruments

A financial asset and a financial liability is offset and the net amount is reported in the balance sheetif the company has a legally enforceable right to set-off the recognised amounts and intends eitherto settle on a net basis or to realise the asset and settle the liability simultaneously.

2.22 Dividends and appropriation to general reserve

Dividends and appropriation to general reserve are recognised in the financial statements in theperiod in which these are approved.

47


3. CAPITAL RISK MANAGEMENT

The Company's objective when managing capital are to safeguard the Company's ability to continue asa going concern in order to provide returns for shareholders and benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may regulate the amount of dividendspaid to shareholders, issue new shares or sell assets to reduce debt.

The Company monitor its capital on the basis of the gearing ratio. This ratio is calculated as net debtdivided by total capital. Net debt is calculated as total bank borrowings less cash and bank balances.Total capital is calculated as equity, as shown in the balance sheet plus net debt.

The gearing ratio as at December 31, 2007 and 2006 were as follows:


Rupees in '000

Total borrowings 542,185 321,880

Less: cash and bank balances - note 13 (2,102) (3,879)

Net Debt 540,083 318,001

Total equity 1,114,124 1,116,141

1,654,207 1,434,142

Gearing ratio 33% 22%

4. FIXED ASSETS

Property, plant and equipment 4.1 647,370 393,850

Capital work-in-progress 4.2 143,712 306,741

791,082 700,591

Intangible assets 4.3 926 1,410

792,008 702,001

4.1 Property, plant and equipment

WRITTENDOWN

COST ACCUMULATED DEPRECIATION VALUEAs at As at As at As at As at

January December January Charge On December December01, Disposals / 31, Rate 01, for disposals / 31, 31,

2007 Additions Writeoff* 2007 % 2007 the year Writeoff* 2007 2007Rs. in '000 Rs. in '000

December 31, 2007

Freehold land 8,350 - - 8,350 - - - - 8,350

Leasehold land 480 - - 480 1.23 124 6 - 130 350

Building on freehold land 42,200 - - 42,200 5 33,140 1,541 - 34,681 7,519

Building on leasehold land 242,979 196,259 - 439,238 5 89,830 18,041 - 107,871 331,367

Plant and machinery 659,037 98,787 1,032 756,792 10 493,587 51,589 1,032 544,144 212,648

Furniture and fixtures 20,335 4,793 - 25,128 10 5,406 2,168 - 7,574 17,554

Motor Vehicles 29,159 22,626 1,036 50,749 20 12,067 7,221 406 18,882 31,867

Factory and office equipment 109,088 27,388 4,789 130,905 7-33 83,624 14,785 4,780 93,190 37,715

782* 439*

1,111,628 349,853 6,857 1,453,842 717,778 95,351 6,218 806,472 647,370

782* 439*

*Assets written off primarily represent items that are obsolete or redundant and have no economic value to the company.

48


WRITTENDOWN

COST ACCUMULATED DEPRECIATION VALUEAs at As at As at As at As at

January December January Charge On December December 01, Disposals / 31, Rate 01, for disposals / 31, 31,

2006 Additions Writeoffs* 2006 % 2006 the year Writeoff* 2006 2006Rs. in '000 Rs. in '000

December 31, 2006

Freehold land 8,350 - - 8,350 - - - - - 8,350

Leasehold land 480 - - 480 1.23 118 6 - 124 356

Building on freehold land 42,200 - - 42,200 5 31,597 1,543 - 33,140 9,060

Building on leasehold land 217,104 25,875 - 242,979 5 80,804 9,026 - 89,830 153,149

Plant and machinery 648,382 24,627 - 659,037 10 468,100 39,459 - 493,587 165,450

13,972 * 13,972 *

Furniture and fixtures 13,476 7,498 - 20,335 10 4,532 1,432 - 5,406 14,929

639 * 558 *

Motor Vehicles 24,726 7,248 2,815 29,159 20 8,034 5,289 1,256 12,067 17,092

Factory and office equipment 114,194 13,294 - 109,088 7-33 89,817 11,763 - 83,624 25,464

18,400 * 17,956 *

1,068,912 78,542 2,815 1,111,628 683,002 68,518 1,256 717,778 393,850

33,011 * 32,486 *

*Assets written off primarily represent items that are obsolete or redundant and have no economic value to the company.

4.1.1 The details of fixed assets disposed off, having net book value in excess of Rs.50,000 each, are as follows:

NetAccumulated Book Sale Mode of Particulars of

Description Cost depreciation value proceeds Disposal buyersRs in '000

Vehicles 496 339 157 249 Company Muhammad Ali ShamimPolicy (Executive)151/11 Sharfabad,

Flat No.F-1, Puri Homes Karachi.

120 22 98 335 Company Muhammad Abdual MajidPolicy (Executive) B-205, Block-10,

Gulshan-e-Iqbal,Karachi.

70 7 63 208 Company Syed Viqar HaiderPolicy (Executive) A-48, Block-H,

North Nazimabad Karachi.

120 2 118 365 Company Mohammad AmjadPolicy (Executive) House No.56/1,

5th Street Off Kh-e-Momin,Phase-V DHA Karachi.

141 9 132 206 Company Muhammad Naeem AyubiPolicy (Employee) House No.424,

Street No-1, Lane-III,Gulrez Housing SchemeChaklala, Rawalpindi.

89 27 62 291 Company Kamran Hamid MirzaPolicy (Executive) 113-A, Saima

Heaven, Block-4,Gulshan-e-Iqbal Karachi.

1,036 406 630 1,654

Aggregate of assetsdisposed off havingbook value less thanRs.50,000 each

Plant & Machinery 1,032 1,032 - 190 Negotiation Various

Factory and Officeequipment 4,789 4,780 9 103 Negotiation Various

6,857 6,218 639 1,947

49


December 31, December 31, 2007 2006

Rupees in '000

4.2 Capital work-in-progress

Building on leasehold land 31,246 188,930Plant and machinery 41,756 68,251Others 3,566 45,780

76,568 302,961Advances to Contractors and Suppliers 67,144 3,780

143,712 306,741

4.3 Intangible assets

WRITTEN

DOWNCOST ACCUMULATED DEPRECIATION VALUE

As at As at As at As at As atJanuary December January Charge On December December

01, Disposals / 31, Rate 01, for disposals / 31, 31,2007 Additions Writeoff* 2007 % 2007 the year Writeoff* 2007 2007

Rs. in '000 Rs. in '000

December 31, 2007

Computer software 1,450 - - 1,450 33 40 484 - 524 926

December 31, 2006

Computer software - 1,450 - 1,450 33 - 40 - 40 1,410

December 31, December 31, Note 2007 2006

Rupees in '000

5. LONG-TERM LOANS

Considered good - securedExecutives 5.1, 5.2 & 5.3 - 32Employees 5.2 13,731 17,554

13,731 17,586

Current maturity shown under current assetsExecutives 10 - (32)Employees 10 (5,218) (5,476)

(5,218) (5,508)8,513 12,078

5.1 Reconciliation of the carrying amount

Opening balance 32 196Interest accrued 204 112

236 308Recoveries during the year 236 (276)

- 32

5.2 Loans to executives and employees have been given for the purchase of motor cars and motor cyclesand to meet personal expenses, in accordance with the company's policy. Loans for the purchase ofmotor cars and motor cycles are interest free whereas personal loans carry mark-up / interest at the rateof 9% (2006: 9%) per annum. These are repayable within five years in equal monthly installments.

