Life... Our focus

ANNUAL REPORT 2006-07 Inspired by the ‘Panchatatvas’- fire, water, earth, air and space- the indispensable and basic elements for sustaining every life form. Our services also extend to nurture life. Thereby treasuring life which is precious, all the time.

02 MAX INDIA ANNUAL REPORT 2006-07 Another element integral to life- is trust. Because Trust is the essence of our relationship… with our people with the people we serve with our stakeholders.

Our heritage of building Trust is all about Being focused in our core values… Integrity, Understanding, Care and responsibility.

And above all Always holding close to our heart Our most cherished mantra “Life… our focus.”

MAX INDIA ANNUAL REPORT 2006-07 03

or shall we say - a company is known by the people it keeps

MAX INDIA ANNUAL REPORT 2006-07 05 An enterprise is known for its focus on quality execution and service excellence.

06 MAX INDIA ANNUAL REPORT 2006-07 LETTER to Shareholders

Dear Shareholders, India is in a sweet spot and Max India reaping benefit from Now, in some detail. Max Vision 2000 after the Company re-invented itself as a service In 2006-07, Max group grew as relentlessly as the Indian economy sector focused enterprise. In our new incarnation with and the service sector. Let’s take a snapshot. In 2006-07, Indian ‘Life...our focus’ and building a value based organization, the bet economy grew a whopping 9.4%, faster than the advance estimate has paid off. Max New York Life and Max Healthcare are shining as of 9.2%, pushing the absolute size of the economy to nearly premium players in the fast growing privatized life insurance and Rs. 40 lakh crore or $1 trillion. Savings and investment touched healthcare sectors. record levels, at 32.4% and 33.8% of GDP respectively. With a growth In a relative flattening of world markets, the country’s GDP growth rate of 13 per cent, the service sector efficiency gains in has been fueled by an increasing confidence in India; larger and manufacturing, higher levels of investment and overall corporate larger investment spend by Indian Industry and FDI; quarter on profitability were the key drivers of economic activity. FDI equity quarter increase in corporate profits; gains in the manufacturing inflow in India touched a record high of $16 billion in 2006-07 sector, and; higher than ever saving rates not only by individuals compared to $5.5 billion in previous fiscal. Overall industrial growth but also by corporates. And lastly, tremendous growth in the service was 11.5 per cent as compared to 8.2 per cent in last fiscal year. sector. Indian Life Insurance industry witnessed a phenomenal growth rate As this goes to print, the appreciation of the rupee is becoming an of more than 100% in new business premium income. With expanded area of worry in the country. For Max India, I am pleased to point geographical reach, and introduction of better products, private life out that our Life Insurance and Healthcare Businesses are relatively insurers captured nearly 26% share of the new business premium insulated from this phenomenon and Max Speciality Products, which income. The new business premium income for the industry stood has reasonable exports, is protected from about equal imports. at Rs. 75,407 crore during the year. Expected to grow at a CAGR of Your Company is in a strong position in all its business operations around 45-50% from the year 2006-07, the market is expected to and well postured to achieve significant growth ahead. With sound reach the value of around Rs. 1683 billion in the year 2009. proof of concept and execution supported by respectable availability of investable funds through the QIP in Max India and financial Max New York Life and support from International Finance Corporation in Max Healthcare, Max Healthcare are shining as we see a buoyant picture for the Company and its shareholders. premium players in the fast growing privatized life insurance and healthcare sectors.

MAX INDIA ANNUAL REPORT 2006-07 07 performance parameters and career pathing. MNYL also introduced MyCare-a comprehensive employee benefit package providing accidental and life benefits to MNYL employees. At MHC, subsequent to the Employee Engagement survey conducted by Hewitt in 2005-06, many new initiatives were taken. Applause - An Employee recognition programme, Comprehensive HR Information System (HRIS) and an Employee portal were launched. HR Polices with reformed employee friendly policies; Compensation Plan Restructuring, Competency Mapping and Broad-banding were some new initiatives. A good people centric governance not only helps us build our team but also create a family unified by purpose and enriched in its relationships.

Max New York Life Insurance Company Limited (MNYL) A robust distribution network of 165 offices across 121 cities and more than 25,000 agent advisors, 17 Bancassurance relationships, and Healthcare spending is on an upward track partly due to the nation becoming wealthier and willingness of consumers to spend more around 300 people strong Direct sales team to on healthcare. Customers, patients and the like are becoming more support MNYL’s strong growth demanding and sensitive to value and quality care. Shift in disease profile from infectious to lifestyle diseases, improved medical technology, lower lengths of stay in hospital, will all provide a further Taking into account the changing socio-economic demographics, fillip to the healthcare spending. The sector needs around 1 million rate of GDP growth, changing consumer behavior and occurrences beds by 2012, which will need a total investment of US$ 78 billion of natural calamities, the Indian life insurance market is expected over next six years, 90% of which will be made by private sector. to reach the value of around Rs.1683 billion in the year 2009 from An enterprise known for its focus on quality execution and service Rs.754 billion in the year 2007. excellence, Max group’s principal competitive strength lies in its MNYL is the fifth largest life insurance company in India in terms strong management team comprising of professionals with wide of new business premiums and fourth largest private player in terms experience and early mover advantage in each of its core businesses. of number of policies sold. With 165 offices across 121 cities and In June 2007, the Company concluded a Qualified Institutional more than 25,000 agent advisors, 17 Bancassurance relationships, Placement of Rs. 1000 crores at Rs. 240 per share. The Company and around 300 people strong Direct sales team, the company has intends to use the net proceeds from this issue to meet its additional built a robust distribution network to support the strong growth. funding requirements in line with its strategic business plans to During the financial year, MNYL has further strengthened its further grow each of its existing businesses. Encouraged by an operations by introducing significant reduction in time taken in almost 100% CAGR of its life insurance business since inception, policy issuance, renewal premium reminders, claims settlement etc. the Company has committed itself to growth plans for this business. A portion of the proceeds is also expected to be used for general Quality has been a focus area for the company. During the year, the ISO 9000 certificate was renewed, confirming the high standards corporate purposes including acquisitions and investments in new of well-documented processes. Six Sigma further strengthened its ventures. roots in the organization with 17 Green Belts certified in the first A well-planned, progressive business model and expansion strategies batch of training and another 24 completed Six Sigma projects and have resulted in a robust financial performance. In the fiscal year are ready to be certified. 2006-07, the consolidated income of the group increased by 79.4% Growth in insurable population, low levels of insurance penetration (excluding one-off item of sale of stake in Hutch Essar in 2005-06) and rising Indian income levels are all significant factors expected to Rs. 1993.53 crore, principally reflecting increased income from to continue to positively effect the results of our Life Insurance life insurance and healthcare subsidiaries. business. As a Group, it has been our focus to continuously evolve better HR With our strength of strong distribution channels and effective practices for manpower retention and motivation. At MNYL, Leading customer support tools, we intend to emerge as a brand of first HR firm Gallup conducted employee engagement survey to examine choice, a preferred employer and a principal of choice for agents efficacy of existing HR policies. Conducted with an employee response by concentrating our focus to: rate as high as 81%, Gallup findings revealed MNYL employees have a strong emotional connect with its vision and rate the company * Protection oriented, long tenor life insurance products and as one of the best in India in leadership feedback, clarity on innovating new product offering.

08 MAX INDIA ANNUAL REPORT 2006-07 * Strengthen the network of well trained and highly motivated industry as it commands MHC has a base of over sales force only 1.2% share of the $40 1,250 physicians, including * Develop larger and alternative distribution channels billion global medical tourism market. several doctors of * Seek and partner with a large bank with pan India presence to expand the product distribution reach MHC owns and operates five international repute, 1200 hospitals and two speciality * Continue to penetrate in semi urban and rural areas medical centers with a total nurses, 300 paramedic staff, * Control operating cost and improve operational efficiency across of 700 beds, which is the business. expected to grow over 1,200 800 support staff and a Max Healthcare Institute Limited (MHC) beds within next three patient base of more than years. A 110-bedded multi- The potential of the Indian healthcare sector is very promising. The speciality healthcare facility 400,000. industry overview indicates it has the same exponential growth commenced operations in potential as software and pharmaceutical industries in the country. The industry is expected to grow at a CAGR of 15% to US$ 79 billion July 2007 at Gurgaon. MHC has a base of over 1,250 physicians, by 2012. The sector needs additional 1 million beds by 2012, which including several doctors of international repute, 1200 nurses, 300 will require fresh investments of around $78 billion over the six year paramedic staff, 800 support staff and a patient base of more than period, and 90% of it is expected to come from private sector 400,000. companies. MHC has a strong commitment towards ‘Excellence in Patient The growth expected in the sector in the coming years will be from Care’. Medical and Service Quality has been the key differentiator the domestic patients and medical value travel. The Economic growth for MHC, resulting in increased trust and satisfaction of its patients, is raising the income levels and purchasing power of people. Apart professionals and stakeholders. There is a continuous emphasis on from that, medical insurance penetration will move up to register operational efficiencies and reduced wastage and reducing 32% CAGR during 2006-12 from the current dismal levels of merely professional and organizational risks. There is a strong emphasis on 4%. Both these factors will enhance the affordability of healthcare ‘Medical Quality’ by engaging quality physicians and other facilities for domestic patients. On the other hand, medical value healthcare personnel. MHC uses explicit credentials and clinical travel in India, which has already reached the mark of US$ 480 privilege systems for selecting Physicians, and engaging and retaining million (Rs.2000 crore), offers a big potential for the Indian healthcare top talent.

MAX INDIA ANNUAL REPORT 2006-07 09 The tertiary care hospitals of MHC -Max Heart & Vascular Institute Neeman Medical International (NMI) (MHVI) and Max Super Speciality Hospital (MSSH) recently became India, with its Good Clinical Practice guidelines and a strong regulatory the first two hospitals of North India to receive prestigious NABH framework in conformity with international standards and cost accreditation. Also Laboratory at MSSH got National Accreditation competitiveness, has been able to attract major global pharma Board for Laboratories (NABL) certification. companies for clinical trial outsourcing. The industry is expected to grow up to US$ 1.3 billion by 2012. NMI, a leading CRO in India, offers a comprehensive suit of service including project management, site management, monitoring, data management services including biostatistical NMI has now become an analysis and medical report writing and clinical trial end-to-end service provider material supply chain management. NMI recently for the pharmaceutical and started a Data Management Center in New Delhi. With biotech industry. the introduction of this new line of service, NMI has now become an end-to-end service provider for the pharmaceutical and The first phase of business roll out completed after 110-bedded biotech industry. NMI’s operation in India is spread across 12 cities multi-speciality healthcare facility became operational in July 2007 and has access to more than 600 GCP/ICH trained Principal at Gurgaon. MHC proposes to commence its second phase of investigators. expansion. MHC proposes to expand its operations beyond NCR to other parts of India as well as further expand its existing network Envisaging future prospect and network expansion NMI has in NCR. MHC is also in the process of increasing the capacity at restructured the organization recently and has shifted its delivery Max Balaji Hospital at Patparganj. The new wing of Max Balaji capabilities to India with the US operations transformed to a business Hospital, scheduled to commence operations in December 2008, is development office. expected to offer an additional 268 patient beds. MHC is also in the process of setting up an additional 80 patient bed facility in its To gain a leadership position in clinical research NMI existing campus in Saket, which is expected to commence operations will focus on the following: by June 2009. MHC also proposes to set up a 100 patient bed multi- * Be an active player in positioning India as a speciality hospital in Dehradun, a town at a distance of approximately preferred destination for clinical trials. 260 kilometres from New Delhi. The hospital in Dehradun is expected * Direct marketing effort to procure business from to commence operations in March, 2009. IFC, Washington has funded medium and small-sized biotechnology and this phase of expansion with an investment of Rs. 300 crore in MHC. pharmaceutical companies in US and Europe. Of the total Rs. 300 crore, Rs. 50 crore has been infused by way of fresh equity at Rs. 55 per share of MHC and the remaining Rs. 250 * Identify medium size clinical research crore by subscription of preferential share capital. organizations for exclusive strategic alliances.

