Matrix Laboratories

The Directors are pleased to present their Report for the year ended
 March 31, 2008, along with the Balance Sheet and Profit and Loss
 Account.
 
 The financial performance of your Company on both a stand-alone and a
 consolidated basis for the year ended March 31, 2008 is summarised
 below:
 
 Particulars                                       Stand-alone basis
 
                                              2007-08       2006-07
 
 Net sales                                    9386.33       7492.21 
 
 Profit before Interest, Research &
 Development and Depreciation                 3040.19       2280.79
 
 Interest                                      267.69        154.01
 
 Research & Development                       1064.08        800.92
 
 Depreciation                                  295.40        250.71
 
 Profit / (Loss) before tax                   1413.02       1075.15
 
 Provision for diminution in the value of
 investment in subsidiary                     4011.83          -
 
 Provision for impairment of goodwill            -             -
 
 Provision for Taxation                        384.76         79.02
 
 Minority Interest and share 
 of loss in associate                            -             -
 
 Net Profit/(Loss) for the year              (2983.57)       996.13
 
 Add: Profit brought forward                  3958.27       2962.56
 
 Total available for appropriation             974.70       3958.69
 
 Appropriations:
 
 Dividend for 2005-06 on 
 additional shares allotted                      -            0.37
 
 Corporate Dividend Tax on above                 -            0.05
 
 Balance carried forward                       974.70      3958.27
 
 
         (Rs. Million) 
       Consolidated basis
 
 2007-08         2006-07
 
 17280.67       16480.27
 
  3779.16        3273.87
 
   960.40         704.19
 
  1423.27        1007.56
 
   605.51         540.70
 
   789.98        1021.42
 
  4871.21           - 
 
   529.69         264.89
 
    41.65           6.57
 
 (4569.27)        763.10
 
  3872.26        3110.13
 
  (697.01)       3873.23
 
     -              0.37
 
     -              0.05
 
  (697.01)       3872.81
 
 
 Your Company posted another impressive year of performance. During the
 year under review, turnover, on a stand-alone basis, increased by 25%,
 while earnings before interest, depreciation and taxation increased by
 34% over the previous financial year despite a significant increase in
 the Research and Development expenditure. The increase in the Research
 and Development expenses is mainly due to upgradation of the finished
 dosage form facilities. The primary reason for the increase in turnover
 is increased sales of Anti-Retroviral - Finished Dosage Forms
 (ARV-FDFs). On a consolidated basis, sales increased by 5%, while
 EBIDTA increased by 4% over the previous year.  The marginal increase
 in sales is due to a decrease in Docpharmas sales, owing to the
 rationalization of its parallel imports business, business in France
 and Italy and a reduction in prices of some of its products in Belgium.
 The reasons for the increase in EBITDA being marginal are the decrease
 in Docpharma sales and the increase in R&D expenditure.
 
 Out of the total sales, Active Pharmaceutical Ingredients (APIs)
 contributed to 58% of total sales for the financial year 2008 as
 against 61% of total sales for the financial year 2007. Growth in this
 product group is marginal at 1%. The primary reason for this marginal
 increase in sales is lower export realizations (due to appreciation of
 rupee against US Dollar by around 12% during FY08) as well as price
 pressure experienced in certain key product launches of last year in
 regulated markets.  However, key product launches like Cetirizine,
 Carvedilol and Mirtazapine as well as robust growth in the
 Anti-Retroviral APIs helped to off-set the above negative impact.
 Revenues on account of FDFs increased in the year under review,
 primarily due to the launch of ARV-FDFs during FY08, as well as an
 increase in milestone payments against contracts for development of
 FDFs.
 
 Your Companys core competence lies in its capabilities to develop,
 manufacture and supply APIs and FDFs.  Matrixs APIs are supplied
 globally to approximately 90 countries. Out of Matrixs total API
 sales, 80% cater to the regulated market requirements.
 