5.3 The maximum aggregate amount due from executives at the end of any month during the year wasRs.0.933 (2006: Rs.0.182) million.

50


December 31, December 31, Note 2007 2006

Rupees in '000

6. LONG-TERM DEPOSITS

Long-term deposits 3,539 3,436Provision against deposits considered doubtful (114) (114)

3,425 3,322

7. STORES AND SPARES

Stores 14,449 14,488Provision against obsolete stores (17) (17)

14,432 14,471Spares 28,947 26,190Provision against obsolete spares (1,101) (1,101)

27,846 25,08942,278 39,560

8. STOCK-IN-TRADE

Raw and packing material and auxiliariesIn hand 514,345 359,952In transit 60,535 28,187

8.1 574,880 388,139Provision against slow moving stock - (8,501)

574,880 379,638Work-in-process 34,862 19,261

Finished goodsIn hand 8.2 482,642 390,482In transit 25,351 31,020

507,993 421,502Provision against slow moving stock (40,714) (23,115)

467,279 398,3871,077,021 797,286

8.1 This includes raw and packing material held by a third party,aggregating to Rs.6.200 (2006: Rs.5.141) million, at the end ofthe current year.

8.2 This includes cost of physician samples, aggregating to Rs.15.749 (2006: Rs.7.589) million, at the end of the current year.

9. TRADE DEBTS

Unsecured

Considered goodRelated parties 9.1 902 2,038Others 137,018 145,055

137,920 147,093Considered doubtful

Others 15,008 15,548152,928 162,641

Provision against debts considered doubtful (15,008) (15,548)137,920 147,093

9.1 Included herein are the following related parties:

Pakistan Telecommunication Company Limited 792 1,743Telephone Industries of Pakistan 87 208Packages Limited 23 9MARI Gas Company Limited - 78

902 2,038

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9.2 The maximum amount due from related parties at the end of any month during the year was Rs.1.269(2006: Rs.2.205) million.


Rupees in '000

10. SHORT - TERM LOANS AND ADVANCES

Considered good

Loans

Current maturity of long-term loansExecutives 5 - 32Employees 5 5,218 5,476

5,218 5,508

AdvancesExecutives 2,411 212Employees 7,253 9,065Contractors and Suppliers 10,092 6,647

19,756 15,92424,974 21,432

11. TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS

Trade depositsTender deposits 11,054 9,351Margin against letters of credit 9,090 35,135

20,144 44,486Provision against trade deposits considered doubtful (2,563) (2,960)

17,581 41,526Short-term prepayments 9,208 6,217

26,789 47,743

12. OTHER RECEIVABLES

Reimbursements due from related parties 12.1 15,141 39,510Employees' Pension Fund 12.3 75,449 62,803Employees' Gratuity Fund 12.3 6,895 11,697Insurance claims 2,445 1,600

Loans due from ex-employees 2,696 2,979Provision against loans due from ex-employees (2,696) (2,979)

- -

Sales tax refundable 7,229 7,229Provision against sales tax refundable

considered doubtful (7,229) (7,229)- -

Miscellaneous 206 1,283100,136 116,893

12.1 Included herein are the following reimbursementsdue from the related parties:

Aventis Intercontinental France - 24Bayer CropScience (Private) Limited 5,119 4,185Aventis Pharma Deutschland GmbH 56 10,260Sanofi Synthelabo Group, France - 140Aventis Pharma UK - 15,254Sanofi Winthrop Industries 9,634 9,634Fisons UK 332 13

15,141 39,510

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12.2 The maximum amount due from related parties at the end of any month during the year was Rs.17.672(2006: Rs.39.510) million.

12.3 The status of the funds and principal assumptions used in the actuarial valuation as of December 31,2007 were as follows:

Pension Fund Gratuity Fund2007 2006 2007 2006

Rupees in '000 Rupees in '000

Balance sheet reconciliation as atDecember 31,

Present value of defined benefit Obligation (161,452) (151,813) (144,111) (126,742)Fair value of plan assets 236,901 214,616 151,006 137,641Unrecognised past service cost - - - 798Net assets in balance sheet 75,449 62,803 6,895 11,697

Movement in asset / (liability)Prepayment/(liability) as at January 1, 62,803 45,817 11,697 (2,710)Charge for the year 1,291 (1,991) (9,799) (11,044)Contribution during the year 166 1,991 2,450 10,124Actuarial gain recognised in equity 11,189 16,986 2,547 15,327Prepayment as at December 31, 75,449 62,803 6,895 11,697

Expense recognizedService cost 4,463 5,851 10,026 9,911Interest cost 14,347 13,089 12,220 10,942Expected return on plan assets (20,101) (16,949) (13,245) (10,606)Annual amortization of unrecognized

Past service cost - - 798 797(1,291) 1,991 9,799 11,044

Actual return on plan assets 28,568 27,462 16,772 16,894

Movement in the defined benefit ObligationObligation as at January 1, 151,813 145,345 126,742 118,975Service cost 4,463 5,851 10,026 9,911Interest cost 14,347 13,089 12,220 10,942Benefits paid (6,449) (5,999) (5,857) (4,047)Actuarial (gain ) / loss (2,722) (6,473) 980 (9,039)Obligation as at December, 31 161,452 151,813 144,111 126,742

Movement in fair value of plan assetsFair value as at January 1, 214,616 191,162 137,641 114,670Expected return on plan assets 20,101 16,949 13,245 10,606Employer contributions 166 1,991 2,450 10,124Benefits paid (6,449) (5,999) (5,857) (4,047)Actuarial gain / (loss) 8,467 10,513 3,527 6,288Fair value as at December 31, 236,901 214,616 151,006 137,641