Max HealthStaff International Limited (MHS) MHC continues to strive ahead of the competition by following many progressive strategies, such as: MHS, in the past few years has gained principal competitive strengths. It is one of the first few companies to provide value added end-to- * Creating Institutions committed to the highest end training and placement solutions for its clients. standards of medical and service excellence, patient care, scientific knowledge and medical education MHS has entered into non-exclusive strategic alliances with large reputed staffing companies in the US to place healthcare personnel * Improve Outpatient volumes through increased at healthcare facilities in the country. Since its inception, MHS has focus on health awareness and regular health registered more than 1,000 nurses into its training and placement screenings program, of which more than 50 nurses have been placed with * Expanding the referral doctor network and focusing staffing companies in the US. As of March 31, 2007, 130 nurses on medical value travel trained with MHS have successfully completed the NCLEX-RN licensure exam and 137 nurses are in the process of clearing * Grow with flexible expansion program utilizing the immigration requirements. The placement of these nurses is currently MHC’s domain expertise suspended because of visa retrogression in the US. This immigration * Attract and retain prominent skilled doctors, who issue is important for US considering the acute shortage of nurses have established reputation for clinical excellence there and, in the short term, a bridge legislation which would temporarily provide relief is being anticipated.

10 MAX INDIA ANNUAL REPORT 2006-07 -More than 50 nurses have been placed with Here is a quick glance of how our businesses performed during 2006-07 staffing companies in the US. Max New York Life Insurance Company Limited -130 nurses trained with MHS have successfully (MNYL) completed the NCLEX-RN licensure exam MNYL grossed premium income of Rs.1500 crore, recording a growth MNYL grossed -137 nurses are in the process of clearing of 90% over the previous year. The first year premium premium income of immigration requirements. increased to Rs. 912 crore, as compared to Rs. 471 crore in Rs.1500 crore, recording the previous financial year. a growth of 90% over During the financial year, the number of employees went up the previous year. from over 2,600 to nearly 4,600. The number of agent advisors crossed 25,000 mark, a growth of 64% year-on-year. Cumulative sum assured as of March 2007 stands at Rs. 44,637 crore. The brand awareness of MNYL increased from 57% in November 2005 to 67% in November 2006. Brand consideration score went up from 7% to 32% reflecting the growing trust in the MNYL brand.

MNYL grossed premium income of Rs.1500 crore, recording a To further consolidate its position as India’s leading Max Healthcare Institute Limitedgrowth (MHC) of 90% over the previous year. healthcare staffing company, MHS focuses on key Revenue from all the hospitals under strategies, such as: Revenue grew operation for the year ended March’07 at * Expanding placement beyond US. Rs. 245 crore, grew 79% year-on-year. * Expanding sourcing and training centers across India. 79% Number of patient episodes increased from 793,667 episodes in the fiscal 2006 * Continue to develop long-term annuity based year-on-year. to 1,142,091 episodes in the fiscal 2007. agreement with well-known healthcare staffing Number of operational beds increased companies. from 398 as at March 31, 2006 to 663 as * Continue to source nurses with prior experience in at March 31, 2007. the critical care segment.

Max Speciality Products (MSP) Neeman Medical International (NMI) MSP is one of the leading manufacturer of speciality BOPP films in For the year ended March 31, 2007, India having a wide range of products and blue chip customer base. Neeman Asia provided services to 21 MSP has installed new production line with an investment of clients. Its client base doubled from Indian operations Rs. 110 crore with a proposed production capacity of 29,000 TPA. 14 to 29, concluded preferred This has placed MSP amongst the top BOPP manufacturers in India. service providers relationship with increasing from five pharma majors and US$ 1.3 million in Relying on its competitive strengths, MSP has worked MNYL grossedsuccessfully premium completed income of Rs.1500fourth its road map for future expansion focusing on the crore, recordingUSFDA a growthGCP audit of 90% for over high the 2006 to US$ 2.3 following strategies: previous year.enrollment. Patient retention rate, a critical business driver in clinical million as at * Increase domestic market share by focusing on trials, was successfully maintained BOPP films at 98.1% in Neeman India as against March 31, 2007. * Develop a one-stop-shop for customers and invest an industry average of in developing new products and applications 65-70%. The order book has also started * Enhance capacity to meet future expected demand seeing some traction with the confirmed in flexible packaging films order book for Indian operations increasing from US$ 1.3 million as at March 31, 2006 to US$ 2.3 million * Explore International markets as at March 31, 2007.

MAX INDIA ANNUAL REPORT 2006-07 11 Max HealthStaff International Limited (MHS) Max Speciality Products (MSP) Cumulative registration crossed mark of 1,000 During the year, total BOPP film production capacity of MSP has 52 nurses. The number of billable nurses placed more than tripled to 29000 tonnes per with staffing partners increased from 23 in annum through commissioning of its Capacity has billable nurses 2005-06 to 52 in 2006-07. As at March 31, new state-of-the-art specialty film 2007, there are additional 137 nurses that production Line, with a capacity of increased more placed with staffing are in different stages of the immigration 20000 tonnes per annum at an than tripled partners process. investment of approx Rs. 110 crore. The speciality plastics product segment to 29000 tpa. clocked a revenue of Rs. 166 crore, a growth of 24% year-on-year.

A quick snapshot of our performance during first quarter of 2007-08

MNYL grossed premium income of Rs.1500 crore, recording a growth of 90% over the previous year. MNYL grossed premium income of Rs. 460 crore, First Year Premium Income MNYL grossed premium income of Rs.1500 crore, recording a recording a growth of 89% over the corresponding Q1-2006 Rs. 149growth crore of 90% over the previous year. previous quarter. First year premium increased to Q1-2007 Rs. 288 crore Rs. 288 crore, a growth of 93% as compared to Rs. 149 crore in the corresponding previous quarter. Agent Advisors The number of agent advisors increased to around 25,000 28,000 from 25,000 as of March 2007. Cumulative March, 2007 28,000 sum assured as of June 2007 stands at Rs. 48,816 June, 2007 crore.

Revenue from all the hospitals under operation at MHC for the quarter ended June’07 at Rs. 82 crore, MHC Revenue grew 63% year-on-year grew 63% year-on-year. Number of patient episodes increased from 245,445 episodes in the quarter Patient Episodes ended June 2006 to 359,495 episodes in the quarter Q1-2006 245,445 ended June 2007. The healthcare business also 359,495 Q1-2007 turned EBITDA positive in the quarter.

NMI added 4 customers in the quarter taking its Order Book total client base to 33. The order book increased March, 2007 US$ 2.3 million from US$ 2.3 million as at March 31, 2007 to June, 2007 US$ 4.0 million currently. US$ 4.0 million

Nurses placed by MHS in the US increased to 60 by Nurses Placed in US the end of current quarter. MHS plans to add another March, 2007 55 training center in Gurgaon to its existing network of 7 such centers. June, 2007 60

At MSP, the new BOPP line of 20,000 TPA stabilized during the quarter achieving the planned output MSP Revenue grew year-on-year levels. The line is currently running at 75% of its 56% installed capacity. Other production lines continued Q1- 2006 Rs. 34 Crore to run at 100% capacity utilization. Revenue for the quarter at Rs. 53 crore, grew 56% year-on-year. Q1- 2007 Rs. 53 Crore EBITDA margin were maintained at 13%.

12 MAX INDIA ANNUAL REPORT 2006-07 Guided by our value driven attitude in our conduct towards people families and on an average 17 patients visit it everyday. The clinic and community, we also proudly associate ourselves with various provides consultation and medication at extremely subsidized rates. social initiatives: The clinic organizes OPD by General Physicians, Gynaecologist, and the Paediatrician during weekdays. Welfare Programmes: Promoting wellness A humanitarian outlook is integral to our approach to Services, and as such welfare activities receive emphasis within the culture of the The Group makes efforts to promote Wellness in the public at large Max Group. These are aimed at benefiting the less fortunate sections through a wide spectrum of activities like Community outreach of the society. Some of the initiatives taken by the Group in this programmes, working with educational institutions, and organizing direction include: seminars/public lectures on preventive healthcare. Free medical check up camps, conducting Continuous Medical & Nursing Education Bhai Mohan Singh Foundation Aiding children Bhai Mohan Singh Foundation is a public charitable trust and a philanthropic organization founded by Late Dr. Bhai Mohan Singh. MNYL has tied up with SOS Children's Villages of India, an The foundation along with Balaji Medical and Diagnostic Research internationally recognised institution for its work in giving Center provided free/heavily subsidized treatment to 4497 OPD and underprivileged children a wholesome life. MNYL has also instituted 65 IPD patients in 2006-07. the David Allen trophy for the Most Socially Responsible Student at SOS Children's Villages. Several scholarships for the bright and Health programs & free camps deserving students in schools and colleges have been allotted. Community welfare and awareness program wing that operates out An added impetus to our Social initiatives is underway in 2007-08. of Max Devki Devi Heart and Vascular Institute, Saket, has been functional for nearly two years now. In 2006-07, it organized camps All praise and hearty acknowledgement to our teams, who have in nearly 22 cities across 9 states. A total of 10,236 patients from upheld the Group's standards of performance and customer service various age groups and sections of society attended more than 63 and strengthened its reputation. The steady fructification of our camps and 22 awareness talks. 9529 ECG and 2688 ECHO and 9494 projects inspires confidence in our stakeholders. It enables us to blood sugar tests were performed. create value for even more people-the process through which we succeed and grow. The division organizes heart check-up & orthopaedic camps, lifestyle management programs for patients & Continuing Medical Education I place my thanks before all of you for reposing your faith and for (CME) programmes for doctors. consistently encouraging us in our endeavors. There is a lot to look ahead to. We have launched initiatives that are rapidly taking shape. Partnership with Chinmaya Mission I wish for the health and longevity of our admirable relationship. MHC in partnership with Chinmaya Mission runs a clinic at Sunlight Colony, Ashram in New Delhi. The clinic caters to underprivileged

New Delhi ANALJIT SINGH JULY 31, 2007 Chairman

MAX INDIA ANNUAL REPORT 2006-07 13 We understand the value of your precious possessions as we try hard to honour our committments.

