AstraZeneca Pharma

The Directors have pleasure in presenting their 29th Report together
 with the Audited Accounts of the Company for the year ended December
 31, 2007.
 
 FINANCIAL RESULTS                                       (Rs. in Mio)
 
 Sales and Other Income                               3136      2774
 Profit Before Tax                                     954       750
 Provision for Taxation -Income Tax                    333       246
 - Adjustment for Deferred Tax                   (7)        3
 - Fringe Benefit Tax                            13    339 14    263 
 Profit after Taxation                                 615       487
 Surplus brought forward from the previous year        381       286 
 Total amount available for appropriation              996       773 
 Appropriation made by Directors
 Transfer to General Reserve                            61        50
 Appropriation recommended by Directors
 
 Dividend                                                 -      375
 Interim Dividend                                         -      300
 Tax on Proposed Dividend                                 -       64
 Tax on Interim Dividend                                  -       42
 Surplus carried over                                   496      381
 
 Dividend
 
 The Directors are pleased to recommend payment of a Dividend of 750%
 (Rs. 15/- per Equity share of Rs.2/- each), which, if approved by
 Members at the Annual General Meeting, will involve an outflow of
 Rs.375 Mio towards Dividend and Rs.63.73 Mio as Dividend Distribution
 Tax resulting in a total outflow of Rs.438.73 Mio.
 
 Bonus Debentures
 
 The Board of Directors, at their meeting held on January 12, 2008,
 pursuant to the Scheme of Arrangement sanctioned by the Honble
 Karnataka High Court at Bangalore on July 7, 2007 (Scheme) and
 subsequent approval accorded by the Reserve Bank of India, allotted 8%
 secured fully paid-up redeemable non-convertible bonus debentures from
 the Companys General Reserve (Bonus Debentures), in the ratio of one
 debenture of the face value of Rs.25/- each for every equity share held
 by the shareholders of the Company as on January 11,2008, being the
 record date fixed by the Company for this purpose. CRISIL has assigned
 a rating of P1+ (pronounced P one Plus) to the Bonus Debentures,
 which indicates a very strong degree of safety with regard to timely
 payment of interest and principal. As the said issue of Bonus
 Debentures constitutes Deemed Dividend, the Company has remitted a
 Dividend Distribution Tax of Rs. 106.22 Mio.
 
 In terms of the Scheme, mortgage/charge has been created in favour of
 the Debenture Trustees, i.e., IL&FS Trust Company Limited for securing
 the redemption of Bonus Debentures and the payment of interest thereon.
 Further the Bonus Debentures have been listed in Bangalore Stock
 Exchange Limited, Bombay Stock Exchange Limited and The National Stock
 Exchange of India Limited. The Bonus Debentures will be redeemed at the
 end of 12 months from the date of allotment, i.e. on January 11,2009.
 
 Sales and Marketing
 
 The Company registered an impressive growth of 12% over the previous
 year with sales of Rs. 2973 Mio.
 
 Cardiovascular segment showed a positive trend, primarily driven by
 innovative marketing initiatives and from an exclusively dedicated
 field force. Seloken XL continues to show impressive growth for a
 third year in a row. This portfolio was further strengthened with the
 launch of Selomax (a Metoprolol and Amlodipine combination).
 
 Maternal Health Care also continued its positive trend. The Company
 continued to drive the concept of Optimising Labour Protocol across
 the country.
 
 Inspite of increased generic competition, Meronem continues to be the
 No.1 Hospital product*. Intense competition from generics as also other
 molecules in Carbapenem category is expected to continue in future.
 Vancocin that was acquired from Eli Lily last year recorded a good
 growth.
 
 The Oncology portfolio was further strengthened with the launch of
 Faslodex (Fulvestrant) for treatment of breast Cancer.
 
 Respiratory therapy area showed a positive trend during the year. This
 portfolio got further strengthened with the launch of Clavotrol PD
 (for treatment of respiratory infection in the pediatric segment).
 Innovative marketing initiatives and a series of customer centric
 activities established our strong presence among our prescribers, which
 helped in posting high growth & performance.
 
