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ABBOTT LABORATORIES (PAKISTAN) LIMITED

ANNUAL REPORT 1997

ABBOTT LABORATORIES

VISION

To be the world's

leading health care company

MISSION

To improve lives

by providing cost-effective

health care products and services

DEDICATED TO:

*Employees

*Customers

*Shareholders

*Suppliers

*Publics

WE VALUE:

*Innovation

*Excellence

*Productivity

*Respect

*Leadership

*Responsibility

*Quality

*Integrity

*Trust

CONTENTS

Company Information

Notice of Annual General Meeting

Chairman's Review

Directors' Report

Auditors' Report to the Members

Balance Sheet

Profit and Loss Account

Statement of Changes in Financial Position

Notes to the Accounts

Pattern of Shareholdings

Statistical Data

List of Products

COMPANY INFORMATION 1997

BOARD OF DIRECTORS

KAMRAN Y. MIRZA

Chairman & Managing Director

TERRENCE C. KEARNEY

(Alternate Mohammed A. Khan)

RICHARD E. KURZ

(Alternate Saleem Riaz)

GARY P. COUGHLAN

(Alternate Farhat Qadeer Dar)

IMRAN A. HALAI

NASIR MAHMOOD

ALI SHABBIR

SECRETARY

MOHAMMED AMIN

AUDITORS

SIDAT HYDER

Chartered Accountants

LEGAL ADVISERS

AZFAR & AZFAR

SURRIDGE & BEECHENO

BANKERS

ABN- AMRO BANK

AMERICAN EXPRESS BANK LTD.

ANZ GRINDLAYS BANK

BANK OF AMERICA N.T. & S.A.

CITIBANK N.A.

DEUTSCHE BANK

HABIB BANK LIMITED

MUSLIM COMMERCIAL BANK

NATIONAL BANK OF PAKISTAN

STANDARD CHARTERED BANK

REGISTERED OFFICE

AND FACTORY

Opp: RADIO PAKISTAN TRANSMISSION CENTRE

HYDERABAD ROAD, LANDHI, KARACHI - PAKISTAN

DEPOTS

ISLAMABAD

PLOT NO. 136, STREET NO.9, 1.10/3 INDUSTRIAL AREA

ISLAMABAD - PAKISTAN

LAHORE

SHAHPUR KANJRA 16 K.M., MULTAN ROAD

LAHORE - PAKISTAN

MULTAN

HASSANABAD, GATE NO.2, NEAR: PAK ARAB FERTILIZERS

KHANEWAL ROAD, MULTAN - PAKISTAN

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Forty Ninth Annual General Meeting of ABBOTT

LABORATORIES (PAKISTAN) LIMITED, will be held on Thursday May 21,1998 at 11:30

a.m. in the Council Hall, Overseas Investors Chamber of Commerce and Industry, Talpur

Road, Karachi, to transact the following business:-

ORDINARY BUSINESS:

1. To receive, consider and adopt the Audited Accounts together with the Directors' and

Auditors' Reports thereon for the year ended November 30, 1997.

2. To declare a Dividend.

3. To appoint Auditors of the Company for the year ending November 30, 1998 and to

fix their remuneration.

SPECIAL BUSINESS:

4. To approve the issue of Bonus Shares in the Ratio of 1:10 as explained in Statement

under section 160 of the Companies Ordinance 1984 in notes.

NOTES

1. Statement under section 160 of the Companies Ordinance 1.984:

ITEM 4

The Directors are of the view that the Company's financial position justifies the capitaliza-

tion of Rs. 15,931,420/- from the unappropriated profits of the company to enable a bonus

issue of i share for every 10 shares held. Messrs. Kamran Y. Mirza and Imran A. Halai,

Directors, are interested in this bonus issue as shareholders. The following resolution shall

be moved at the meeting as an ordinary resolution.