14 MAX INDIA ANNUAL REPORT 2006-07 MANAGEMENT DISCUSSION & ANALYSIS

A review of the performance of Businesses include those of your company’s joint ventures and subsidiaries as required under clause 49 of the listing agreements executed by the Company with the stock exchanges is furnished here under: Max New York Life Company Limited

Financial Year 2006-2007 was a phenomenal year for the Indian market, the penetration level is considerably lower with only 3.3 Life Insurance industry with the growth rate of over 100% in new percent of GDP expended on life insurance as compared to an Asian business premium income. Private life insurers continued their average of around 10 percent. Third, a decent regulatory framework growth march with expanded geographical reach and better products. is in place, which allows enough freedom to operate, yet keeping The state owned Life Insurance Corporation also recorded a controls to ensure that the policyholder’s interest does not get phenomenal growth during the year. Private life insurers garnered compromised. Fourth and one of the most important, the vibrant 26% share of the new business premiums during the year. New Indian economy is in a high growth phase and is fast integrating business premium income for the industry stood at Rs. 75,407 crore with the global economy. This has created numerous opportunities during the year. for Indians and has also changed the financial paradigms for the Entry of Bharti AXA Life Insurance and Reliance Life Insurance during individuals. The appetite for financial risk has increased which has fiscal 2007 is expected to intensify competition. Further, several created the need for instruments to mitigate that risk. Life insurance international players announced their plans to enter the Indian life is the right blend of financial protection with long-term wealth insurance market over next couple of years, which gives a tremendous creation. However, the Indian consumer is yet to understand the confidence to the existing players on potential of the market. true value and relevance of life insurance products and hence a significant proportion of urban Indian population still remains largely Indian life insurance industry is considered to be a strong player in underinsured, due to ignorance or lack of focus and attention. This the world today. There are several factors leading to the success provides another reason to believe that the Industry is in for a story of the Indian life insurance segment. For one, the high growth sustained period of high growth. rate unmatched by any other market. Second, a vast untapped market. Even with five years of high growth in Indian life insurance However, such times of high growth also have its own challenges. Indian life insurers must guard against misselling which can have a long-term impact on the credibility of the sector. Industry bodies Insurance Regulatory and Development Authority (IRDA) and Life Insurance Council, an industry platform for life insurers, have also taken a note of this and are taking necessary actions to prevent this from happening. The increasing competition and entry of new players in the life insurance space has caused the attrition rates amongst employees and agents to reach the record levels.

MAX INDIA ANNUAL REPORT 2006-07 15 MANAGEMENT DISCUSSION & ANALYSIS

In an effort to have better understanding of the macro economic premiums and was fourth in terms of number of policies sold. With factors impacting Indian Life Insurance sector, the company conducted 165 offices across 121 cities, more than 25,000 agent advisors, MNYL – NCAER India Financial Protection Survey to understand the 17 bancassurance relationships and more than 300 people strong financial behaviour of Indian households and how financially secure Direct Sales Force team, MNYL has built a robust distribution network are they. The survey was conducted across 342 cities and 1976 to support strong growth. village in 63,016 households selected from primary listing of 440,000 households to understand how they earn, spend and save. The survey During the financial year, MNYL further strengthened its operations brought forth some of the startling facts to the Industry’s notice. by achieving significant reduction in time taken in policy issuance, renewal premium reminders, claims settlement etc. The company * 96% of the Indian households are financially at risk also launched a distribution portal with an objective to provide all * 54% of the households are confident about their current and the information to the agent advisors related to the policies sold future financial stability reflecting the fact that financial optimism by them. This is aimed at enhancing the efficiency of its agent is not rooted in financial reality advisors and will enable them to be in touch with the office while they are away from the office. * 81% of Indian households save but 51% put their money either in bank and 36% just keep it at home. A miniscule 2.2% invest The brand awareness of MNYL increased from 57% in November in life insurance. However, Indian households save for long- 2005 to 67% in November 2007 as per Insurance Bus, the omnibus term objectives such as emergencies, children education and research conducted by A C Nielsen. In the same period brand marriage and old age. This results in financial goals not being consideration score went up from 7% to 32% reflecting the growing met trust in the MNYL brand. * 78% of the Indian households are aware of life insurance but Life Insurance is a business of people-ensuring quality of life for its only 24% own life insurance. customers through highly trained and customer focused employees. MNYL has built a strong base over the last six years-a country wide The findings clearly announced the need for better financial literacy multi-channel distribution network, a robust operations team, strong to build a financially secure India. brand awareness and consideration and a top management team During Fiscal 2007, MNYL maintained its fifth ranking amongst with large experience in Indian and International life insurance private life insurance players in India in terms of new business sector. This would provide platform for strong growth of the company

16 MAX INDIA ANNUAL REPORT 2006-07 MANAGEMENT DISCUSSION & ANALYSIS

over the years to come. During the financial year, the number of employees went up from over 2,600 to around 4,600. The number Some of the achievements include: of agent advisors crossed 25,000 mark. To ensure that there is no · MNYL generated Rs. 742 crore from operations, a growth compromise in the quality of advice, the training team was expanded of 154% year-on-year. to approximately 240 trainers and 1700 supervisors who ensured * Around 1.1 million policies in force as at March 31, 2007 that before the agent advisor start working in the field, he has ample with over 550,000 policies sold during the year. training to back him. The Gallup survey on employee satisfaction revealed better scores across the parameters. On many of the * MNYL considerably expanded the network of distribution parameters such as Performance Management System and career channels. The number of agents and sales offices increased planning, the company had the best score in India. Whereas on from 15,285 and 105, respectively, in the year ended March several others such as overall satisfaction, advocacy and leadership 31, 2006 to 25,048 and 165, respectively, in the year ended team, MNYL had the best score in Banking, Financial Services and March 31, 2007. Insurance (BFSI) sector. * Sum assured in-force of around Rs. 45,000 crore. Quality has been a focus area for the Company. During the year, the * The agency distribution channel, which is the primary ISO 9000 certificate was renewed, confirming the high standards distribution channel for the company, recorded a growth of well-documented processes. Six Sigma took further roots in the of 106% with sales record of Rs 650 crore. This growth organization with more than 20 awareness sessions launched across was made possible through increased geographical the home office and zones covering around 300 employees. coverage, and better penetration in the existing 17 Green Belts were certified in the first batch of training and geographies. Further, productivity of its agents is also another 24 completed Six Sigma projects and are ready to be certified. improving. These initiatives will help drive the Six Sigma projects during the financial year 2008 and will help further enhance the customer * The bancassurance distribution channel has grown to 17 service standards. relationships with the access to over 350 branches across over 40 locations. MNYL has put in place a comprehensive risk management system. The Risk Management Group of the Company monitors the adequacy * The company got into 4 new corporate agency tie-ups and effectiveness of internal controls across functions and distribution during the year taking the total of such distribution channels. The compliance status is reported to the audit committee arrangements to 14. All of these distribution arrangements every quarter. The company has built robust processes with in-built have a potential to record high growth over the next controls. Different audits by various entities, including ISO certification several years. ensure that its processes continue to evolve with time and are * Number of Direct Sales Offices expanded from 4 offices followed by all the line managers. across 4 locations as at March 31, 2006 to 10 offices During the financial year 2007, MNYL grossed premium income of across 8 locations as at March 31, 2007. The 300 strong Rs.1500 crore, recording a growth of 90% over the previous year. sales force sets new standards in productivity, with both The first year premium increased to Rs. 912 crore, as compared to case rate as well as case size doubling vis-à-vis previous Rs. 471 crore in the previous financial year. The Unit-linked products year. contributed around 70% to the first year premiums.

78% of the Indian households are aware of Life Insurance24% but only own it.

MNYL grossed premium income of Rs.1500 crore, recording a growth of 90% over the previous year. MAX INDIA ANNUAL REPORT 2006-07 17 Our customers’ trust is our motivational force to work in meaningful way. We do it for thousands of lives everyday.

18 MAX INDIA ANNUAL REPORT 2006-07 MANAGEMENT DISCUSSION & ANALYSIS

Max Healthcare Institute Limited

Healthcare spending in India is expected to rise at a rate of 15% Government expenditure on healthcare has been on a decline in per annum and is estimated to contribute 6.1% of GDP in 2012. relative terms and is currently at 0.9% of GDP against an average Healthcare spending is on an upward track partly as average of 3% of GDP in the developing countries and 5% of GDP in the disposable Income is growing in India, consumers are demanding high-income countries. The government plans to increase this to more, are willing to spend more on healthcare and are sensitive to 2% of GDP in the next five years. The government is expected to value and quality of care that they receive. The shift in disease add 11% of the 1 million beds to be added by 2012 with an investment profiles from infectious to lifestyle diseases will provide a further of around US$ 8 billion. fillip to the healthcare spending. Based on the demographic trends The healthcare is a fragmented industry and faces increasing and disease profiles, lifestyle diseases – cardiovascular, asthma and competition from small hospitals and healthcare providers. It is cancer have become the most important segments and inpatient highly dependent on availability of doctors, nurses and other spending is expected to increase from 39% to 50%. Booming healthcare professionals, which is a scarce resource and makes the economy and high literacy rates, increasing life expectancy, industry even more competitive. In addition the industry is exposed recognition of healthcare as a priority sector and medical tourism to risk of technological obsolescence, demographic changes and are some of the other drivers for the healthcare industry. cycles of seasonal diseases. The majority of healthcare services in India are provided by the MHC is country’s one of the leading comprehensive provider of private sector. In fact, private health sector in India is one of the seamless, integrated and world-class healthcare services. It is largest in the world with 80% of all qualified doctors, 75% of committed to highest standards of medical service excellence, patient dispensaries and 60% of hospitals in India belonging to the private care, scientific knowledge and medical education. MHC owns and sector. The revenues generated by the private hospitals are currently operates a network of five hospitals and two speciality medical estimated at around US$ 15.5 billion and are likely to increase to centers located in New Delhi. and surrounding NCR region. These US$ 35.9 billion by 2012 at a CAGR of 15%. The bed per thousand include super-speciality and multi speciality hospitals, which provide population ratio for India stands at 1.1 in 2006 as against an average primary, secondary and tertiary healthcare to patients. of 4.3 for comparable countries like China, Korea and Thailand in 2002. An addition of 1 million beds over next six years can at best take this ratio to 1.85, which is still lower. Private sector will take a lead and is expected to contribute approximately 89% of these beds. This would translate into the private sector investment of around US$ 70 billion by 2012.