Key actuarial assumptions used are as follows:

Discount factor used 10.5% 9.5% 10.5% 9.5%Expected rate of returns per annumon plan assets 10.5% 9.5% 10.5% 9.5%

Expected rate of increase in future salaries per annum 10% 9% 10% 9%

Indexation of pension 6% 5% - -Retirement age (years) 58 58 58 58

53


2007 2006Rupees in '000 % Rupees in '000 %

Plan assets comprise of:Funded pension plan

Debt 182,414 77% 210,323 98%Others (includes cash and bank

balances) 54,487 23% 4,293 2%236,901 100% 214,616 100%

Funded gratuity planDebt 134,395 89% 134,888 98%Others (includes cash and bank

balances) 16,611 11% 2,753 2%151,006 100% 137,641 100%

Comparison for five years:2007 2006 2005 2004 2003

Rupees in '000

Funded pension planPresent value of defined

benefit obligation (161,452) (151,813) (145,345) (137,866) (62,337)Fair value of plan assets 236,901 214,616 194,352 174,731 82,770Deficit 75,449 62,803 49,007 36,865 20,433

Experience adjustmentActuarial gain onobligation 2,999 6,474 864 3,887 24,148

Actuarial gain on planassets 8,467 10,513 8,889 2,526 (2,282)

Funded gratuity planPresent value of defined

benefit obligation (144,111) (126,742) (118,975) (101,196) (43,204)Fair value of plan assets 151,006 137,641 115,955 107,841 51,936Deficit / (Surplus) 6,895 10,899 (3,020) 6,645 8,732

Experience adjustmentActuarial loss/(gain) onobligation 721 (9,039) (11,158) (6,786) 10,086

Actuarial gain on planassets 3,528 6,288 (1,240) 1,707 (2,913)

12.4 The expected return on plan assets is based on the market expectations and depends upon the assetportfolio of the plan, at the beginning of the period, for returns over the entire life of the related obligation.

12.5 Based on actuary' advice, the amount of expected contribution to gratuity and pension funds in 2008 willbe Rs 9.667 million and negative Rs 0.967 million, respectively.


Rupees in '000

13. CASH AND BANK BALANCES

Cash at banks incurrent accounts 13.1 2,102 2,788deposit accounts - 1,091

2,102 3,879

13.1 Included herein is a sum of Rs.0.345 (2006: Rs.0.395) million, representing deposits placed by suppliers.

54


December 31, December 31,2007 2006

Rupees in '00014. SHARE CAPITAL

No. of SharesDec 31, Dec 31,

2007 2006

Authorised Share Capital10,000,000 10,000,000 Ordinary shares of Rs.10 each 100,000 100,000

Issued, subscribed and paidup capital

2,757,783 2,757,783 Ordinary shares of Rs.10 each fully paid in cash 27,578 27,578

Ordinary shares of Rs.10 each issued as fully paid for consideration other than cash:

687,500 687,500 - against plant and equipment 6,875 6,875140,000 140,000 - against loan 1,400 1,400

2,700,000 2,700,000 - in exchange for 450,000 Ordinary shares of Rs.10 eachof former Rhone Poulenc Rorer Pakistan (Private) Limited 27,000 27,000

3,527,500 3,527,500 35,275 35,2753,359,477 3,359,477 Ordinary shares of Rs.10 each

issued as fully paid bonus shares 33,595 33,5959,644,760 9,644,760 96,448 96,448

Hoechst GmbH, Germany (formerly Aventis Pharma Holding GmbH), held 3,479,469 (2006: 3,479,469)Ordinary shares of Rs.10 each, aggregating to Rs.34.795 million, at the end of the current year. Theultimate parent of the Group is Sanofi-Aventis S.A.


Rupees in '000

15. REVENUE RESERVES

General reserve 835,538 685,538Unappropriated profit 158,203 310,220

993,741 995,758

16. DEFERRED TAXATION

Credit balances arising from:Accelerated tax depreciation allowance 66,757 33,271

Recognition of actuarial gain on retirementbenefit plans 30,708 -

Debit balances resulting from:

Provision against:- trade debts (4,396) (4,627)- others (15,942) (9,435)

Liabilities outstanding for more than three years (4,040) (4,105)73,087 15,104

55



Rupees in '000

17. TRADE AND OTHER PAYABLES

Trade

CreditorsRelated parties 337,283 162,961Other trade creditors 67,153 106,053

404,436 269,014

Other payablesAccrued liabilities 17.1 202,254 177,213Royalty and technical fee 17.2 29,276 28,184Advances from customers 3,928 1,025Workers' Profit Participation Fund 17.3 6,936 19,336Workers' Welfare Fund 2,592 6,969Central Research Fund 1,273 3,603Compensated absences 18,254 17,425Security deposits 345 395Unclaimed dividend 1,535 1,335Unrealised loss on re-measurement of

Forward Exchange Contract 17,301 2,502283,694 257,987688,130 527,001

17.1 This includes a sum of Rs.3.508 (2006: Rs.3.257) million due to related parties on account of expensesincurred by them on behalf of the Company.

17.2 This represents royalty and technical fee due to Rhone Poulenc Rorer S.A. (RPR), a related party, underthe license and technical assistance agreement, dated September 11, 1997.


Rupees in '000

17.3 Workers' Profit Participation Fund

Balance at the beginning of the year 19,336 21,787Allocation for the year 6,936 19,336

26,272 41,123

Interest on funds utilised in Company's business 931 1,130Amounts paid to the Trustees of the Fund (20,267) (22,917)

6,936 19,336

18. ACCRUED MARK-UP

Mark-up accrued on secured:long term financing - 751short term borrowings 10,527 7,125

10,527 7,876

19. SHORT - TERM BORROWINGS

SecuredShort term loans - 100,000Running finances utilised under mark-up

arrangements 19.1 & 19.2 542,185 159,380542,185 259,380

19.1 The facilities for running finances available from various banks under mark-up arrangements aggregatedto Rs.1,320 (2006: Rs.1,320) million. These facilities expire on various dates, latest by December 31, 2008. Therates of mark-up range between Re.0.2753 and Re.0.2904 (2006: Re.0.2734 and Re.0.3164) per Rs.1,000 perday. The facilities are secured by way of charge on stock-in-trade and book debts of the company,ranking pari-passu.

56


19.2 Out of the facilities of Rs.804 (2006: Rs.749) million for opening the letters of credit, guarantees and billdiscounting, the unutilized amount was Rs.725 (2006: Rs.459) million as at the end of the year.