"RESOLVED THAT, pursuant to Article 100 of the Articles of Association of the Company

a 10% bonus issue of the present issued share capital i.e. Rs. 159,314,230/- be made by cap-

italizing an amount of Rs. 15,931,420/- out of the unappropriated profits of the company and

by applying the same to issue 1593142 ordinary shares of Rs. 10/- each to be allotted as fully

paid bonus shares in the proportion of one such bonus share for every 10 shares held and

that such new shares shall rank pari-passu in all respects with the existing ordinary shares

of the Company except that they shall not qualify for dividends for the year ended November

30, 1997. The said bonus shares be issued to such shareholders whose names appear on the

FURTHER RESOLVED THAT in the event of any member holding less than 10 shares or a

number of shares which is not an exact multiple of 10 then for such shares, which are less

than 10 or in excess of a multiple of 10, he will be entitled to a fraction representing One

Tenth part of a share for each such share held and the Secretary be and is hereby authorized

to consolidate all such fractions of shares into whole new shares and sell the shares consti-

tuted thereby through the Karachi Stock Exchange (Guarantee) Limited and to pay the pro-

ceeds of sales when realized (less expenses) to members entitled to fractions of a share pro-

rata to their entitlement.

RESOLVED FURTHER THAT FOR the purpose of giving effect to the above the Secretary

be and is hereby authorized for purposes of sale, to consolidate the fractions and register

them as full shares in his name, to take all necessary actions and to settle any questions or

difficulty that may arise in regard to the distribution of the said bonus shares or in the pay-

ment of sale proceeds of the fractional entitlements as he deems fit".

2. The share transfer books of the Company will remain closed from Wednesday April

22, 1998 to Thursday May 21, 1998 (Both days inclusive).

3. A member entitled to attend and vote at the meeting may appoint a proxy to

attend, speak and vote instead of him/her. Proxies must be deposited at the

Company's registered office not less than 48 hours before the time for holding

the meeting.

4. Shareholders are requested to notify any change in their address.

CHAIRMAN'S REVIEW

It gives me great pleasure in welcoming you to the 49th Annual General Meeting of the Company.

OPERATING RESULTS:

The net sales of your Company increased from Rs.1612 million in 1996 to Rs. 1921 million,

registering a growth of 19.1%. This performance is highly creditable, considering the economy

continued to be very sluggish and the haphazard manner by which the Government allowed the

Pharmaceutical Industry to recover 4% Sales Tax from the Consumer and its subsequent,

untimely withdrawal. The Sales Tax, caused considerable confusion to the Consumer as well as

the trade and the latter drastically reduced their stocks, pending clarification of the issue.

The Export Sales, most of which is accounted for by Sri Lanka, registered an impressive growth

of 45.3% and this is considered in line with the company's long range plan.

The following are some of the major products which also hold significant market share:-

· Klaricid

A new generation Antibiotic for treatment of Respiratory Tract

Infections

· Klaricid

A new Antibiotic which provides excellent combination therapy for cure

500 HP

and management of Peptic Ulcer Disease.

· Erythrocin

One of the most widely used and safe Antibiotics for everyday

Respiratory Tract, Skin / Soft Tissue and dental Infections.

· Hytrin

Provides symptomatic treatment of BPH (Benign Prostate Hyperplasia).

· Epival

Anti-Epileptic for safe and effective control of wide ranging Seizures and

migraine prophylaxis.

· Loftyl

A Vaso-Active drug for the alleviation of Peripheral and Cerebral

Microcirculatory disorders.

· Ensure

A complete and balanced Medical Nutritional supplement for the adults and

elderly.

The other major product groups are - Cough and Cold, Haematinics as well as Vitamin

preparations, which continue to hold their own ground against competition.

Profit after tax in 1997 was Rs.82.9 Million versus Rs.129.7 million in 1996, registering a decline

of 36.1%. The reduction in profit, despite increase in Sales, is a cause of great concern to the

Company and can be primarily attributed to the following factors which were beyond its control:-

· Devaluation of Pak Rupee viz a viz major currencies of the world.

· The inability of the Industry to fully recover Sales Tax paid on the Raw Materials and

Packing Materials from the Consumers.

· Delayed and inadequate Price increases to offset significant increase in costs due to factors

stated above.

Despite Sales growth of 19.1%, high rate of inflation and launch of new products, the operating

expense increase was limited to 11.8%, due to strict controls exercised by the management.

NEW PRODUCTS:

In the financial year under review the following new products were launched:

PHARMACEUTICALS:

Artifen Gel

Potent, effective, topical analgesic and anti-inflammatory for

arthritis.

Dobutamine

Ready to use Dobutamine IV solution for the management of cardiac

alecompensation due to organic heart disease or cardiac surgery.