MAX INDIA ANNUAL REPORT 2006-07 19 MANAGEMENT DISCUSSION & ANALYSIS

MHC follows a model aimed towards healthcare excellence based of MHC – Max Heart & Vascular Institute (MHVI) and Max Super on focused management and leadership, established systems and Speciality Hospital (MSSH) became the first two hospitals of protocols, professional development for its healthcare personnel North India to receive prestigious NABH accreditation. NABH through CME and training courses, superior infection control and is an autonomous body established in 2005 under the Quality patient safety measures, stringent audit measures, continuous Council of India for setting benchmarks in Indian healthcare monitoring of patient feedback as well as quality patient care. industry. As on March 31, 2007, MHC had a base of around 1,250 physicians, * NABL: National Accreditation Board for Laboratories: In 2006- including several doctors of international repute, 1,200 nurses, 300 07, MHC also acquired National Accreditation Board for paramedic staff, 800 other support staff and a patient base of more Laboratories accreditation ( ISO 15189:2003) for its Laboratory than 400,000 patients. It manages 17 operation theatres and 168 at MSSH. critical care beds across an integrated network. MHC has a strong 0 commitment towards ‘Excellence in Patient Care’. Service Quality: 360 view MHC lays strong emphasis on ‘Medical Quality’ by engaging * The organization has a very good performance measurement Physicians and Nurses, who are primary service provider and its core system, for key processes, both medical and service. Around 114 competency. Among the strategies for achieving medical and service indicators are tracked uniformly across all hospitals and targets excellence, there is a critical piece on using explicit credentialing have been set. These are regularly reviewed for identifying and clinical privilege systems for selection of Physicians, as also opportunities for improvement. engaging and retaining top talent. Nurses are selected on the basis * Patient feedback is sought form all patients through a patient of proficiency testing and a strong emphasis is laid on continuous satisfaction questionnaire, and analyzed. The current patient training. The organization has defined and laid down systems, satisfaction with services and care ranges between 80—90 %. processes and Standards of care. * Six Sigma technology is in use for quality improvement. The HIS (Hospital Information System) and use of effective technology organization conducts regular Medical and Service Audits for and biomedical equipment gives MHC a strong infrastructural surveillance of quality. support. Medical excellence is driven by medical teams (includes Patient safety, evidence based medicine, infection control etc) and MHC lays strong emphasis on training and professional development. service excellence is driven by Service Teams. In this fiscal year, MHC started formal training and education programs including post graduate training for doctors and Max As an external endorsement, the following accreditations Heart and Vascular Institute was recognized for DNB training in have been acquired: Cardiology. State of the art infrastructure, online clinical information * ISO: All 5 hospitals of MHC are ISO certified. systems, e-library and skills labs support internationally recognized * National Accreditation Board for Hospitals and Health Care faculty and skill based courses are offered to Physicians, Nurses, and Organizations (NABH): In 2006-07, the tertiary care hospitals staff. Some of the most popular courses include "Critical Care"

20 MAX INDIA ANNUAL REPORT 2006-07 MANAGEMENT DISCUSSION & ANALYSIS

'Advanced Cardiac Life Support', 'Emergency Life Support' From 663 beds across its network of five hospitals, MHC intends to and 'Paediatric Advanced Life Support'. These are in addition to increase its capacity to over 1,200 within next three years. With the induction, on the job functional training, CME training and CME first phase of business roll out completed, MHC proposes to commence programs. its second phase of expansion. MHC proposes to expand its operations Max Heart & Vascular Institute combines cutting edge technology beyond NCR to other parts of India as well as further expand its with internationally acclaimed professional expertise to deliver a existing network in NCR. A 110 -bedded multi-speciality healthcare range of comprehensive and advanced cardiac care services facility commenced operations in July 2007 at Gurgaon, Haryana. encompassing all areas of Non- Invasive and Interventional Cardiology, MHC is also in the process of increasing the capacity at Max Balaji Cardio Thoracic & Vascular Surgery and support services. Max Super Hospital at Patparganj. The new wing of Max Balaji Hospital, expected Specialty Hospital provides tertiary care facilities in Neurosciences, to commence operations in December 2008, plans to offer an Orthopaedics, Paediatrics, Obstretics & Gynaecology and other additional 268 patient beds. MHC is also in the process of setting support services. The Institute of Orthopaedics & Joint replacement up an 80-patient bed hospital in Saket, which is expected to offers comprehensive and latest treatment for joint replacement commence operations by June 2009. MHC also proposes to set up using Computer Navigation, Sports Medicine, Management of a 100 patient bed multi-speciality hospital in Dehradun, a town at Arthritis & Trauma, Spine Surgery and Paediatric Orthopaedics. On a distance of approximately 260 kilometers away from New Delhi. the other hand, Institute of Neurosciences boasts of high-end The hospital in Dehradun is expected to commence operations in technology including Brain Suite and Flat Panel DSA Lab. In December 2008. IFC Washington has funded this phase of expansion 2006-07 MHC introduced breakthrough technology at Max Institute with an investment of Rs. 300 crore in MHC. of Neurosciences – India’s first DynaCT, which has taken Stroke, There will be increased competition from large corporate players Aneurysm and Spine treatment a step forward as Interventional entering the healthcare sector. However high quality standards and Neuroradiologist can see live images of brain while performing the strong brand recall would differentiate MHC from competition. As procedure. Brain Suite is the first integrated high field intra operative MHC will be almost doubling its bed capacities, managing increased MRI in Asia, using which the Neurosurgeons can operate upon scale of operations and improving utilization rates will be a key complicated brain tumour patients with utmost precision offering challenge. The healthcare services industry is extremely capital reduced re-operations and recurrence rates. intensive and MHC’s future expansion plans will require significant The Institute of Paediatrics has a team of highly experienced capital expenditures. MHC’s growth strategies depend on its ability Paediatricians, Paediatric Super Specialists, fully equipped Neonatal to fund these expenditure and build, acquire and/or manage additional ICUs with round-the-clock Neonatologists provide Multi-Speciality hospitals as well as expand, improve and augment its existing hospitals.

Achievements during the 2006-07 include: * Various hospitals in MHC’s network performed 790 cardiac surgeries, 1490 angioplasties and 3025 angiographies. In addition, 1600 ortho-surgeries, 495 neuro-surgeries and 5925 other major and minor surgeries were done. * Average occupancy rate of operational beds at MHC’s network of hospitals was approximately 63.5% in 2006-07 as compared to 56.3% in 2005-06 with the average operational beds increasing from 346 in 2005- 06 to 610 in 2006-07. * Number of patient episodes increased from 793,667 episodes in the fiscal 2006 to 1,142,091 episodes in care to the small premature babies whereas state-of-the-art Paediatric the fiscal 2007. In the last quarter of fiscal 2007, MHC ICUs (PICU) can treat critically ill children suffering from life averaged over 100,000 patient episodes per month. threatening conditions. At the Institute of Obstetrics & Gynaecology, advanced maternity and reproductive healthcare service is even * Revenue of all the hospital in MHC’s network grew offered to patients in the high-risk group. The services range from nearly 79% to Rs. 245 crore in the fiscal 2007 from reproductive care and mother & child healthcare to infertility. Rs. 137 crore in last fiscal year. Max Institute of Allied Medical Sciences offers comprehensive * MSSH a 188-beded Super Speciality that commenced services in medical, surgical and minimal access surgery programmes operations in May 2006 turned EBITDA positive in the with state of the art Surgical Intensive Care Unit, Medical Intensive ninth month of operations. Care Unit, dedicated endoscopy suite, sleep lab and 5 modular Operation Theatres.

MAX INDIA ANNUAL REPORT 2006-07 21 Pharmaceutical majors, world wide, seek allies to support their product development initiatives through elaborate and tactical clinical research. Growing pressure, due to competitive market and regulatory obligations, the pharmaceutical and drug development industry has strategised itself to maximize output level by minimizing on product turnaround time. India is fast emerging as an attractive destination for clinical trials due to its larger patient base, experienced investigators and low cost of conducting trials. According to Frost & Sullivan, it is 20%-30% faster to recruit patients for clinical trials in India than in the Western Europe and the US. Moreover, with many pharmaceutical and biotech companies setting up their R&D centers and offices in India, the clinical research market is expected to grow at a CAGR of 20-30%. Clinical trials industry has the potential of becoming a US$ 1.3 billion industry by 2012 with profit margins of 20-25%. Even though the advantages of conducting trials in India are well known the industry needs a boost in terms of effective government policies and a proactive strategy. While the clinical research services market is growing, it is important that the regulatory environment also supports the conduct of trials in the country. The absence of trained manpower is another challenge that the industry is currently facing.

22 MAX INDIA ANNUAL REPORT 2006-07 MANAGEMENT DISCUSSION & ANALYSIS

Neeman Medical International

The R&D expense level of top 10 pharmaceutical companies is NMI is a value added CRO providing a broad range of clinical approx 23% of their sales turnover. Mounting R&D expenses have research services to global pharmaceutical, device and biotechnology escalated the cost of developing a new blockbuster drug, which is companies as well as collaborating with other CROs in providing estimated to be approx US $ 1.2 billion. To economize on variety of clinical services. The global headquarters of NMI is in developmental costs and time to introduce the drug to the market, Cary, NC, USA. The US operation of NMI is mainly responsible for a majority of pharmaceutical companies are looking towards business development initiatives for the clinical research business outsourcing clinical trials to the most cost competitive regions. with the delivery capabilities based out of India. India, China and Latin America are emerging as important players NMI provides clinical research services in the space of phase II, III, in drug development program particularly after implementation of & IV studies and has access to 600 ICH GCP trained investigators. WTO norms related to protection of patent rights. India with its The team of 75 clinical research coordinators present in 21 cities vast pool of trained clinicians has potential to become one of the across India gives it access to patients and investigator sites for largest centers for conducting clinical trials. various therapeutic areas. During 06-07, NMI widened its services The CRO (Contract Research Organization) industry is highly spectrum from existing phase-II, phase-III and phase-IV clinical dependent on R&D expenditures of pharmaceutical and biotech trial design and management and site management services to companies. Also the operating results are subject to volatility due monitoring of a trial, clinical data management, biostatistical to factors such as the commencement, completion, cancellation or analysis and medical report writing and supply chain management delay of contracts, the progress of ongoing projects, cost of overruns, of clinical trial material. competitive industry conditions, the ability to develop and market NMI follows a robust system of quality control and all its operational new services on a timely basis, changes in service mix for various activities are governed by strict adherence to ICH-GCP guidelines. clients, changes in client R&D expenditures and other general It is the first CRO whose 4 sites have been audited successfully by economic factors. There are potential liability risks USFDA for highest enrollment globally. NMI has been certified for associated with conducting clinical research ISO 9001:2000 for site management, monitoring, and data services. Also CRO companies primarily management. All the activities and operations are governed by compete with in-house research robust Standard Operating Procedures (SOPs). departments of pharmaceutical and biotechnology companies, universities and Clinical research industry is highly people-oriented requiring a lot teaching hospitals, many of which possess of focus on training and development. NMI has 102 full time greater capital, technical and other employees, with majority holding qualified medical and resources. pharmacological degrees. Extensive training program combined with best industry practices have resulted in best retention rates industry is likely to increase competition and helped NMI attract qualified personnel. among the larger CROs for both clients and acquisition of candidates and may Since commencement of NMI’s Indian operations, over 3,200 subjects lead to price and other forms of have been enrolled at over 200 sites. An impressive operating competition. standard has enabled NMI to provide services to 21 clients over 45 contracts during the fiscal year 2006-07. NMI’s automated workflow process using the SAS CDMS (PheedIT) software system ensures efficient and accurate data management. Patient retention rate, a critical business driver in clinical trials, is at 98.1% in NMI India as against an industry average of 65-70%. NMI’s prestigious customers include large pharmaceutical companies such as Merck, Glaxo SmithKline, Bristol Myers Squibb, Sanofi- Aventis, Johnson & Johnson and Wyeth as well as other medium size companies such as Achillion, GlobeImmune and Onconova.