20. CONTINGENCIES AND COMMITMENTS

20.1 Contingencies

(a) Bank guarantees, aggregating to Rs.60.139 million, as at the end of the current year (2006: Rs.49.822)million have been given to the Collector of Customs in respect of exemption of levies on import ofspecified pharmaceutical materials, subject to the consumption of such raw materials within thespecified period and to various other parties.

(b) Claims not acknowledged as debt amounted to Rs.15.391 (2006: Rs.6.062) million at the end of thecurrent year.

(c) In finalizing the tax assessment of former Rhone Poulenc Rorer Pakistan (Private) Limited for theassessment years 1994-95 to 1997-98, the Taxation Officer (T.O) made additions mainly on the allegedcontention that the Company had paid excessive amounts for importing certain raw materials,disallowances out of sales promotion, royalty paid to an associated company and certain otherexpenses. The said additions and disallowances have been set aside by the Income Tax AppellateTribunal (ITAT). However, the department has filed appeals against the decision of the ITAT before theHigh Court.

For the assessment years 1998-99 to 2002-03, the T.O had again made similar additions. For theassessment years 1998-99 and 1999-2000 the ITAT has maintained the CITA order of setting aside theadditions except of Transfer pricing and certain selling expenses which was deleted by CITA. Thecompany has filed Miscellaneous application before ITAT against the order of ITAT.

For the assessment year 1998-99 to 2002-03, the T.O has again made similar additions. The CIT(Appeals), however, set aside the major additions made by the T.O. For the assessment years 1998-99and 1999-2000, the company filed appeals against the CIT (Appeals) before the ITAT, which set asidethe order of CIT(Appeals) and directed for fresh assessment.

The management of the company is of the view that the final outcome of the above referred matterswill be in favour of the company and, hence, no provision of approximately Rs.190 million has beenmade in these financial statements pending a final decision in this matter.

20.2 Commitments

(a) Commitments in respect of capital expenditure contracted for amounted to Rs.251.545 (2006: Rs. 59.992) million as at the end of the year.

(b) Commitments for rentals under operating lease agreements in respect of vehicles amounted toRs.13.570 (2006: Rs.34.604) million at the end of the year, payable over the next five years, are asfollows:

Years December 31, December 31,2007 2006

Rupees in million

2007 - 16.8942008 9.997 9.9972009 2.511 2.5112010 0.708 0.7082011 0.354 0.354

13.570 30.464

(c) Commitments in respect of foreign exchange forward contracts with banks as at December 31, 2007amounted to Rs.566.70 (2006 : Rs.439.96) million.


Rupees in '000

21. NET SALES

Gross salesLocal 4,179,500 4,109,646Export 13,406 27,613

4,192,906 4,137,259

Toll manufacturing 10,721 12,9664,203,627 4,150,225

Returns (21,577) (47,672)Discounts (285,783) (284,128)

(307,360) (331,800)

3,896,267 3,818,425

57


22. OPERATING COSTS Distribution and Administrative

Cost of Sales marketing expenses expenses Total

2007 2006 2007 2006 2007 2006 2007 2006

Rupees in '000

Raw, auxiliary and packing materialconsumed I,839,126 1,652,877 - - - - I,839,126 1,652,877

Stores and spares consumed 6,584 7,002 - - - - 6,584 7,002Stationery and supplies consumed 3,143 4,320 5,221 5,210 270 1,482 8,634 11,012Staff costs - note 22.1 236,493 207,095 228,995 204,196 45,408 61,356 510,896 472,647Fuel and power 80,090 72,232 1,792 1,412 5,973 5,411 87,855 79,055Rent, rates and taxes 3,314 4,605 5,045 6,021 370 703 8,729 11,329Lease rentals 2,137 2,153 12,895 11,377 1,862 2,737 16,894 16,267Royalty and technical fee - - 28,813 27,713 - - 28,813 27,713Insurance 2,276 2,023 4,063 5,406 591 562 6,930 7,991Provision against raw and

packing material - 428 - - - - - 428Repairs and maintenance 41,555 35,613 543 721 10,514 12,043 52,612 48,377Depreciation / amortisation 70,413 49,914 11,801 9,618 13,621 9,026 95,835 68,558Travelling and conveyance 32,828 27,406 165,648 158,126 8,574 12,600 207,050 198,132Handling, freight and transportation - - 23,808 21,034 - - 23,808 21,034Communication 2,148 2,037 11,600 11,068 9,773 9,389 23,521 22,494Security and maintenance 3,282 2,311 1,180 785 1,710 1,268 6,172 4,364Publication and subscription 1,031 429 164 839 14 526 1,209 1,794Advertising, samples and

sales promotion - - 212,910 166,371 - - 212,910 166,371Commission expenses - - 22,631 23,771 - - 22,631 23,771Software license / maintenance fee - - 2,597 1,579 201 526 2,798 2,105Provision against loans to

ex-employees / (written back) - - (283) 2,205 - - (283) 2,205Provision for doubtful trade

deposits / (written back) - - (398) 1,371 - - (398) 1,371Provision for doubtful trade

debts / (written back) - - (540) - - - (540) -Bad debts recovered - - (21) (2,243) - - (21) (2,243)Sales tax recovered - - - (2,739) - - - (2,739)Other expenses 10,527 13,698 14,503 11,353 1,009 7,428 26,039 32,479

2,334,947 2,084,143 752,967 665,194 99,890 125,057 3,187,804 2,874,394Recovery of service charges

from outside parties (8,327) (9,868) - - - (48) (8,327) (9,916)2,326,620 2,074,275 752,967 665,194 99,890 125,009 3,179,477 2,864,478

Opening work in process 19,261 39,490Closing work in process (34,862) (19,261)Cost of goods manufactured 2,311,019 2,094,504Opening stock of finished goods 421,502 577,583Finished goods purchased 600,228 360,282Stock written off 9,776 2,032Cost of samples issued under

distribution and marketingexpenses (41,936) (28,367)

Provision against finished goods 17,599 (11,666)Closing stock of finished goods (507,993) (421,502)

2,810,195 2,572,866

22.1 Staff costs

Salaries and wages 225,967 197,043 216,640 183,261 37,446 55,913 480,053 436,217Training expenses 573 580 6,570 8,412 55 614 7,198 9,606Defined benefit plan 3,834 4,515 3,938 6,011 736 2,509 8,508 13,035Defined contribution plan 6,119 4,957 1,847 6,512 7,171 2,320 15,137 13,789