 Matrix is successfully obtaining the benefits of being strategically
 aligned with Mylan by deriving economies of scale; supplying a number
 of APIs which grow progressively over a period of time; and partnering
 with Mylan for the development and manufacture of FDFs.
 
 During the year under review, your Company filed 22 US Drug Master
 Files (DMFs) and 18 EU DMFs / CEPs.  With these filings, as on March
 31, 2008, the cumulative number of DMFs filed by your Company, together
 with its subsidiaries and associates, are 133 US DMFs and 80 EU DMFs /
 CEPs. During the year, your Company also filed 28 AND As with the US
 FDA, 2 with European Regulatory Agencies and 11 with WHO, aggregating
 to 41 regulatory filings covering its FDFs.
 
 The Research and Development of FDFs commenced during the Financial
 Year 06 and by the end of second full year of operations (FY08), your
 Company has filed a total of 41 AND As with the US FDA, 8 regulatory
 filings with European Regulatory Agencies and 21 filings with WHO,
 aggregating to 70 regulatory submissions. Of these, your Company
 believes that it has also filed its first first to file ANDA with the
 US FDA. During the year under review, your Company secured approvals
 for 13 AND As from the US FDA and 3 from the European Regulatory
 Agencies.
 
 DOCPHARMA NV
 
 The year under review witnessed changes in the underlying business
 conditions of the Docpharma group in the countries in which it
 operates. During the last quarter of FY 08, the management undertook a
 detailed review of business projections against each of the markets and
 businesses in which the Docpharma group operates.  The study revealed a
 shift in the market dynamics in Belgium and the Netherlands, including:
 the introduction of a tender system in order to reduce healthcare
 spending; severe competition from new entrants; and the parallel import
 business becoming litigation prone. These changes led to margin erosion
 in the pharmaceutical FDF business of Docpharma. The Hospital segment
 of the business also lost certain important distribution contracts.
 
 As a result of the foregoing, the profit and loss account of Matrix
 stand-alone financials for FY08 includes an exceptional item which
 represents a provision of Rs. 4011.83 Million to the carrying cost of
 investment in Docpharma NV which is held by Matrix NV.
 Correspondingly, on a consolidated basis, goodwill has been written
 down by Rs 4871.21 Million.
 
 Appointment of Mr.Jagdish Viswanath
 
 Mr. Jagdish Viswanath Dore joined your Company as the Chief Executive
 Officer effective April 21, 2008. He assumed the responsibilities of
 Mr. Rajiv Malik who became Executive Vice President and Head of Global
 Technical Operations for Mylan Inc. (NYSE: MYL) in October 2007 and has
 been serving as interim CEO for Matrix, a majority-owned subsidiary of
 Mylan. Pursuant to his employment, Mr. Malik will relocate to the US.
 
 Mr. Dore joins Matrix after a distinguished 29 year career with Sandoz,
 most recently as Managing Director and India Country Head. In this
 role, Mr. Dore spearheaded Sandozs operations in India including
 global development and manufacturing; local and export sales;
 day-to-day operations; and technical operations in the Asia Pacific
 region.
 
 Mr. Dore brings a great deal of experience on a strategic and
 operational level that will be invaluable to Matrix as it strengthens
 its leadership in API, further develops its FDF capabilities and
 continues to grow its ARV business.
 
 Mr. Malik relinquished his position as Managing Director effective July
 1, 2008. However, Mr. Malik remains as Non Executive Director on the
 Board of your Company.  Consequent to Mr. Maliks resignation, Mr.
 Dore, Chief Executive Officer of the Company, was appointed Managing
 Director of the Company effective July 1, 2008.
 
 Your Board has placed on record its appreciation of the valuable
 services rendered by Mr. Malik during his tenure as Managing Director
 of the Company.
 
 Keeping in view the ongoing expansion cum modernisation plans and other
 significant capital expenditure programmes on the anvil to augment
 production capacities / modernisation of its facilities, your Directors
 have, after due deliberations, decided to plough back profits and,
 hence, to not recommend any dividend for the financial year 2007-08.
 