Achievements during the 2006-07 include: * NMI’s client base has doubled from 14 as at March 31, 2006 to 29 as at March 31, 2007. * NMI has established preferred provider relationship with 5 Pharma majors. * Order Book for Indian operations has increased from US$ 1.3 million as at March 31, 2006 to US$ 2.3 million as at March 31, 2007.

MAX INDIA ANNUAL REPORT 2006-07 23 Over the last three years, with the entrance of several organized players, India has emerged as a large supplier of nurses to the US, with Indian nurses gaining wide acceptance in the West. At present, India has over 2,200 nursing school producing nearly 80,000 graduates per year. With the start of NCLEX-RN examination centers in India in the year 2006, the industry got a major thrust attracting many new, small and large-scale companies entering the sector. The competition will increase further with several global players expected to enter Indian market soon. According to industry estimate, demand for trained nurses in the US alone is expected to reach 800,000 by 2020. The accelerating demand-supply gap of healthcare staff is no more confined to the US, Middle East, and Europe alone, it has spilled over to other countries namely Canada, Ireland and Australia as well. Apart from nurses, the shortage also exists in other allied healthcare resources such as therapists, pharmacists and radiographers etc. Healthcare Staffing is a well-structured and mature industry in the US with several healthcare staffing companies’ record annual revenue exceeding US$ 100 million. Demand for healthcare staff is taking a quantum leap, as a large proportion of existing healthcare professionals in US are aging and are close to retirement age. Additional factors in US like increase in life expectancy and per capita income, low interest in nursing as a profession as well as lack of adequate nursing institutions, ageing population with increasing healthcare requirements and an increase in number of acute care nursing facilities willing to recruit International nurses are fuelling the growth of the sector.

24 MAX INDIA ANNUAL REPORT 2006-07 MANAGEMENT DISCUSSION & ANALYSIS

Max HealthStaff International Limited

The sector is significantly dependent on the ability of its contract staffing to hospitals and healthcare facilities in US. Since its inception, workers to be able to receive valid immigration visas (EB-3 visa, MHS has registered more than 1,000 nurses into its training and green card) in a timely manner. There is a cap on the maximum placement programmes, of which more than 50 nurses have been number of visas that can be issued by the USCIS, which got exhausted placed with staffing companies in the US. As of March 31, 2007, in November 2006 leading to visa retrogression. Until the visa 130 nurses trained with MHS have successfully completed the retrogression is lifted, MHS will not be able to place any more nurses NCLEX-RN licensure exam and 137 nurses are in the process of in the US. The issue is currently being debated in the US. The best- clearing immigration requirements. case scenario envisages lifting of all visa caps for nurses and physical MHS is considering the expansion of its operations to cover allied therapists until 2017. However, there is no visibility on the timelines healthcare staffing personnel including physical therapists, for for the immigration reforms. placement in US based hospitals, nursing homes, clinics and surgical Although the US visa regulation may become easier for certain and ambulatory care centers on a long term assignments. The service sectors including nursing professionals, a key challenging company is also evaluating expansion of its network to other cities area might still loom large on sourcing qualified nurses, who possess of India in addition to seven existing training and sourcing centers the skills, experience and licenses necessary to meet the stiff in New Delhi, Chandigarh, Kottayam (Kerala) and Chennai. requirements of the International Staffing partners. A number of MHS has developed various internal procedures to uphold its high International firms with global operations, Indian firms as well as standards in sourcing healthcare professionals, which ensures all unorganized smaller operators are competing to attract these nurses. the recruits have appropriate credentials, skills and the requisite The success of staffing business depends primarily on Individual experience for their assignments. MHS strict adherence to high nurses honoring their work commitments. quality management standards is an integral component of satisfying A 100% subsidiary of Max India Ltd., MHS is an international both its clients and the healthcare professionals recruited by MHS healthcare staffing company, that trains and places professionals for placements. at healthcare institutions in India and abroad. MHS offers India’s During the financial year, MHS further strengthened its operations most comprehensive overseas nursing program to highly skilled through its process orientation and achieved automation of certain nurses. MHS has tailor made this program for nursing professionals processes. It implemented a customized integrated enterprise who wish to be placed in USA. The program offers excellent training management application to enable the comprehensive monitoring for I.E.L.T.S and NCLEX – RN exams in India and trains nurses to and tracking of candidates and generate various MIS reports. enhance their social and cross cultural skills. Training being an integral part of MHS has entered into non-exclusive strategic alliances with large MHS’s business attracts the reputed staffing companies in the US to provide healthcare personnel maximum focus in the Company. MHS spends lot of resources in training and development of its employees. A 74 employee strong team of MHS is the one of the most experienced pool of professionals available in the healthcare staffing industry. Number of billable nurses placed with MHS staffing partners from 23 in 2005-06 to 52 in 2006-07. This increase reflected into growth in revenue of MHS from Rs. 0.56 crore in the year 2005-06 to Rs. 2.53 crore in 2006-07.

MAX INDIA ANNUAL REPORT 2006-07 25 BOPP Film Industry growth in India is riding on overall growth of the FMCG sector, retail sector boom and changing consumer perceptions in India. With 45% increase in capacity in 04-05, 10% increase in 05-06 and 35% increase in 06-07, the total capacity of the Indian BOPP Industry reached 193 KTA in March’07. Changing urban lifestyle with increased consumption of packed food, easy to open packaging, fast food snacks, enhanced need for hygiene and need for increased shelf life of product as well as a cost reduction measure from rigid packaging to flexible packaging has induced an ever-growing demand for flexible packaging. With opening up of organized retail sector in India, demand for flexible packaging is set to further increase. The domestic demand for BOPP continues to grow at around 20% p.a., while globally it is growing at 7%. Since per capita BOPP consumption in India is much lower as compared to Western and other Asian countries, there is a huge potential for growth. The domestic demand for BOPP is driven by the converting industry, which is growing by more than 20% p.a. The converting industry is able to tap the global markets leading to a significant increase in outsourcing of flexible packaging requirements of multinational food and consumer product companies to India. This makes India an attractive destination for converters and large international converters are expected to set up operations in India. The best gains are expected from world’s emerging markets, including Eastern Asia, Latin America, Eastern Europe, and the Middle East. China, India and Russia also hold sizable, largely untapped market, with potential for significant growth.

26 MAX INDIA ANNUAL REPORT 2006-07 MANAGEMENT DISCUSSION & ANALYSIS

Max Speciality Products

Indian BOPP players have significant advantages over its European, MSP's core strength lies in its product technology, high focus on American & Japanese competitors because of the low cost base and manufacturing & marketing of niche quality products and customer large growing Indian market. Though Chinese BOPP manufacturers service. MSP has a perpetual track record of introducing 3-4 new have 40% of the global capacity but they are primarily meeting the products every year with its own in-house R&D. MSP has a focus fast growing domestic demand and are not major exporters. Strong on high value added products, blue chip customers and a strong packaging growth and shift from other PP films represent a big international market reach. opportunity in the domestic market but likely build up of huge MSP commissioned a new state-of-the-art high-speed BOPP film capacities in China and increasing capacity in India can put margins production Line, with a capacity of 20000 tones per annum (TPA) under pressure. Increase in raw material prices, to the extent MSP in March 2007 at an investment of approx Rs. 110 crore. With the is unable to pass these to its customers, could also have an adverse introduction of this line, the total BOPP film production capacity impact on the margins. However MSP, because of its strategy of of MSP has more than tripled to approx. 29000 TPA. MSP also focus on high value added products and continuous development commissioned its 3rd metalliser in August 2006, one month ahead of new products, should be able to insulate itself from the above of its schedule. The capacity expansion projects are expected to risk to a large extent. augment MSP’s capabilities to enhance its market shares in India MSP has adequate Internal control systems in place. It has defined and improve its cost advantages. MSP intends to increase domestic SOPs for its various operating processes. Periodic audit of these market share by developing a ‘one-stop-shop’ for clients who can processes by accrediting agencies, including ISO, gives a comfort work with MSP to develop new BOPP products and applications. about their adequacy and adherence. Further, Internal Audit is To enhance its market share of value added products market, MSP conducted quarterly and the reports are being submitted for review is also in the process of installing a second thermal coating line to the Audit Committee. with an installed annual capacity of 144 million square meters, MSP is Max India’s fully owned business unit, specialising in which is expected to be commissioned in September 2007. manufacturing wide range of sophisticated Barrier and Packaging As on March 31, 2007, MSP had 360 employees including 260 at its BOPP Films and Leather Finishing Foils including High Barrier facility at Railmajra. MSP has one of the most experienced team in Metallised BOPP films and Thermal Lamination films. Leather finishing the BOPP Industry due to emphasis on training and development. foil business manufactures a wide range of Leather Finishing and It provides a professional working environment to its employees Laminating Foils. MSP’s state-of-the-art manufacturing facility near with a regular focus on safety and environment. Certification from Chandigarh, is certified with ISO 9001:2000. During 06-07, as a step accrediting agencies and regular awards from State Government to further enhance focus on environment and safety, MSP got are a validation of good employment practices in place. MSP also certification of ISO 14001:2004 (Environment Management System) contributes to various social initiatives within its vicinity. and OHSAS 18001:1999 certifications (Occupational Health Safety Standards) Achievements during the 2006-07 include: * MSP maintained high production efficiencies and all its BOPP production lines achieved 100% capacity utilization in 2006-07. * Further, MSP witnessed volume growth of 17.5% in sales of BOPP Films and 14% in sales of Leather finishing foils during the year. * MSP’s revenue increased by 23.6% to Rs. 166.27 crore in 2006-07. * Profit before tax at Rs. 11.76 crore, a growth of 17.4%.

MAX INDIA ANNUAL REPORT 2006-07 27 With strong social committment and extra- ordinary perseverance all things are attainable.

28 MAX INDIA ANNUAL REPORT 2006-07 CORPORATE GOVERNANCE REPORT

Philosophy of Corporate Governance Your Company believes in carrying out its activities in a true and fair manner aimed at maintaining transparency and accountability with the ultimate objective of realizing shareholders value and interest of all other stakeholders. The Company remains firmly committed to this central value and endeavors to improve these values on an ongoing basis.

Board composition The Board of Directors of the Company currently comprises of ten members with two executive directors and eight non-executive directors. Mr. Analjit Singh, Executive Chairman of the Company is a Promoter Director. Seven members of the Board are independent directors. The non-executive directors do not have any pecuniary relationship with the Company. Mr. Rajesh Khanna, a non-executive director represent Warburg Pincus group, which has 22.60% equity stake in the Company as on date. No Director is a member in more than ten committees, or the Chairman of more than five committees, across all public companies in which he is a Director.