236,493 207,095 228,995 204,196 45,408 61,356 510,896 472,647

58



Rupees in '000

23. OTHER OPERATING EXPENSES

Auditors' remuneration 23.1 1,123 1,219Workers' Profits Participation Fund 6,936 19,336Workers' Welfare Fund 3,495 7,090Fixed assets written-off 4.1 343 525Contribution for research and development fund 1,273 3,603Legal and consultancy charges 4,748 6,671Donations 23.2 846 260Miscellaneous 705 3,481

19,469 42,185

23.1 Auditors' remuneration

Audit fee 533 485Review of half yearly financial statements 172 172Special certification and reportings 288 457Out-of-pocket expenses 130 105

1,123 1,219

23.2 Names of donees in which a director or his spousehas an interest:

• LUMS School of Science & EngineeringD.H.A, Lahore

(Syed Babar Ali, Chairman, and Tariq Wajid, Chief Executive, are the members of the Board ofTrustees of Lahore University of ManagementSciences) 600 -

• World Wide Fund for Nature Fortune Centre, P.E.C.H.S, Karachi(Syed Babar Ali, Chairman, is the memberof the fund) 30 30

24. OTHER OPERATING INCOME

Interest from:related parties 24.1 799 3,392others 204 112

1,003 3,504

Gain on sale of fixed assets 1,308 3,257Scrap sales 5,007 4,406License fee from a related party 5,781 4,561Liabilities no longer payable written back 7,832 765Miscellaneous 707 1,832

21,638 18,325

24.1 This represents interest @ 3.6% (2006: 3.6%) per annum, which the company earns from its relatedparties for making payment on time in respect of import of goods.

59



Rupees in '000

25. FINANCE COSTS

Mark-up on:long term financing 2,599 14,299short term running finances 35,798 27,035short term loans 22,902 9,838

61,299 51,172

Interest on Workers' Profit Participation Fund 931 1,130Exchange losses - net 44,312 20,434Bank charges 2,757 3,192

48,000 24,756109,299 75,928

26. TAXATION

Current 35,395 111,892Prior (20,018) -Deferred 25,212 16,654

40,589 128,546

26.1 Explanation of relationship between accountingprofit and tax expense:

Accounting profit before taxation 126,085 355,568

Income tax at the applicable tax rate 35% (2006: 35%) 44,130 124,449Tax effect of permanent differences - 84Effect of tax under presumptive tax regime and other

adjustments - net 16,477 4,013Effect of prior years' tax charge (20,018) -

40,589 128,546

27. BASIC EARNINGS PER SHARE

There is no dilutive effect on the basic earnings per share of the Company, which is based on:


Rupees in '000

Net profit for the year 85,496 227,022

Number of shares

Weighted average number of Ordinary shares 9,644,760 9,644,760

(Rupees)

Earnings per share - Basic and Diluted 8.86 23.54

60



Rupees in '000

28. CASH GENERATED FROM OPERATIONS

Profit before taxation 126,085 355,568

Adjustment for non-cash charges and other items:Depreciation 95,835 68,558Fixed assets written-off 343 525Gain on sale of fixed assets (1,308) (3,257)Retirement benefits 8,508 13,035Interest income (1,003) (3,504)Financial charges 109,299 75,928Working capital changes 28.1 (84,377) 268,334

253,382 775,187

28.1 Working capital changes

(Increase) / decrease in current assets:

Stores and spares (2,718) (3,462)Stock-in-trade (279,735) 276,682Trade debts 9,173 (63,729)Loans and advances (3,542) 5,553Trade deposits and short-term prepayments 20,954 94,201Other receivables - net 24,601 25,696

(231,267) 334,941

Increase / (decrease) in current liabilities:

Creditors, accrued and other liabilities - net(excluding accruals for financial charges and

unclaimed dividend) 146,890 (66,607)(84,377) 268,334

29. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise of the following items:

Cash and bank balances 13 2,102 3,879Short-term borrowings 19 (542,185) (159,380)

(540,083) (155,501)

61


30. TRANSACTIONS WITH RELATED PARTIES

The related parties of the Company comprise associated undertakings, employees' provident fund, employees' gratuity fund,employees' pension fund, directors and key management personnel of the company. The company in the normal course ofbusiness carries out transactions with various related parties. Amounts due from and to related parties, remuneration of Executivesand the Chief Executive are disclosed in the relevant notes.

There are no transactions with key management personnel other than under the terms of employment.

Terms and conditions of transactions with related parties

The transactions with the related parties are made at normal market prices. There have been no guarantees provided orreceived for any related party receivables or payables. Other material transactions with related parties are given below:

December 31, 2007 December 31, 2006Associated Associatedundertaking undertakingby virtue of Retirement by virtue of Retirement

Group Common Benefits Group Common BenefitsCompanies Directorship Plans Total Companies Directorship Plans Total

Rupees in '000

i) Gross sales 16,907 - - 16,907 33,327 - - 33,327ii) Purchase of goods 1,720,680 38,363 - 1,759,043 1,121,474 42,435 - 1,163,909iii) Purchase of services - 3,817 - 3,817 - 6,256 - 6,256iv) Recovery of service

charges and otherexpenses - 8,051 - 8,051 - 3,944 - 3,944

v) License fee of landreceived - 5,364 - 5,364 - 4,561 - 4,561

vi) Interest income earned 799 - - 799 3,392 - - 3,392vii) Royalty and technical

fee 28,813 - - 28,813 27,713 - - 27,713viii) Contributions paid

- Pension Fund - - 166 166 - - 1,991 1,991- Gratuity Fund - - 2,450 2,450 - - 11,044 11,044- Provident Fund - - 15,137 15,137 - - 13,789 13,789

30.1 The related party status of outstanding balances as at December 31, 2007 are included in creditors, accrued and other liabilitiesand other receivables. The balances are unsecured and are settled in accordance with the terms and conditions of thetransactions.

31. REMUNERATION OF CHIEF EXECUTIVE, DIRECTOR AND EXECUTIVES

The aggregate amounts charged in the financial statements for the year in respect of remuneration, including benefits, to theChief Executive, Director and Executives of the Company are as follows:

Chief Executive Director Executives Total2007 2006 2007 2006 2007 2006 2007 2006

Rupees in '000

Managerial remuneration 7,377 6,706 3,296 3,024 37,440 30,716 48,113 40,446Profit sharing bonus 2,914 2,778 818 681 7,637 5,951 11,369 9,410Retirement benefits 1,352 1,229 604 554 6,465 5,290 8,421 7,073Perquisites and benefits:

Rent and utilities 4,057 3,689 1,813 1,663 20,180 15,874 26,050 21,226Medical expenses 68 75 70 62 1,185 1,191 1,323 1,328Club subscription 41 41 38 59 52 41 131 141

15,809 14,518 6,639 6,043 72,959 59,063 95,407 79,624

Number of person 1 1 1 1 39 30 41 32

In addition to the above remuneration, Chief Executive, Director and certain Executives are also provided with free use of theCompany maintained cars.