 Changes in Capital Structure
 
 Issue of shares on exercise of Employee Stock Options
 
 During the year under review, the Company has allotted equity shares
 pursuant to exercise of stock options by eligible employees, as
 summarised below:
 
 Date of Allotment            No. of Shares
 
 June 14, 2007                280770
 
 August 3, 2007                51206
 
 September 22, 2007            45300
 
 December 17, 2007             93785
 
 Consequent to the above, the paid-up share capital of the Company as at
 March 31, 2008 is Rs. 309.16 million.
 
 Consolidated Financial Statements
 
 In accordance with the Accounting Standard AS-21 on Consolidated
 Financial Statements, your Directors are pleased to provide the audited
 Consolidated Financial Statements in the Annual Report.
 
 Notes on Subsidiaries
 
 Your Company has 27 subsidiary companies (including step down
 subsidiaries) as on March 31, 2008.
 
 Pursuant to section 212 (8) of the Companies Act, the Central
 Government vide its letter no. 47/81/2008-CL-III dated March 5, 2008
 granted exemption from attaching to the Balance Sheet of the Company,
 the Accounts and other documents of each of its subsidiaries. However,
 the Consolidated Financial Statements of the Company, which include the
 results of the said subsidiaries, form a part of this Annual Report. A
 statement containing certain particulars of the subsidiaries, as
 stipulated by the Government of India, Ministry of Corporate Affairs
 while granting such exemption, are attached to the Annual Report.
 Copies of the annual accounts of the Companys subsidiaries can be
 sought by any investor of the Company on making a written request to
 the Company at the Registered Office of the Company in this regard. The
 Annual Accounts of the subsidiary companies are also available for
 inspection by any investor at the Companys registered office.
 
 Report on Corporate Governance
 
 A detailed Report on Corporate Governance is given in a separate
 section in this Annual Report.
 
 Management Discussion and Analysis
 
 A report of the Management Discussion and Analysis (MDA) of the Company
 is presented in this Annual Report.
 
 Fixed Deposits
 
 Your Company has not accepted / renewed any fixed deposits under
 Section 58A of the Companies Act, 1956 during the year 2007-08. As on
 March 31, 2008, an unclaimed fixed deposit of Rs. 10,000/- pertaining
 to one depositor is outstanding.
 
 Directors
 
 Prof. P. V. Indiresan and Mr. Jagdish Dore were appointed as Additional
 Directors of the Company effective October 30, 2007 and July 1, 2008,
 respectively.
 
 Appointments
 
 M/s. N. Prasad, Rajiv Malik and Dr. Fred E Cohen, Directors will retire
 by rotation at the ensuing Annual General Meeting of your Company and,
 being eligible, offer themselves for re-election.
 
 Your Board of Directors recommend the appointment of M/s. N. Prasad,
 Rajiv Malik and Dr. Fred E Cohen as Directors of the Company.
 
 Brief profiles of M/s. N. Prasad, Rajiv Malik and Dr. Fred E Cohen,
 together with the list of the other companies in which they hold
 directorships, have been provided in the Notice of the Annual General
 Meeting.
 
 Auditors
 
 M/s. Deloitte Haskins & Sells, Chartered Accountants, Statutory
 Auditors of the Company, hold office until the conclusion of the
 ensuing Annual General Meeting and are eligible for re-appointment. The
 Company has received a certificate from M/s. Deloitte Haskins & Sells,
 Chartered Accountants, under Section 224 (1) of the Companies Act,
 1956, confirming their eligibility and willingness to accept the office
 of the statutory auditors for the financial year 2008-09, if
 re-appointed. Your Board recommends the appointment of M/s. Deloitte
 Haskins & Sells, as Statutory Auditors of the Company for the financial
 year 2008-09.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217 (2AA) of the Companies Act, 1956, your
 directors confirm having:
 