MAX INDIA ANNUAL REPORT 2006-07 29 CORPORATE GOVERNANCE REPORT

Attendance of Directors at Board Meetings for the financial year 2006-2007, and the AGM and the number of directorships and memberships/chairmanships of Board Committees as on March 31, 2007 and details of Board meetings are given below:

Director Board Attendance at Directorships* Memberships/ meetings last AGM Chairmanships of attended Board Committees** Mr. Analjit Singh [Promoter Director] 04 13 Nil Dr. S.S. Baijal [Non-executive Independent Director] 04 06 5 (including 3 as Chairman) Mr. N.C. Singhal [Non-executive Independent Director] 06 08 4 (including 2 as Chairman) Mr. Ashwani Windlass [Non-executive Independent Director] 01 -- 03 2 (including 1 as Chairman) Mr. Bharat Sahgal [Non-executive Independent Director] 01 -- 01 Nil Mr. Rajesh Khanna [Non-executive Director] 04 -- 07 05 Mr. N. Rangachary [Non-executive Independent Director] 06 -- 04 02 Mr. Piyush Mankad [Non-executive Independent Director] 06 -- 10 07 (including 1 as Chairman) Mr. Nitin Sibal # [Non-executive Director] 02 Nil Nil Mr. Anuroop Singh@ [Non-executive Independent Director] NA -- 04 Nil Mr. B. Anantharaman [Executive Director] 06 07 3 (including 1 as Chairman)

* Excludes Directorships in Indian private limited companies, foreign companies, memberships of managing committees of various chambers / bodies and alternate directorships. ** Represents Memberships/Chairmanships of Audit Committee & Shareholders/Investors Grievance Committee # Resigned from the Board effective January 24, 2007 @ Appointed as an Additional Director on the Board on March 30, 2007 Details of Board meetings held during the year ended March 31, 2007:

Date Board Strength No. of Directors present May 17, 2006 10 08 June 29, 2006 10 04 July 31, 2006 10 07 October 30, 2006 10 07 January 24, 2007 09 09 February 22, 2007 09 05 Board Procedures Detailed agenda with explanatory notes and information is circulated among the members of the Board in advance of each meeting. Presentations are made to the Board covering all businesses of the Company and its subsidiaries/joint ventures. All requisite information is made available to the members of Board to ensure adequate disclosure and a transparent decision making process. Code of Conduct for Directors & Senior management A code of conduct as applicable to the directors and senior management of the Company had been approved by the Board of Directors of the Company which is being abided by them. The Annual Report of the Company contains a declaration to this effect from the CEO/CFO of the Company. The Code of conduct has been posted on the website of the Company as well. Committees of the Board Audit Committee This Committee currently comprises of Mr. N.C. Singhal (Chairman), Dr. S.S. Baijal, Mr. N. Rangachary, Mr. Rajesh Khanna and Mr. Ashwani Windlass. All members of the Committee, except Mr. Rajesh Khanna, are independent directors. The Company Secretary of the Company acts as the Secretary of this Committee. This committee inter alia, recommends appointment of statutory auditors; reviews Company’s

30 MAX INDIA ANNUAL REPORT 2006-07 CORPORATE GOVERNANCE REPORT

financial reporting processes and systems; reviews financial and risk management policies, Company’s financial statements, including annual and quarterly financial results; and financial accounting practices & policies. The scope of the audit committee has been defined by the Board of Directors in accordance with Clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956. The Internal Auditors and Jt. Managing Director and representatives of Statutory Auditors are invited to the meetings of the Committee, as required. Mr. N.C. Singhal, the Chairman of the Audit Committee was present at the last Annual General Meeting.

Meetings and attendance of the Audit Committee during the year: Director Number of meetings held Number of meetings attended Mr. N. C. Singhal 06 06 Dr. S.S. Baijal 06 05 Mr. Ashwani Windlass 06 01 Mr. Rajesh Khanna 06 03 Mr. N. Rangachary 06 06

Remuneration Committee Presently, the Committee comprises of Dr. S.S. Baijal (Chairman), Mr. Analjit Singh, Mr. Ashwani Windlass, Mr. Rajesh Khanna and Mr. N.C. Singhal, out of which, Dr. S.S. Baijal, Mr. Ashwani Windlass and Mr. N.C. Singhal are independent directors. This Committee evaluates compensation and benefits for Executive Directors and administers the ESOP Schemes of the Company. The remuneration policy of the Company is aimed at attracting and retaining the best talent to leverage performance in a significant manner. The strategy takes into account, the remuneration trends, talent market and the competitive requirements. Meetings and attendance of the Remuneration Committee during the year: Director Number of meetings held Number of meetings attended Dr. S.S. Baijal 01 01 Mr. Analjit Singh 01 -- Mr. Ashwani Windlass 01 -- Mr. Rajesh Khanna 01 01 Mr. N.C. Singhal 01 01

Remuneration paid to Directors during 2006-2007 The Company has not paid any remuneration to its non-executive directors, except the Sitting Fees for attending meetings of the Board/Committees @ Rs.15,000/- per meeting. Details of the remuneration paid to the executive directors of the Company for the year ended March 31, 2007 are as under: (Amount in Rs.) Period Mr. Analjit Singh Mr. B. Anantharaman Salary 2,50,00,000 1,98,84,000 House Rent Allowance/ Housing 0.00 30,00,000 Benefits (Perquisites) 13,19,763 6,81,187 Bonuses/Performance Incentives 70,00,000 84,00,000 Retirals 24,30,000 16,20,000 Service contract -- -- Notice period 3 months 3 months Stock options, if any.(in numbers) -- 7,26,595* * Options were granted on June 19, 2006 which shall vest in a graded manner from the expiry of one year from the date of grant, i.e., from June 19, 2007. Details of equity shares of Rs. 2/- each held by Directors of the Company as on March 31, 2007 are: (a) Mr. Analjit Singh – 35,65,010 shares, (b) Dr. S.S. Baijal – 25,000 shares, (c) Mr. N.C. Singhal – 20,000 Shares, (d) Mr. Ashwani Windlass – 1,23,800 shares, (e) Mr. Bharat Sahgal – 9,28,000 shares and (f) Mr. B. Anantharaman – 3,64,750 shares. Shareholders/Investors Grievance Committee Currently, this Committee comprises of Mr. Ashwani Windlass (Chairman), Mr. Piyush Mankad and Mr. B. Anantharaman. It approves the transfer and transmission of securities; issuance of duplicate certificates, redressal of investors’ grievances. It also suggests and monitors measures to improve investor relations.

MAX INDIA ANNUAL REPORT 2006-07 31 CORPORATE GOVERNANCE REPORT

Meetings and attendance of the Shareholders/Investors Grievance Committee during the year: Director Number of meetings held Number of meetings attended Mr. Ashwani Windlass 05 04 Mr. B. Anantharaman 05 04 Mr. Piyush Mankad 05 05 Besides, the Company Secretary has been authorized to effect transfer of shares upto 500 per folio. Mr. V. Krishnan, Company Secretary is the Compliance Officer for the Company. The Company has normally attended to the Shareholders/Investors complaints within a period of 7 working days except in cases, which were under legal proceedings/disputes. The Company received 116 complaints from the shareholders during the financial year ended March 31, 2007 and the Company has attended to all the complaints received. Banking Operations Committee Currently, this Committee approves opening and operation of bank accounts and reviews its mandates, from time to time. It comprises of Mr. Analjit Singh Mr. Piyush Mankad and Mr. B. Anantharaman. This Committee met two times during the year. Disclosures (a) Related party transactions The Company has not entered into any transaction of a material nature with the promoters, directors or the management, their subsidiaries or relatives, etc., that may have any potential conflict with the interest of the Company. (b) Compliance by the Company The Company has complied with the requirements of the stock exchanges, SEBI and other statutory authorities on all matters relating to capital markets during the last three years. No penalties or strictures have been imposed on the Company by the stock exchanges, SEBI, or other statutory authorities relating to the above. General body meetings The annual general meetings (AGM) of the Company have been held at the Registered Office of the Company. The last three AGMs were held as under: Date Time September 30, 2004 10.30 AM September 26, 2005 10.30 AM September 15, 2006 10.30 AM The following special resolutions were passed by the shareholders in the previous 3 AGMs: Date of AGM Subject matter of the resolution September 30, 2004 * Conferring the title of Lifetime Chairman Emeritus upon Dr. Bhai Mohan Singh and approval for incurring his medical expenses. * Maintenance of office of Lifetime Chairman Emeritus. * Appointment of Mr. B. Anantharaman as Jt. Managing Director for a five year period effective August 11, 2004 and payment of his remuneration for a three year period from August 11, 2004. September 26, 2005 * Payment of managerial remuneration to Mr. Analjit Singh, Executive Chairman for the period from October 30, 2004 to March 31, 2005. * Reappointment of Mr. Analjit Singh as Executive Chairman of the Company for a five year period effective October 30, 2005 * Payment of managerial remuneration to Mr. Analjit Singh, Executive Chairman for a three year period from April 1, 2005. * Payment of managerial remuneration to Mr. B. Anantharaman, Jt. Managing Director for a three year period from April 1, 2005. * Approval for making further investments in company’s subsidiaries, viz., Max New York Life Insurance Company Limited, Max Healthcare Institute Limited and Pharmax Corporation Limited. September 15, 2006 * Payment of managerial remuneration to Mr. Analjit Singh, Executive Chairman for a three-year period from April 1, 2006. * Payment of managerial remuneration to Mr. B. Anantharaman, Jt. Managing Director for a three-year period from April 1, 2006. * Amendment of Articles of Association of the Company. Postal Ballot During the year under review, no resolution was passed through postal ballot. Further, no special resolution requiring approval of the shareholders through postal ballot is being proposed at the ensuing annual general meeting. Means of Communication Timely disclosure of reliable information, corporate financial performance is at the core of good corporate governance. Towards this

32 MAX INDIA ANNUAL REPORT 2006-07 CORPORATE GOVERNANCE REPORT

direction, the quarterly/annual results of the Company were announced within the prescribed period and published in Business Standard and Punjabi Tribune/Desh Sewak. The results can also be accessed on the Company’s website www.maxindia.com. The official news releases and the presentations made to the investors/analysts are also displayed on the Company’s website. The results are not sent individually to the shareholders. General Shareholder Information A section on the ‘Shareholder Information’ is annexed, and forms part of this Annual Report. Management Discussion & Analysis A section on the ‘Management Discussion & Analysis’ is annexed, and forms part of this Annual Report. Compliance Certificate of the Auditors The statutory auditors of the Company have certified that the Company has complied with the conditions of corporate governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges and the same is annexed to the Report. Status as regards adoption/non-adoption of non-mandatory requirements laid down in revised Clause 49 of the Listing Agreement : Sl. No. Provisions of non-mandatory requirements Status 1. The Board * A non-executive Chairman may be entitled to maintain a Chairman’s office at the Company’s Not applicable as the expense and also allowed reimbursement of expenses incurred in performance of his duties. Chairman is Executive. * Independent Directors may have a tenure not exceeding, in the aggregate, a period of nine years, Not adopted on the Board of a company. 2. Remuneration Committee * The Board may set up a remuneration committee to determine on their behalf and on behalf of the Adopted shareholders with agreed terms of reference, the company’s policy on specific remuneration packages for executive directors including pension rights and any compensation payment. * To avoid conflicts of interest, the remuneration committee, which would determine the remuneration Adopted packages of the executive directors may comprise of at least three directors, all of whom should be non-executive directors, the Chairman of committee being an independent director. * All the members of the remuneration committee could be present at the meeting Not adopted * The Chairman of the remuneration committee could be present at the Annual General Meeting, to Not adopted answer the shareholder queries. However, it would be up to the Chairman to decide who should answer the queries.