The above remuneration of Director does not include amounts paid or provided by the related parties.

Aggregate amount charged in the financial statements for fee to Directors other than working Directors was Rs.4,500 (2006: Rs.4,500).

62


32. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

32.1 Financial assets and liabilities

Interest / mark-up bearing Non-interest / mark-up bearing

Effective Maturity Maturity Maturity Maturity

Rate of upto one after one upto one after one

interest Year year Sub-total year year Sub-total Total

% Rupees in '000

December 31, 2007

Financial assets

Trade debts - - - - 137,920 - 137,920 137,920

Loans to employees 9 1,462 2,867 4,329 3,756 5,646 9,402 13,731

Deposits - - - - 17,581 3,425 21,006 21,006

Other receivables - - - - 17,792 - 17,792 17,792

Cash and bank balances - - - - 2,102 - 2,102 2,102

1,462 2,867 4,329 179,151 9,071 188,222 192,551

Financial liabilities

Short term finances 10.05-10.60 542,185 - 542,185 - - - 542,185

Trade and other payables - - - - 688,130 - 688,130 688,130

Accrued mark-up - - - - 10,527 - 10,527 10,527

542,185 - 542,185 698,657 - 698,657 1,240,842

Interest / mark-up bearing Non-interest / mark-up bearing

Effective Maturity Maturity Maturity Maturity

Rate of upto one after one upto one after one

interest Year year Sub-total year year Sub-total Total

% Rupees in '000

December 31, 2006

Financial assets

Trade debts - - - - 147,093 - 147,093 147,093

Loans to employees 9 1,304 1,693 2,997 4,204 10,385 14,589 17,586

Deposits - - - - 41,526 3,322 44,848 44,848

Other receivables - - - - 42,393 - 42,393 42,393

Cash and bank balances 4 1,091 - 1,091 2,788 - 2,788 3,879

2,395 1,693 4,088 238,004 13,707 251,711 255,799

Financial liabilities

Short term finances 3.5-10.57 259,380 - 259,380 - - - 259,380

Long term finance 10.19 62,500 - 62,500 - - - 62,500

Trade and other payables - - - - 483,271 - 483,271 483,271

Accrued mark-up - - - - 7,876 - 7,876 7,876

321,880 - 321,880 491,147 - 491,147 813,027

63


32.2 Financial risk management

Taken as a whole, risk arising from the Company's financial instruments is limited as there is no significantexposure to market risk in respect of such instruments.

i) Credit risk

Credit risk represents the risk of a loss if the counter parties fail to perform as contracted. TheCompany's credit risk is primarily attributable to its receivables. Out of the total financial assets ofRs.192.551 (2006: 255.799) million, the financial assets which are subject to credit risk amounted toRs.190.449 (2006: 251.920) million. The Company has no significant concentrations of credit risk. Tomanage exposure to credit risk, the Company applies credit limits to its customers and ensures thatsales of products and services are made to customers with appropriate credit history and creditworthiness.

ii) Foreign exchange risk

Foreign exchange is the risk of loss through changes in foreign currency exchange rates. TheCompany is exposed to foreign exchange risk due to transactions denominated in foreigncurrencies. The Company uses forward contracts to hedge its exposure to foreign currency risk,where appropriate.

iii) Interest rate risk

Rates on both short term and long term finances vary with the changes in KIBOR rate.

iv) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of fundingthrough an adequate amount of committed credit facilities. Due to effective cash managementand planning policy, the Company aims at maintaining flexibility in funding by keeping committedcredit lines available.

v) Fair values of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in the financial statementsapproximate their fair values.

33. CAPACITY AND PRODUCTION

The capacity and production of the Company's manufacturing facility is undeterminable as it is a multiproduct plant involving varying processes of manufacture.

34. DATE OF AUTHORISATION FOR ISSUE

These financial statements were authorized for issue on 13th February, 2008 by the Board of Directors ofthe company.

35. MOVEMENT BETWEEN RESERVES AND PROPOSED DIVIDEND

The Board of Directors in its meeting held on 13th February, 2008 (i) approved the transfer of Rs.100 millionfrom unappropriated profit to general reserve; and (ii) proposed a final dividend of Rs.4.40 per share forthe year ended December 31, 2007, amounting to Rs. 42.44 million for approval of members at the AnnualGeneral Meeting to be held on 19th March, 2008. These financial statements do not include the effect ofthe aforementioned movement between reserves and proposed dividend.

64


36. COMPARATIVE FIGURES

Following major corresponding figures have been reclassified for better presentation:

RupeesFrom To in '000

Operating fixed assets Intangible assets 1,410

Long-term loans Other receivables 2,979

Administrative expenses Cost of SalesStaff cost Staff cost 1,878

Travelling expenses Travelling expenses 1,170

Other expenses Other expenses 7,127

Distribution and marketing expenses Cost of SalesStaff cost Staff cost 15,866

37. GENERAL

Figures presented in these financial statements have been rounded off to the nearest rupee.

65





SIZE OF HOLDING NUMBER OF NUMBER OFRs. 10 SHARES SHAREHOLDERS Rs. 10 SHARES

HELD

1 100 319 15,710

101 101 381 118,631

501 501 99 77,596

1001 1001 86 161,710

5001 5001 8 61,604

15001 15001 3 54,128

20001 20001 2 46,742

50001 50001 1 51,442

55001 55001 1 55,896

135001 135001 1 137,200

200001 200001 1 204,099

225001 225001 1 229,461

235001 235001 1 236,364

340001 340001 1 342,602

510001 510001 1 510,212

1075001 1075001 1 1,080,000

1160001 1160001 1 1,161,894

1615001 1615001 1 1,620,000

3475001 3475001 1 3,479,469

910 9,644,760

Number of Number of %Shareholders Category Shareholders Shares held

Associated Companies, Undertakings 4 6,312,805 65.45and Related Parties

NIT and ICP 2 465,825 4.83

Directors, CEO and their Spouses 12 1,120,002 11.61

Public Sector Companies and 2 1,284,099 13.31Corporations

Banks, Development Finance Institutions, 2 140 0.00Non-Banking Finance Institutions