Abocain Spinal

Hyperbaric, potent and safe long acting spinal anesthetic with last-

ing analgesic effect.

MEDICAL NUTRITIONALS:

Osmolite

Ready to use isotonic, complete and balanced nutrition for problem

free tube feeding.

DIAGNOSTICS:

Precision QID

A highly accurate, reliable and convenient portable Blood Glucose

Monitor to frequently check and store the blood sugar readings.

MANUFACTURING AND TECHNOLOGY:

Despite decline in profits, your Company continues to invest in its manufacturing facilities, to

ensure that it maintains its reputation as Manufacturer of the Highest Quality. The state of art

of Pharmaceutical Manufacturing and Standards of GMP (Good Manufacturing Practices) are

constantly changing, and every effort is made to keep abreast of these changes.

Your Company has obtained ISO 9002 Certification in the reporting year, which will further re-

inforce its quality image and reputation.

Further, considerable effort is being made by the Company to comply with the standards fixed by

the Environment Protection Act.

DIVIDEND:

Board of Directors, despite reduced profits are pleased to announce the following final dividend:

* Cash

15 %

* Bonus Share

10 %

An interim dividend of 10% has already been paid during the year.

DIRECTORS:

Your Board consists of:

Mr. Kamran Y. Mirza

Mr. Terrence C. Kearney

Mr. Richard E.Kurz

Mr. Gary P. Coughlan

Mr. Imran A.Halai

Mr. Nasir Mahmood

Mr. Ali Shabbir

I take this opportunity of welcoming Mr. Terrence C. Kearney, and Mr. All Shabbir, nominees of

Abbott Laboratories North Chicago. The former replaces Mr. James E. Miller and the latter the

late Mr. Sharif Ahmed.

On February 1, 1998 Mr. Sharif Ahmed suddenly passed away, having been with the Company

for almost 17 years. The Company deeply mourns his untimely death which was also a great loss

to it.

I would like to express my deep appreciation of the valuable contributions made by Mr. James E.

Miller & (Late) Mr. Sharif Ahmed during their tenure in office.

Mr. Mohammed Amin, has been appointed as Company Secretary.

EMPLOYEES:

The Company is managed by highly skilled and qualified personnel in all departments. It is the

Company's policy to develop human resources and to this effect, continuous efforts are made to

upgrade the skills of personnel employed by way of on-the-job training, as well as courses and

seminars in and outside Pakistan. During the year under review, 537 employees were provided

training locally, as well as abroad.

Abbott Pakistan also has a regular inflow of technical experts from Abbott USA and other

affiliated companies around the world, enabling it to keep abreast with the latest developments

in the Pharmaceutical Industry.

The relationship between staff and management continues to be satisfactory, and I wish to take

this opportunity to thank all of them, on behalf of the Board, for their loyal service and good work

during the year 1997.

The Union agreement expired on December 31, 1997 and is under negotiation for a further

period of 2 years, at the time of writing this report.

The Company had approximately 1000 employees on its payroll at the end of 1997.

FUTURE PROSPECTS:

The Pharmaceutical Industry was very hopeful that, as the current Government was the one

which took the decision in mid 1993 viz partial De-Regulation and Annual Indexation, a more

realistic approach would be re-adopted. It is therefore highly disappointing, that this has not

happened. Indeed, a price increase which was due on November 1, 1997 has not materialized,

despite written commitment to this effect by the Government.

Consequently, your Company and the Pharmaceutical Industry will continue to experience pres-

sure on profits despite efforts to contain costs.

It is imperative, that the Ministry of Health adheres to the decision taken by the ECC in mid

1993, to remove price control restriction on Decontrolled Drugs and give Annual price increases

as per Indexation Formula, for Controlled Drugs.

Further, in order to keep prices of drugs at a reasonable level it is strongly recommended that

the Import Duties should be totally removed from Raw and Packing Materials. Prior to October

1995, imported Raw & Packing materials were either Duty free or had reduced rates applied to

them. Finally, the Government must realise, that without reasonable profits, the Pharmaceutical

Industry will be unable to generate adequate funds for reinvestment and would thus, not be in a

position to assist the Government in meeting its National Health Care Goals.