 i) Followed the applicable accounting standards with proper explanation
 relating to material departures in the preparation of the Annual
 Accounts;
 
 ii) Selected such accounting policies and applied them consistently and
 made judgements and estimates that are reasonable and prudent so as to
 give a true and fair view of the state of affairs of your Company at
 the end of the financial year 2007-08 and of the profit of your Company
 for that period;
 
 iii) Taken proper and sufficient care for the maintenance of adequate
 accounting records in accordance with the provisions of the Companies
 Act, 1956 for safeguarding the assets of your Company and for
 preventing and detecting fraud and other irregularities; and
 
 iv) Prepared the Annual Accounts on a going-concern basis.
 
 Listing Fee
 
 The equity shares of your Company are listed on The Stock Exchange,
 Mumbai (BSE) and the National Stock Exchange of India Limited (NSE).
 Your Company has paid the listing fees to each of these stock exchanges
 for the year 2008-09 before the due date.
 
 Companies (Disclosure of Particulars in the Report of Board of
 Directors) Rules, 1988
 
 Information in accordance with the provisions of Section 217(l)(e) of
 the Companies Act, 1956, read with Companies (Disclosure of Particulars
 in the Report of Board of Directors) Rules, 1988 relating to the
 conservation of energy, technology absorption and foreign exchange
 earnings and outgo is given in the annexure II forming part of this
 report.
 
 Particulars of Employees
 
 The details of the employees drawing remuneration exceeding the limits
 prescribed under the provisions of Section 217 (2A) of the Companies
 Act, 1956 is given in the annexure HI forming part of this Report.
 
 Employee Stock Option Scheme
 
 The Members approved Employee Stock Option Plans (ESOP) for all the
 eligible employees / Directors of your Company as well as for all the
 eligible employees of the Subsidiary Companies.
 
 During the year under review, there were no fresh stock options granted
 by the Company to any employees / Directors under the ESOP Schemes.
 However, during the year under review, 4,71,061 options were exercised
 and equivalent number of equity shares were issued and allotted under
 the ESOP Scheme - 2004. The Companys Auditors, M/s. Deloitte Haskins &
 Sells, Chartered Accountants, Hyderabad have certified that the Scheme
 has been implemented in accordance with the Securities and Exchange
 Board of India (Employee Stock Options Scheme) Guidelines, 1999 and the
 resolution passed by the Members of the Company.
 
 The details of the options granted up to March 31, 2008, pursuant to
 clause 12 of the Securities and Exchange Board of India (Employee Stock
 Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are
 set out in the annexure I to this Report.
 
 Transfer of Unpaid / Unclaimed dividend to Investor Education
 Protection Fund
 
 Pursuant to the provisions of Section 205A (5) of the Companies Act,
 1956, the dividend declared for the year 1998-99 which remained
 unclaimed for a period of seven years has been transferred by the
 Company to the Investor Education and Protection Fund established by
 the Central Government.
 
 Acknowledgements
 
 Your Directors wish to express their grateful appreciation for the
 co-operation and support received from the Government of India,
 Government of Andhra Pradesh, Government of Maharashtra, Banks viz.,
 Export Import Bank of India, State Bank of India, Andhra Bank, The Bank
 of Nova Scotia, HDFC Bank, ABN Amro Bank, HSBC Bank, Deutsche Bank and
 Yes Bank. Your Directors also thank the vendors, customers,
 consultants, auditors and others who have been assisting your Company
 in the various facets of its operations. Your Directors also wish to
 place on record their sincere appreciation to its parent company Mylan
 Inc., for its support in implementing the organizational goals.
 
 The Directors also wish to place on record their sincere appreciation
 of the employees at all levels for their dedicated contribution towards
 the growth of your Company.
 
                          For and on behalf of the Board of Directors
 
 Place   :  Pittsburgh, USA                      Robert J. Coury
 Date    :  August 2, 2008                              Chairman