3. Shareholders Rights * A half-yearly declaration of financial performance including summary of the significant events in Not adopted last six-months, may be sent to each household of shareholders. 4. Audit Qualifications * Company may move towards a regime of unqualified financial statements Adopted 5. Training of Board members * A company may train its Board members in the business model of the Company as well as the risk All Board members are experts profile of the business parameters of the company, their responsibilities as directors, and the best in their respective fields.They ways to discharge them. are well aware of the business model of the Company as well as the risk profile. 6. Mechanism for evaluating Non-executive Board members * The performance evaluation of non-executive directors could be done by a peer group comprising Not adopted. the entire Board of Directors, excluding the director being evaluated; and Peer Group evaluation could be the mechanism to determine whether to extend / continue the terms of appointment of non-executive directors. 7. Whistle Blower Policy * The company may establish a mechanism for employees to report to the management concerns Not adopted about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy. This mechanism could also provide for adequate safeguards against victimization of employees who avail of the mechanism and also provide for direct access to the Chairman of the Audit committee in exceptional cases. Once established, the existence of the mechanism may be appropriately communicated within the organization.

New Delhi For Max India Limited JULY 31, 2007 ANALJIT SINGH Chairman

MAX INDIA ANNUAL REPORT 2006-07 33 CORPORATE GOVERNANCE REPORT

CERTIFICATION BY EXECUTIVE CHAIRMAN AND JT. MANAGING DIRECTOR

July 31, 2007 The Board of Directors Max India Limited Bhai Mohan Singh Nagar, Railmajra, Tehsil Balachaur, Dist. Nawanshahr Punjab – 144 533

We, Analjit Singh, Executive Chairman and B. Anantharaman, Jt. Managing Director/ Group CFO of Max India Limited certify to the Board in terms of the requirement of Clause 49(V) of the listing agreement, that we have reviewed the financial statement and the cash flow statement of the Company for the financial year ended March 31, 2007.

1. To the best of our knowledge, we certify that: (a) these statements do not contain any materially untrue statement or omit any material fact or contain statements that are misleading; (b) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations; and (c) there are no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company’s code of conduct.

2. For the purposes of financial reporting, we accept the responsibility for establishing and maintaining internal controls and that we have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of internal controls (if any), and further state that the internal control systems are adequate, commensurate with the size of business. 3. We do further certify that there has been: (a) no significant changes in internal controls during the year; (b) no significant changes in accounting policies during the year; and (c) no instances of fraud, of which we are aware during the period.

ANALJIT SINGH B. ANANTHARAMAN Executive Chairman Jt. Managing Director/Group CFO

34 MAX INDIA ANNUAL REPORT 2006-07 CORPORATE GOVERNANCE REPORT

AUDITORS’ CERTIFICATE ON COMPLIANCE WITH CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENT(S)

To the Members of Max India Limited

1. We have reviewed the implementation of Corporate Governance procedures by Max India Limited during the year ended March 31, 2007, with the relevant records and documents maintained by the Company, furnished to us for our review and the report on Corporate Governance as approved by the Board of Directors. 2. The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to a review of procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. 3. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. 4. On the basis of our review and according to the information and explanations given to us, the conditions of Corporate Governance as stipulated in Clause 49 of the listing agreements with the Stock Exchanges have been complied with in all material respect by the Company and that no investor grievance is pending for a period exceeding one month against the Company as per the records maintained by the Shareholders/Investors Grievance Committee.

V. NIJHAWAN Partner For and on behalf of New Delhi Price Waterhouse JULY 31, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 35 SHAREHOLDERS’ INFORMATION

Registered Office and Plant Location Investor Helpline Bhai Mohan Singh Nagar, Railmajra, Max House, 1, Dr. Jha Marg, Okhla, Tehsil Balachaur, Phase III, New Delhi–110 020 District Nawanshahr, Punjab- 144533. Phone–011 42598000 Fax–011 26324126 E-mail–[email protected].

Share Transfer Agent Annual General Meeting Mas Services Limited, AB-4, Safdarjung Enclave Date and Time : Friday, September 14, 2007 New Delhi–110 029, Tel–011 26104326/ 26104142 at 10.30 am Fax–011 26181081, e-mail: [email protected] Venue : Registered Office of the Company Book Closure Friday, September 7, 2007 to Friday, September 14, 2007 (both days inclusive)

Financial Calendar – 2007-08 1. First quarter results - July 2007 2. Second quarter & half yearly results - October 2007 3. Third quarter results - January 2008 4. Annual results - June 2008

Listing on Stock Exchanges The Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (‘BSE’) and the National Stock Exchangeof India Limitedf (‘NSE’). The Company has received in-principle approval for delisting its shares from The Calcutta Stock Exchange. The Company confirms that it has paid annual listing fees due to BSE and NSE for the year 2007-08.

Connectivity with Depositories The Company’s shares are in dematerialized mode through National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL)

Stock Code Reuters Bloomberg Bombay Stock Exchange MAXI.BO MAX:IN National Stock Exchange MAXI.NS NMAX:IN

Monthly high and low quotation on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)

Month BSE NSE High Low High Low (Rs.) (Rs.) (Rs.) (Rs.) April, 06 929.95 775.00 894.00 807.65 May, 06 962.20 676.55 949.00 715.05 June,06 836.00 509.40 879.75 520.00 July, 06 795.00 590.05 796.00 581.55 August, 06 710.00 650.00 729.00 641.60 September, 06 805.00 680.00 814.80 682.05 October, 06 960.00 808.00 979.00 782.60 November, 06 1149.85 808.20 1099.00 804.00 December, 06 928.90 816.00 930.00 825.00 January, 07 1071.00 821.00 1064.30 842.00 February, 07 1240.00 994.00 1248.00 968.70 *March, 07 1069.00 185.55 1039.95 185.10

* Pursuant to the special resolution of our shareholders on February 26, 2007, each equity share of par value of Rs. 10/- each was split into five equity shares of par value of Rs. 2/- each, the effective date of such split being March 20, 2007. However, in accordance with BSE and NSE norms, the trading of the equity shares at the split par value of Rs. 2/- each commenced on March 12, 2007.

36 MAX INDIA ANNUAL REPORT 2006-07 SHAREHOLDERS’ INFORMATION

Share Price Vs. Sensex**

1400 16000 1200 14000 1000 12000 10000 800 8000 600 6000 400 4000 200 2000 0 0

July, 06 July, Price May, 06 May, June, 06 April, 06 March, 07 August, 06 October, 06 October, Janurary, 07 Janurary, February, 07 February, Sensex December, 06 December, November, 06 November, September, 06 September,

** Computed on the basis of market value of shares at the face value of Rs. 10/- each for the year ended March 31, 2007.

Shareholding Pattern as on June 30, 2007

Category No. of shares held$ % of shareholding Promoters 73916023 33.36 Mutual Funds and UTI 3801360 1.72 Banks, Financial Institutions, Insurance Companies 63025 0.03 Foreign Institutional Investors 87848029 39.65 Foreign Direct Investment 29823320 13.46 Bodies Corporate 1050271 0.47 Non-resident Indians/ Overseas Corporate Bodies 7124158 3.21 Resident Individuals 17942529 8.10 Total 221568715 100.00

$ Equity shares of Rs. 2 each

Distribution of shareholding as on March 31, 2007 No. of Shareholders Percentage Shareholdings No. of shares$ Percentage to total to total 25755 96.87 01 – 500 9930537 5.52 455 1.71 501 – 1000 1694203 0.94 186 0.70 1001 – 2000 1331694 0.74 40 0.15 2001 – 3000 490559 0.27 26 0.10 3001 – 4000 460860 0.26 18 0.07 4001 – 5000 428579 0.24 33 0.12 5001 – 10000 1178071 0.65 74 0.28 10001 - above 164387552 91.38 26587 100.00 Total 179902055 100.00

$ Equity shares of Rs. 2 each Dematerialisation status as on July 31, 2007 (i) Shareholding in dematerialised mode 98.17% (ii) Shareholding in physical mode 1.83%

MAX INDIA ANNUAL REPORT 2006-07 37 SHAREHOLDERS’ INFORMATION

Secretarial Audit Report As stipulated by the Securities and Exchange Board of India, a qualified practicing Company Secretary carries out the Secretarial Audit, on a quarterly basis, to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) with the total listed and paid-up capital. The audit, inter alia, confirms that the total listed and paid up capital of the Company is in agreement with the aggregate of the total number of shares in dematerialized form and total number of shares in physical form. For shareholders holding shares in dematerialised mode Shareholders holding shares in dematerialised mode are requested to intimate all changes with respect to bank details, mandate, nomination, power of attorney, change of address, change of name etc. to their depository participant (DP). These changes will be reflected in the Company’s records on the down loading of information from Depositories, which will help the Company provide better service to its shareholders. Share Transfer System In respect of shares upto 500 per folio, transfers are effected on a weekly basis. For others, the transfers are effected within limits prescribed by law. The average turnaround time for processing registration of transfers is 9 days from the date of receipt of requests. The processing activities with respect to requests received for dematerialisation are completed within 8 -10 days. Unclaimed/unpaid dividend Under Section 205C of the Companies Act, 1956 the amount of dividend remaining unclaimed for a period of seven years from the date of payment have been transferred to the Investor Education and Protection Fund. Shareholders who have not encashed the dividend for the financial year 2000 - 01, are requested to make their claims to the Company. No claim shall lie against the Company or the said Fund in respect of dividend amounts which remain unclaimed for a period of seven years from the date of payment and no payment shall be made in respect of any such claims. Communication of Financial Results The unaudited quarterly financial results and the audited annual accounts are normally published in Business Standard and Punjabi Tribune/Desh Sewak. The financial results are also available on the Company's website- www.maxindia.com Please visit us at www.maxindia.com for financial and other information about your Company

For Max India Limited New Delhi B. ANANTHARAMAN JULY 31, 2007 Jt. Managing Director

38 MAX INDIA ANNUAL REPORT 2006-07 COMPANY INFORMATION

BOARD OF DIRECTORS Mr. Analjit Singh - Chairman Dr. S.S. Baijal Mr. Ashwani Windlass Mr. N.C. Singhal Mr. Bharat Sahgal Mr. Rajesh Khanna Mr. N. Rangachary Mr. Piyush Mankad Mr. Anuroop Singh Mr. B. Anantharaman - Jt. Managing Director

COMPANY SECRETARY Mr. V. Krishnan

MAJOR INTERNATIONAL AFFILIATE New York Life International Inc., USA

AUDITORS Price Waterhouse, Chartered Accountants

BANKERS Citibank N.A. Yes Bank Limited Punjab National Bank Oriental Bank of Commerce

SHARE TRANSFER AGENT Mas Services Limited AB-4, Safdarjung Enclave, New Delhi - 110 029 Tel: 011 26104326/ 26104142, Fax: 011 –26181081 e-mail: [email protected]

CORPORATE OFFICE Max House, Okhla, New Delhi - 110 020.