In conclusion, I would like to assure you, that your Company is critically aware of the difficult

situation that prevails and every effort will be made to remain financially viable, without

compromising its image as Manufacturer of the highest quality and a responsible Corporate

Citizen.

DIRECTORS' REPORT

The Directors of ABBOTT LABORATORIES (PAKISTAN) LIMITED, have pleasure in

submitting their report together with Audited Accounts of the Company for the year ended

November 30,1997.

RS.000's

Net Profits of the Company for the year before

taxation but after providing for all expenses, interest

and depreciation

114,860

LESS: Provision for:

Workers' Profits Participation Fund

5,743

Workers' Welfare Fund

1,885

7,628

----------

107,232

LESS: Provision for taxation

24,376

----------

82,856

ADD: Unappropriated profit b/f.

2,003

----------

Available for appropriation

84,859

LESS: Appropriations:

- Interim Cash Dividend Paid

10%

15,931

- Proposed Final Cash Dividend

15%

23,897

- Fully Paid Bonus Shares

10%

15,931

- Transfer to General Reserve

29,000

84,759

----------

Un-appropriated profit c/f.

100

==========

The pattern of shareholdings is given on page 39 of this report.

Abbott Laboratories, a company incorporated in the State of Illinois, USA, is the primary

shareholder of the Company.

Earnings per Share:

Earnings per share after taxation-Rupees 5.20 (1996: Rupees 8.96)

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Abbott Laboratories (Pakistan) Limited as at November 30, 1997

and the related profit and 1oss account and statement of changes in financial position, together with the notes

forming part thereof, for the year then ended and we state that we have obtained all the information and

explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and,

after due verification thereof, we report that:

(a) in our opinion, proper books of account have been kept by the Company as required by the Companies

Ordinance, 1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in

conformity with the Companies Ordinance, 1984, and are In agreement with the books of account and

are 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, investment made and the expenditure incurred during the year were In

accordance with the objects of the Company;

the balance sheet, and the profit and loss account and the statement of changes in financial position,

together with the notes forming part thereof, give the information required by the Companies

Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of

the Company's affairs as at November 30,1997 and of the profit and the changes in financial position

for the year then ended; and

(d) in our opinion, zakat deductible at source under the Zakat and Ushr Ordinance, 1980 was deducted

by the Company and deposited in the Central Zakat Fund established under section 7 of that

Ordinance.

SIDAT HYDER QAMAR MAQBOOL & CO

Karachi: March 4, 1998

CHARTERED ACCOUNTANTS

BALANCE SHEET AS AT NOVEMBER 30, 1997

Note

1997

1996

SHARE CAPITAL AND RESERVES

(RUPEES 000'S)

Share capital

Authorised

30,000,000 (1996: 15,000,000) ordinary shares of Rs. 10 each

300,000

150,000

==========

Issued, subscribed and paid-up

159,314

144,831

Reserves

391,824

361,376

Unappropriated profit

100

2,003

----------

551,238

508,210

DEFERRED LIABILITY

Deferred taxation

12,310

7,332

CURRENT LIABILITIES

----------

Short-term loan

210,600

Short-term running finances under mark-up arrangements

5,631

100,627

Creditors, accrued and other liabilities

303,768

259,560

Taxation

17,821

Proposed dividend

23,897

14,483

----------

543,896

392,491

CONTINGENCIES AND COMMITMENTS

----------

1,107,444

908,033

==========

FIXED ASSETS - TANGIBLE

Operating assets

312,048

256,177

Capital work-in-progress

30,262

36,869

----------

342,310

293,046

LONG-TERM LOANS

14,282

9,873

LONG-TERM DEPOSITS

858

CURRENT ASSETS

Stores and spare parts

37,226

31,198

Stock-in-trade

474,250

444,243

Trade debts

52,304

43,001

Loans and advances

17,936

12,851

Trade deposits and short-term prepayments

40,807

42,505

Other receivables

73,153

15,982

Cash and bank balances

54,318

14,476

----------

749,994

604,256

----------

1,107,444

908,033

==========

The annexed notes form an integral part of these accounts.

PROFIT & LOSS ACCOUNT

FOR THE YEAR ENDED NOVEMBER 30, 1997

Note

1997

1996

(RUPEES 000'S)

Net sales

1,920,541

1,612,139

Cost of goods sold

1,437,265

1,088,829

----------