 The Gastrointestinal therapy area, that was introduced last year with
 the launch of Neksium, recorded an impressive  growth and became the
 number 3 Esomeprazole within a short span of one year.
 
 The Local Anesthesia therapy products that comprises of Xylocaine and
 Sensorcaine registered healthy growth during the year.
 
 The Zonal business structure continues to leverage regional
 opportunities. Optimizing coverage helped in focusing on key
 prescribers and also in improving implementation of marketing
 strategies. This helped in shifting from a product centric to a
 customer centric approach thereby contributing to the improved overall
 performance in all therapy areas.
 
 * Source: IMS HSA Audit Dec 07
 
 Sales Force Effectiveness
 
 The Companys focus on Sales Force Effectiveness (SFE) initiatives
 continued in 2007. Various planning tools and initiatives for diagnosis
 and development of business and people, such as, the Pillville
 business plan, the field coaching tool, the talent management
 programmes, the focus on improving the product knowledge and field
 training- provided a cutting edge to the Companys field force in terms
 of improved efficiency and effectiveness.  Sharpening customer
 segmentation and targeting processes to enhance customer coverage and
 ensure focus on key customers continued to be driven as an ongoing
 Project.
 
 Medical, Regulatory and Clinical Trials
 
 In addition to supporting the launch of three new brands namely
 Faslodex, Selomax and Clavotrol, strategic medico- marketing
 initiatives such as setting up and conducting of Advisory Board
 meetings, scientific meetings and symposium in order to update the
 knowledge of medical fraternity were undertaken for the existing
 products.
 
 Renewal of various licences including import licence and site
 registrations were completed for existing products.
 
 Various approvals in connection with conducting Global Clinical Trails
 in India were obtained. Your company continued to participate in
 pivotal global clinical trials as per Good Clinical practice norms for
 AZ pipeline products.
 
 Manufacturing
 
 The Company continued with its initiatives towards better-cost
 management through purchasing efficiency, improved Overall Equipment
 Effectiveness (OEE) and process improvements both in formulations and
 active pharma ingredients (APIs). Productivity continued to show
 improvement both in terms of value and volume. The installation of
 Vapour Absorption Machine (VAM) has resulted in effective energy
 conservation.
 
 Safety Health and Environment
 
 Your Directors are pleased to inform you that the Companys plant
 underwent Occupational Health Safety Assessment Series (OHSAS) 18001
 certification audit and re certification audit of ISO 14001 during the
 year by M/s Germanischer Llyod, Germany and a Certificate has been
 issued for 3 years. The installation of VAM resulted in considerable
 savings in energy and CFC/HCFC elimination. Initiatives towards waste
 reduction and water consumption reduction continued during the year.
 
 As a part of its initiative towards improving driver safety, a
 two-wheeler defensive driving programme was rolled out to all the field
 employees across zones.
 
 Factory Land at Yelahanka
 
 In the last Directors Report the members were informed that the
 National Highways Authority of India (NHAI) have acquired a portion of
 the factory land at Yelahanka for expansion of the Hyderabad -
 Bangalore Highway. The Special Land Acquisition Officer (SLAO) had
 awarded a compensation of Rs.23,709,254/- for the said acquisition. The
 SLAO has subsequently reduced the compensation to Rs.4,98,879/-,
 claiming that the original award was amended on the basis of a
 direction received from the Government of Kamataka.
 
 The Company has not accepted the amended award and has disputed the
 same. The Company has invoked the arbitration provision under the
 National Highways Act, 1956. The Company has further filed a Writ
 Petition challenging the direction given by the Government of Karnataka
 and for directing the SLAO to pay compensation as per the original
 amount awarded. As per advice received the Company has adequate grounds
 for challenging the amended award.
 
 In this connection reference may be made to note No.2 in Schedule 16 of
 the Annual Accounts.
 