Modaraba and Mututal Funds 2 5,800 0.06

Insurance Companies 1 19,100 0.20

Others 19 42,102 0.44

Individuals 866 394,887 4.09

TOTALS : 910 9,644,760 100.00

Corporate GovernancePattern of shareholdingAs at December 31, 2007

66

Under clause(i) of sub-regulation(XIX) of Regulation 37 of chapter(XI) of the Listing Regulations of KarachiStock Exchange (Guarantee) Ltd.As at December 31, 2007

Shareholder Category Number of Number ofShareholders Shares held

Associated Companies, Undertakings and

Related Parties

HOECHST GmbH, GERMANY 1 3,479,469

PLASMA INVESTMENTS (U.K.) LIMITED 1 1,620,000

IGI INSURANCE LIMITED 1 1,161,894

M/S ALI GOHAR & CO. (PVT) LTD. 1 51,442

NIT and ICP (name wise detail)

NATIONAL BANK OF PAKISTAN,TRUSTEE DEPTT. 2 465,825

Directors, CEO and their spouse and

minor children (name wise detail)

MR. PIR ALI GOHAR 3 535,698

MR. ARSHAD ALI GOHAR 3 8,340

MR. SYED BABAR ALI 1 510,212

MR. SYED HYDER ALI 1 16,914

MRS. NAIYAR ZAMANI GOHAR 1 7,434

MRS. PERWIN BABAR ALI 1 22,690

SYEDA HENNA BABAR ALI 2 18,714

Executives (As advised by SAPL) NIL NIL

Public Sector Companies and Corporations 2 1,284,099

Banks, Development Finance Institutions,

Non-Banking Finance Institutions 2 140

Modaraba and Mutual Funds 2 5,800

Insurance Companies 1 19,100

Shareholders holding 10% or more voting interest

HOECHST GmbH, GERMANY 1 3,479,469

PLASMA INVESTMENTS (U.K.) LIMITED 1 1,620,000

INTERNATIONAL GENERAL INSURANCE CO. PAK. 1 1,161,894

NATIONAL FERTILIZER CORPORATION 1 1,080,000

67

Pattern of shareholding

PARTICULARS 2007 2006Rs.000 Rs.000

VALUE ADDED

Net sales 3,896,267 3,818,425Materials and services (2,905,336) (2,707,756)

990,931 1,110,669

Other income 21,638 18,325

1,012,569 1,128,994

% % DISTRIBUTION TO EMPLOYEES

Salaries, wages and benefits 480,053 47 485,155 43

Workers' Profit Participation Fund 6,936 1 19,336 2 486,989 48 504,491 45

GOVERNMENT

Tax 132,309 13 174,413 15

Custom duty & Sales Tax 208,445 21 147,420 13

Workers' Welfare Fund 3,495 - 7,090 1 344,249 34 328,923 29

SHAREHOLDERSDividend 42,437 4 68,478 6

RETAINED IN BUSINESS

Depreciation 95,835 10 68,558 6

Retained profit 43,059 4 158,544 14138,894 14 227,102 20

1,012,569 100 1,128,994 100

Statement of Value Added and its Distribution

68

2002 2003 2004 2005 2006 2007

(Rupees in thousand)

Operating assets 141,600 152,023 323,098 385,911 395,260 648,296

Capital work-in-progress 190,010 294,206 274,494 246,285 306,741 143,712

Net current & other assets 24,078 65,420 258,265 50,090 429,244 395,203

Total assets employed 355,688 511,649 855,857 682,286 1,131,245 1,187,211

Ordinary capital 96,448 96,448 96,448 96,448 96,448 96,448

Capital reserve 23,935 23,935 23,935 23,935 23,935 23,935

Revenue reserve 225,538 380,211 547,974 494,928 995,758 993,741

Long term & deferred liabilities 9,767 11,055 187,500 66,975 15,104 73,087

Total funds employed 355,688 511,649 855,857 682,286 1,131,245 1,187,211

Net turnover 2,534,802 2,896,603 3,178,776 3,445,958 3,818,425 3,896,267

Profit/(loss) before taxation (208,987) 234,149 383,484 398,920 355,568 126,085

% of net sales (8.2) 8.1 12.1 11.6 9.3 3.2

% of average assets employed (57.8) 53.9 56.1 51.9 39.2 10.9

Profit/(loss) after taxation (213,635) 154,673 244,922 277,824 227,022 85,496

Cash dividend - amount - 57,869 72,336 83,909 68,478 42,437

Cash dividend - % - 60 75 87 71 44

Earnings/(loss) per share Rs.

(based on profit/(loss) before tax (21.67) 24.27 39.76 41.61 36.87 13.07

Number of permanent

employees at year end 743 709 779 829 847 846

Six Years at a Glance

69

Ratio Analysis 2002 2003 2004 2005 2006 2007

Liquidity RatiosCurrent Ratio Times 1.0 1.0 1.4 1.3 1.5 1.3Quick Ratio Times 0.4 0.5 0.4 0.3 0.5 0.4Net Working Capital Rs. '000 (5,540) (30,841) 229,342 352,915 413,844 383,265Networth Rs. '000 345,921 442,725 668,357 940,717 1,116,141 1,114,124Current assets/Total assets % 81.4% 70.1% 57.8% 69.9% 63.9% 66.9%Inventory / Current Assets % 54.9% 48.6% 73.2% 73.2% 65.9% 68.9%Inventory to Total Assets % 44.7% 34.1% 42.3% 51.2% 42.1 46.1%

Activity RatiosInventory Turnover Times 3.3 2.9 3.7 2.6 2.6 5.0Average No of Days Inventory in Stock Days 109.2 125.0 98.0 137.1 137.2 71.7Accounts Receivable Turnover Times 13.7 29.5 46.9 47.5 33.1 27.3Average Collection Period Days 26.3 12.2 9.0 7.6 10.9 13.2Fixed Assets Turnover Times 7.6 6.5 5.3 5.5 5.4 4.9Operating Assets Turnover Times 17.9 19.1 9.8 8.9 9.7 6.0Total Assets Turnover Times 1.3 1.8 2.1 1.6 1.9 1.6

LeverageDebt to Equity Ratio Times 3.5 0.3 0.7 0.3 0.3 0.5Times Interest Earned Times -0.7 4.7 15.5 5.6 5.7 1.2Fixed Assets to Equity Times 1.0 1.0 0.9 0.7 0.6 0.7Financial Leverage Times 0.5 1.9 1.8 1.8 2.0 2.8

