SHARON

 During the current year, we have added many more products in Active Pharma Ingredients  (API), Intermediates and Formations. We were able to start commercial productions in our two  new plants based in Taloja, near Navi Mumbai and has got approval of U.K. MHRA at our  Dehradun Formulation plant. Our ultimate goal is to get the USFDA approval of API plant at  Taloja and Formation plant at Dehradun which will open word market to us including Europe  and USA.  Your Company has achieved turnover of ` lacs for the year-ended as against the turnover of  ` lacs for the year-ended  In view of the outer performance during the year , your Directors are happy to recommend a payment of  Dividend of ` 1.50 (Rupee One and Paise Fifty only), (i.e. 15%) per Equity share of ` 10/- each (i.e. 15%) as compared  to ` 1.20 (Rupee One and Paise Twenty only), (i.e. 12%) per Equity of ` 10/- each (i.e 12%) during the previous year  The Total payout of ` 1,58,35,350/- is expected during the current year due to dividend payout excluding  Dividend Distribution Tax amount.

 CREDIT RATING:  Credit Analysis & Research Limited (CARE) has assigned ‘CARE A-’ (Single A minus) rating for the Long Term  Bank facilities and ‘PR1’ ( PR One) rating for the Short Term Bank facilities of the company.  Experienced board of directors

 It has prudently extended its presence across the entire product value chain: manufacturing APIs right after  producing the basic raw materials, through the intermediates stage upto the API stage, enabling it to meet the  varied needs of its customers and at the same time improve its profitability. Same is the case with some of the  Formulation  Streamlines the customers’ supply chain by backward integrating its production line for key basic intermediates,  enabling it to evolve a one-time transaction into long-term relationships, and moving forward, offer a larger  product and service basket to them, a climb up the value chain.  Offers customers a non-compete, trusting platform, imbibing high levels of confidence for exclusive product  manufacturing, product secrecy and also exclusive marketing rights.  Enhances customer’s profitability by deriving a low cost model through the attainment of cost efficiencies driven  by continuous review of its own manufacturing assets, to make sure that they are being used most efficiently  while preserving the flexibility to respond to fluctuations in demand.  Ensures customers continuity of supply, consistency of quality, competitiveness in price and curtailment in  response time for customers.  And lastly, continuously expands its product pipeline across diverse fast growing therapeutic segments to meet  Having achieved this and moving forward, Sharon is committed to leverage the lucrative opportunities coming up  by forward integrating into contract formulation research and manufacturing, entering high-margin, highly-sensitive  oncology therapeutic segment, invested in new state-of-the-art API facilities targeting the regulated markets,  expanding product pipelines by addressing the growing anti-depressant and anti-retro vials therapeutic segments,  filing DMFs for its key products, strengthening R&D capabilities, vigorously improving productivity in pursuit of  operational excellence in all its activities and rank amongst the most efficient and effective companies in this sector,  all of which will help Sharon Bio Medicine to build a fully integrated company, emerge as a suitable partner for  long-term relationships and cumulatively strengthen its potential to deliver substantial upside for all its stakeholders.

 SHARON ADVANTAGE  Sharon has got the R & D centre along with Toxicology, API & Intermediate and Formulation Unit. Therefore,  apart from a strong relationship with the clients, presence across the entire CRAMS value chain would be  another critical factor for a company looking at partnering the innovator. An innovator would prefer a partner  who could turn out to be a one-stop shop for its various requirements. As a result, companies having presence  across the entire CRAMS chain i.e. from drug discovery to manufacturing would eventually become preferred  vendors for an innovator.  The CRAMS industry is fraught with long gestation periods. It takes around 4-6 years from the time the  negotiations begin till the delivery of products commences. A partner has to first set up the facility, initiate  production and get it approved by various regulatory authorities before starting shipments of the product.  Setting up a facility would be capital intensive and the initial cost has to be borne by the partner.  However, once the supplies commence and offtake at the innovators end pick up, returns are likely to stabilize  over a period of time. Most of the contracts are over a period of five years with almost guaranteed revenue on  a year on year basis. Consequently, there is a gradual pick up in revenues as the product at the innovators end  also gains higher market share.  Although India scores over China on most fronts, the Chinese companies pose a significant threat to the Indian  story. Over the years, Chinese companies have been aggressive in filing DMF. Chinese have filed over 60 DMFs  in the 2005 as compared to 40 in Over the next 2-3 years, Chinese companies are likely to move up the  value chain by venturing into high-end intermediates and formulations. Leveraging on its low cost advantage  and strong backing of the government, China posses a significant threat of making significant inroads into the  US market as well as command better share of the CRAMS industry. Other Asian countries like Taiwan and  Korea could also pose a threat to Indian companies.

 In our opinion and according to the information and explanations given to us, there are adequate  internal control procedures commensurate with the size of the company and the nature of its business,  with regards to purchase of Inventory and Fixed assets and for the sale of Goods & Services. We have  not observed any major weakness in the internal control system during the course of audit.  NO default and accumulated loss