 Human Resources and Employee Relations
 
 Attracting and retaining the best talent available continued to be a
 focus area for the Company. New Leadership Capability rolled out across
 the organization to enhance the capability to meet the future
 challenges of the business.  The Companys strong Goal Alignment
 Process continued to ensure that every individuals efforts were fully
 aligned to the overall business objective. The Company has a total
 employee strength of 937.
 
 A settlement with the field union was signed on January 31, 2008,
 effective for a period of three years from January 1, 2007. Employee
 Relations continued to be cordial at all levels.
 
 Information Systems
 
 During 2007, the Company took up implementation of CRM solution for
 improving customer focus, adherence to Pharma Code and for improving
 marketing campaign efficiencies. The application design development and
 pilot testing has since been completed and the same has been
 implemented.
 
 With a view to mitigate business risk, a Disaster Recovery solution was
 implemented during the year.
 
 Drug Price Control Order
 
 In the last Directors Report, Members were informed that the Writ
 Petition filed by the Company relating to the Demand Notice on
 Rifampicin was allowed in part by the Karnataka High Court. Consequent
 to the Order of the High Court, the Central Government heard the
 Companys representation on the issue. The Central Government confirmed
 its earlier order and issued a demand notice. The Company has filed a
 Writ Petition in the Karnataka High Court, which is pending hearing and
 final disposal before the Court.
 
 The Central Government also issued a demand notice for another product
 Ibuprofen sold during 1981 to 1987. The Company has filed a Writ
 Petition in the Karnataka High Court which is pending hearing and final
 disposal before the Court.
 
 In this connection, reference maybe made to note No.1 in Schedule 16 to
 the Annual Accounts.
 
 Information pursuant to Section 217 of The Companies Act, 1956
 
 Information required under Section 217 (1)(e) of the Companies Act,
 1956, read with the Companies (Disclosure of Particulars in the Report
 of the Board of Directors) Rules, 1988, is given in Annexure-I and
 forms part of this Report.
 
 Information required under Section 217 (2A) of the Companies Act, 1956,
 read with the Companies (Particulars of the Employees) Rules, 1975, is
 given in Annexure-ll and forms part of this Report.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Board of
 Directors states that in the preparation of the Companys Accounts, the
 applicable accounting standards have been followed and proper
 explanations have been provided for material departures, wherever
 applicable. The Directors have selected such accounting policies, which
 have been applied consistently and made judgments and estimates that
 are reasonable and prudent so as to give a true and fair view of the
 state of affairs of the Company as of the financial year ended December
 31,2007 and of the profit of your Company for that period. The Board of
 Directors has taken proper and sufficient care for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Act for safeguarding the assets of the Company and for preventing and
 detecting fraud and other irregularities.
 
 It is confirmed that the financial statements have been prepared on a
 going concern basis.
 
 Open Public Offers made by AstraZeneca Pharmaceuticals AB, Sweden to
 the Shareholders of the Company Members had been advised of the Writ
 Petitions filed by the under mentioned shareholders challenging the
 First Open Public Offer made pursuant to the Letter of Offer dated May
 11, 2002 and the Second Open Public Offer made pursuant to the Letter
 of Offer dated October 29, 2002, by AstraZeneca Pharmaceuticals AB,
 Sweden. The status of the same as of December 31, 2007 is as under:
 
 First Open Offer pursuant to the Letter of Offer dated May 11. 2002
 
 The suit in the Kerala High Court, Kochi, filed by Ms Annie Koshy and
 the two suits in the Karnataka High Court, Bangalore, filed by Mr Arun
 Kumar Agrawal and Ms A Prameela, are part heard.
 
 Second Open Offer pursuant to the Letter of Offer dated October 29.
 2002 The two suits in the Karnataka High Court, Bangalore, filed by Mr.
 Arun Kumar Agrawal and Ms. A Prameela, are part heard.
 
 Corporate Social Responsibility
 
 Your Company aims to make a positive contribution to the local
 communities through charitable donations, sponsorships and other
 initiatives that help make a difference to peoples lives.
 