Profitability RatiosSales Growth % 22.3% 14.3% 9.7% 8.4% 10.80% 2.0%COGS Margin % 76.3% 70.6% 69.0% 66.2% 66.90% 72.1%Profit before tax as a % of Net Sales % -8.2% 8.1% 12.1% 11.6% 9.3% 3.2%Net Profit Margin % -8.4% 5.3% 7.7% 8.1% 5.9% 2.2%Gross Profit Margin % 23.7% 29.4% 31.0% 33.8% 33.1% 27.9%Operating Profit Margin % -3.8% 10.3% 13.8% 13.4% 11.3% 6.0%Return on Assets % -11.0% 9.6% 16.5% 13.1% 11.4% 3.5%Return on Equity % -61.8% 34.9% 36.6% 31.1% 20.3% 7.7%Admin.,Dist.&Mktg.Exp./Sales % 27.5% 19.1% 17.2% 19.5% 21.2% 21.9%Admin.,Dist.&Mktg.Exp.Growth % 64.7% -20.6% -1.5% 22.8% 20.2% 7.9%Financial Charges/Net Income % -56.0% 41.0% 10.8% 22.1% 33.4% 127.8%

Market ValueMarket Value per Share Rs. 62 120 232 295 252 276Book value per Share Rs. 35.9 45.9 69.30 97.54 115.72 115.5Market / Book Ratio Times 1.7 2.6 3.3 3.1 2.2 2.4Earning per share (before tax) Rs. -21.7 24.3 39.8 41.4 36.9 13.1Earning per share (after tax) Rs. -22.2 16.0 25.4 28.6 23.5 8.9Price Earning Ratio Times -2.8 7.5 9.10 10.20 10.7 31.1Dividend per share Rs. - 6.0 7.5 8.7 7.1 4.4Dividend yield % - 5.0 3.2 2.9 2.8 1.6Payout ratio (after tax) % - 37.5 29.5 30.4 30.2 49.4Market capitalisation Rs M 431 1,157 2,238 2,845 2,430 2,662Breakup value Rs. 49.81 45.90 69.30 97.54 115.72 115.52

Six years summary of Statistics

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71

72

73

Notice is hereby given that the fortieth Annual General Meeting of the Company will be held on Wednesday,19 March, 2008 at 10:00 hours in the Conference Hall of the Overseas Investors Chamber of Commerce andIndustry, Talpur Road, Karachi to transact the following business:

ORDINARY BUSINESS:

1. To confirm the minutes of the last Annual General Meeting held on March 28, 2007.

2. To receive and adopt the Balance Sheet and Profit & Loss Account for the year ended December 31, 2007together with the Directors' and Auditors' reports thereon.

3. To approve and declare dividend on the ordinary shares of the company. The directors haverecommended a cash dividend of Rs.4.40 (44%) per share.

4. To appoint Auditors' for the year ending December 31, 2008 and to fix their remuneration. The presentauditors, M/s. Ford Rhodes Sidat Hyder & Co., Chartered Accountants being eligible, have offeredthemselves for re-appointment. The audit committee and Board of Directors have also recommendedappointment of M/s. Ford Rhodes Sidat Hyder & Co., Chartered Accountants as auditors for the yearending December 31, 2008.

5. To elect nine Directors as fixed by the Board in accordance with the provisions of Section 178 of theCompanies Ordinance, 1984 for a term of three years. All of the retiring Directors namely Messrs. Syed BabarAli, Tariq Wajid, Pir Ali Gohar, Tariq Iqbal Khan, Syed Hyder Ali, J.L Grunwald, Eric Le-Bris, Jean-Marc Georgesand M.Z. Moin Mohajir, being eligible, have notified their intention to offer themselves for re-election asDirectors.

SPECIAL BUSINESS:

6. To approve the disposal of the Company's house in Rawalpindi, which is presently used as sales office bypassing the following resolution as an ordinary resolution:

“RESOLVED that the Company is hereby authorized to dispose the house, located at 87-A, Satellite Town,Rawalpindi, which is currently being used as a sales office.”

By Order of the Board

Muhammad IrfanCompany Secretary

Karachi, 27th February, 2008

Notes:

1. The Share Transfer Books of the Company shall remain closed from March 6, 2008 to March 19, 2008 (bothdays inclusive).

2. A member entitled to attend and vote at the above meeting may appoint a Proxy to attend and vote onhis behalf. No person shall act as a proxy (except for a Corporation) unless he is entitled to be present andvote in his own right. Instrument appointing proxy must be deposited at the Registered Office of theCompany at least 48 hours before the time of the Meeting.

3. Shareholders whose shares are deposited with Central Depository Company (CDC) are requested to bringtheir original National Identity Card and account number in the CDC for verification.

4. CDC Account Holders will further have to follow the guidelines as laid down in Circular No.1, dated 26January 2000 issued by the Securities and Exchange Commission of Pakistan.

Notice of Meeting

74

I/We of

(full address) being a member of sanofi-

aventis Pakistan limited hereby appoint

of

(full address) or failing him

of (full address) as my / our proxy to attend and vote for me / us and on my / our behalf at the 40thAnnual General Meeting of the company to be held on Wednesday, March 19, 2008 and at anyadjournment thereof.

As witness my / our hand this day of 2008.

Witness No.1

Name

Address

N.I.C. No.

Witness No.2

Name

Address

N.I.C. No. Folio No.

Participant ID No.

Account No. in CDC

Important

1. CDC Account Holders are requested to strictly follow the guidelines mentioned in Circular No.1of 2000 of SECP.

2. A member entitled to attend a General Meeting is entitled to appoint a proxy to attend and voteinstead of him/her, no person shall act as a proxy, who is not a member of the Company exceptthat a Corporation may appoint a person who is not a member.

3. The instrument appointing a proxy, together with the Board of Directors' resolution/Power ofAttorney (if any) under which it is signed or a notarially certified copy thereof, should bedeposited at the Registered Office not less than 48 hours before the time for holding the meeting.

4. The instrument appointing a proxy should be signed by the member or by his attorney dulyauthorized in writing. If the member is corporation, it's common seal should be affixed to theinstrument.

Proxy Form

75

Signature of Member(s)

(Name in Block Letters)

Rs.5/-Revenue

Stamp

Documents

2 0 annual report 0 - Sanofi sanofi-aventis annual report 2007 Contents Business Section ... 43 Notes to the Financial Statements ... to it can be found in Pakistan today