 In the year 2007, the Company continued its support to the Federation
 of Obstetrics & Gynaecological Societies of India (FOGSI) in their
 initiative- Jaagruti. This Initiative aims to reduce the maternal
 mortality rates in 7 states of India, i.e. Uttar Pradesh, Bihar,
 Jharkhand, West Bengal, Uttaranchal, Rajasthan and Gujarat, where there
 is a high rate of illiteracy and poverty.
 
 The campaign involved dissemination of key messages promoting safe
 motherhood and simple precautionary measures, through Radio &
 Television media. FOGSI prepared a 13-episode series on maternal
 mortality. The message was broadcasted among the rural masses through a
 dramatized depiction followed by a panel discussion of experts
 comprising Doctors and Social Workers.
 
 Your Company continues its community activities focused on making the
 Katigenahalli Primary School, Yelahanka, a better place to study for
 the children. Your Company also continues to contribute to the monthly
 operating cost of the emergency ambulance service Operation
 Sanjeevini run by the Comprehensive Trauma Care Consortium, Bangalore.
 
 Corporate Governance Report
 
 The Company has taken adequate steps to ensure that all mandatory
 provisions of Corporate Governance as prescribed by the amended Listing
 Agreements of the Stock Exchanges on which the Company is listed are
 complied with.
 
 The Management Discussion and Analysis is attached as Annexure-lll and
 forms part of this Report.
 
 A Report on Corporate Governance forming part of the Directors Report,
 along with a certificate from the Auditors confirming compliance, is
 annexed as Annexure-IV and forms part of this Report.
 
 Directors
 
 Dr. Henrik Nistrup Madsen and Mr. Ruud Dobber resigned as a Director of
 the Company with effect from July 26,2007.  The Board places on record
 its sincere appreciation of the services rendered and contribution made
 by Dr. Henrik Nistrup Madsen and Mr. Ruud Dobber during their tenure as
 a Director of the Company.
 
 Mr. Bhasker V. Iyer stepped down as Managing Director of the Company
 with effect from May 31, 2007, consequent to his transfer to a regional
 role in AstraZeneca as the Area Vice President, South East Asia and
 India. Mr. Anandh Balasundaram was appointed as a Director and Managing
 Director of the Company with effect from June 1, 2007.
 
 Mr. Bhasker V Iyer and Mr. Graham Timothy Baker were appointed as
 Directors of the Company with effect from July 26, 2007.
 
 Mr. Anandh, Mr. Iyer and Mr. Baker hold office as Additional Directors,
 only upto the date of the forthcoming Annual General Meeting of the
 Company, but are eligible for re-appointment. The Company has received
 notices in writing from Members under Section 257 of the Companies Act,
 1956, proposing their candidature for the office of Director of the
 Company.
 
 In accordance with the provisions of the Companies Act, 1956, and the
 Companys Articles of Association, Mr. D.E. Udwadia, Director will
 retire by rotation at the ensuing Annual General Meeting of your
 Company and, being eligible, offers himself for re-election. Your Board
 of Directors has recommended his re-election.
 
 Auditors
 
 The present Auditors M/s BSR & Co., Chartered Accountants, retire at
 the ensuing Annual General Meeting. However, being eligible, they offer
 themselves for re-appointment.
 
 Acknowledgements
 
 Your Directors take this opportunity to thank AstraZeneca
 Pharmaceuticals AB, Sweden and AstraZeneca PLC, for their continued
 support. The Company was pleased to receive several top global visitors
 from AstraZeneca during the year, including Mr. Louis Schweitzer,
 Chairman and Mr. David Brennan, Chief Executive Officer of the group,
 demonstrating their strong commitment to India business.
 
 Your Directors would also like to thank the Central and the State
 Governments, various Statutory Authorities, the Companys Bankers, the
 Medical Profession and Trade, Vendors & Business Associates and the
 Shareholders for their continued interest in, and valued support to the
 Companys operations.
 
 The Directors place on record their sincere appreciation of the
 significant contributions made, and the continued support extended, by
 the employees at all levels to the Companys operations during the
 year.
 
                                    On behalf of the Board of Directors
 
                                                      D E Udwadia
                                                      Chairman
 
 Place : Bangalore
 Date  : February 25, 2008