WEBSITE www.maxindia .com

MAX INDIA ANNUAL REPORT 2006-07 39 MAX INDIA LIMITED MAX INDIA LIMITED

DIRECTORS’ REPORT

Your Directors have pleasure in presenting the Nineteenth Annual Report Sales volume of Leather Finishing Foil division of MSP increased by 14% of your Company, with the audited Statement of Accounts, for the from 965 thousand sq. meters to 1101 thousand sq. meters. Major financial year ended March 31, 2007. portion of increased volume of Foil came from exports. Exports increased by 72% at 340 thousand sq meter in 2006-07 from 198 thousand sq FINANCIAL RESULTS (RS. CRORE) meter in 2005-06. Year Ended Year Ended March 31,2007 March 31,2006 Profit before tax was Rs. 20.42 crore in the current year as compared Income with Rs. 3.52 crore in the previous year. The reserves of your Company Gross sales 176.61 142.35 increased from Rs. 922.23 crore as of March 31, 2006 to Rs. 967.27 crore Less: Sales returns (1.21) (0.87) as of March 31, 2007. Service and other income for the current year Excise duty (20.06) (16.63) includes income of Rs. 21.81 crore from treasury corpus with the Net sales 155.34 124.85 Company and Rs. 5.05 crore arising from the divestment of your Service and other income 40.37 23.97 Company’s stake in Max Estate Ltd. and Malsi Estate Ltd. erstwhile Total Income 195.71 148.82 subsidiaries. Expenditure Manufacturing and other expenses 164.61 129.66 The operating subsidiaries of your Company continued to do well, made Financial expenses 4.92 9.54 excellent progress and posted robust business performance for the year Depreciation and amortization 5.76 6.10 under review. A brief update on the business achievements of your Total Expenditure 175.29 145.30 Company’s key operating subsidiaries is provided below:

Profit Before Tax 20.42 3.52 (i) Max New York Life Insurance Company Limited: Tax expense 6.20 (2.37) Max New York Life Insurance Company Limited (MNYL) continues Profit After Tax 14.22 5.89 to rank amongst the top quartile of private life insurance companies in India. MNYL ranked number 4 amongst private life insurers in RESULTS OF OPERATIONS FY 2006-07 in terms of the number of policies sold. During the year Fiscal 2006-07 represents a major growth milestone for your Company. under review, MNYL grossed premium income of Rs.1500 crore, During the year, Max Speciality Products (MSP) commissioned its 3rd recording a growth of 90% over the previous year. The first year BOPP production line, which enhanced its production capacity from premium increased to Rs. 912 crore, as compared to Rs. 471 crore around 9000 tonnes per annum to 29,000 tonnes per annum. This in the previous financial year. MNYL has around 1.1 million policies capacity expansion will enable MSP to regain its market share and in force as at March 31, 2007 with over 550,000 policies sold during strengthen its position as a niche player in high-end speciality packaging the year. MNYL expanded its distribution capacity by taking its films segment. During the year, MSP registered an impressive 24% year- agent strength to around 25,000 as of March 31, 2007 and added on-year growth in its gross sales. Sales volume of BOPP films grew by 60 sales offices during 2006-07 taking the total number of offices 17.5% at 11,985 tons as compared to 10,200 tons in 2005-06. During to 165 spread over 121 locations in India. As of March 31, 2007, 2006-07, sales volume of metalised films and thermal films grew by the sum assured in-force was around Rs. 45,000 crore. The agency around 26% and around 65% respectively over the previous year, in distribution channel, which is the primary distribution channel for line with MSP’s focus on high contribution and high value-addition the company, recorded a growth of 106% with first year’s new products. As part of its strategy to expand its footprint outside India, business sales from this channel at Rs. 650 crore in 2006-07 due MSP registered 47% growth in export sales of BOPP films from Rs. 19.97 to increased geographical coverage, better penetration in the crores in 2005-06 to Rs. 29.44 crore in 2006-07. All the production lines existing geographies and improved productivity of agents. operated at 100% capacity utilization. Additionally, the business continued to improve its operational efficiencies with a strong focus on quality (ii) Max Healthcare: parameters. Max Healthcare (MHC) provides comprehensive, integrated and world-class healthcare services with state-of-art infrastructure Raw material prices continued their increasing trend during the year designed in accordance with international norms. Max Healthcare due to increase in global crude prices. Further, the competitive landscape owns and operates a network of five hospitals, two speciality medical became stiffer with an overall addition of 35% BOPP production capacity centers and nine clinics/implants located in New Delhi and during 2006-07. However, as a result of optimization of its production surrounding NCR region. Two super specialty hospitals in its network processes and continuing improvements in production efficiencies, MSP located at Saket in New Delhi have been accredited with NABH was able to minimize fall in its contribution margins as compared to certification for patient care. It continues to improve its healthcare previous year. infrastructure and equipment through acquisition of sophisticated healthcare equipment such as the BrainSUITE, 64 slice CT Angio as During the year, MSP also commissioned its 3rd metalliser in August, well as other modern equipment, thereby improving outcomes for 2006, one month ahead of its schedule. Further, in order to augment patients. As of March 31, 2007, MHC had approximately 1,250 its presence in high value added segment, MSP is in the process of physicians, of which approximately one-third were full-time installing a second thermal coating line with an annual capacity of 144 employees, including several doctors of international repute. MHC million square meters, which is expected to get commissioned in follows a model aimed towards healthcare excellence based on September, 2007. focused management and leadership, established systems and

MAX INDIA ANNUAL REPORT 2006-07 43 MAX INDIA LIMITED

DIRECTORS’ REPORT

protocols, professional development for its healthcare professionals MHS provides training support to these nurses, assists them to take through continuing medical education and training courses, superior certain examinations, facilitates their immigration process to enable infection control and patient safety measures, stringent audit them to work in a U.S. hospital setting in a clinical area of their measures, continuous monitoring of patient feedback as well as expertise. quality patient care. Since inception, MHS has enrolled over 1,000 nurses into its training and placement programs, of which more than 50 nurses have been During the year ended March 31, 2007, MHC’s network of hospitals placed with staffing companies in the U.S. since November 2005. performed 790 cardiac surgeries, 1,490 angioplasties and 3,025 As of March 31, 2007, an additional 137 nurses were in the different angiographies. In addition, during the year these hospitals performed stages of immigration process. Number of billable nurses placed 1,600 ortho-surgeries, 495 neuro-surgeries and 5,925 general with MHS staffing partners increased from 23 in the year 2005-06 surgeries. From 663 beds across its network of five hospitals, MHC to 52 in the year 2006-07 resulting into increase of revenue of MHS intends to increase its capacity to over 1,200 within next three by 351.8% from Rs. 0.56 crore in 2005-06 to Rs. 2.53 crore in 2006- years. In addition, a 108-bedded multi-speciality healthcare facility 07. commenced operations in July 2007 at Gurgaon, Haryana. In fiscal 2007, the average occupancy rate for MHC’s network of hospitals SUB-DIVISION OF FACE VALUE OF THE EQUITY SHARES OF THE was approximately 63.5% of the operational beds as compared to COMPANY 56.3% in last fiscal. During 2006-07, MHC’s network of hospitals Shareholders of your Company in its Extraordinary General Meeting generated total income of Rs. 245 crore, a growth of 79% over Rs. held on February 26, 2007 approved sub-division of authorised share 137 crore in 2005-06. As of March 31, 2007, MHC had a patient capital of the Company comprising 92,000,000 equity shares of par base of more than 400,000 patients. In the last quarter of fiscal value of Rs.10/- each into 460,000,000 equity shares of par value of 2007, MHC averaged over 100,000 patient episodes per month. Rs.2/- each. Consequently, new equity shares of the Company with a face value of Rs.2/- each were issued in place of the equity shares of (iii) Neeman Medical International: Rs.10/- each on March 20, 2007. Neeman Medical International (NMI) is a contract research organization that provides a broad range of clinical research services, INCREASE IN FII’S INVESTMENT LIMIT IN THE COMPANY to a cross section of pharmaceutical and biotechnology companies The Shareholders of the Company in their Extraordinary General Meeting as well as other contract research organizations. NMI augments the held on March 23, 2007 had increased the limit for FII investments in research and development activities of pharmaceutical and the equity share capital of the Company from 40% to 49% of paid-up biotechnology companies by offering high quality, value added share capital of the Company. clinical research services to reduce drug development time and expense. During 06-07, NMI enhanced its services spectrum from ALLOTMENT OF EQUITY SHARES OF THE COMPANY UNDER existing phase-II, phase-III and phase-IV clinical trial design and CHAPTER XIII-A OF THE SECURITIES AND EXCHANGE BOARD OF management and site management services to monitoring of trials, INDIA (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, clinical data management, bio-statistical analysis, medical report 2000 writing and supply chain management of clinical trial material. Pursuant to the decision of the Board and shareholders of the Company During 2006-07, NMI shifted its delivery base in India and its US to raise up to Rs. 1,000 crores by way of issue of shares to Qualified office focus on business development initiatives. Further, various Institutional Buyers, in terms of Chapter XIII-A of the Securities and adverse business conditions and continued operating losses led NMI Exchange Board of India (Disclosure and Investor Protection) Guidelines, decide to cease its operations in Costa Rica in October, 2006. 2000 as amended, the Company allotted on June 15, 2007, 41,666,660 equity shares of Rs. 2/- each to the bidders @ Rs. 240/- per equity share During the fiscal 2007, NMI provided services to 21 clients over 45 aggregating to Rs. 9999,998,400/-. contracts. During fiscal 2007, NMI doubled its client base to 29 from 14 in fiscal 2006. NMI increased its employee base to 102 as With the aforesaid allotment of shares, the paid up Equity Share Capital on March 31, 2007 from 77 as on March 31, 2006. As of March 31, of the Company increased from Rs.34,91,03,100/- as on March 31, 2007 2007, NMI had several active contracts representing an income of to Rs. 44,31,37,430/- as of June 15, 2007. approximately US$ 2.3 million over the remaining life of those contracts. DIVESTMENT OF STAKE HELD IN MAX ESTATES LTD. AND MALSI ESTATES LTD. (iv) Max Healthstaff: As informed in our previous report, the Company divested entire stake Max HealthStaff (MHS) provides value added end-to-end placement in its wholly owned subsidiaries, Max Estates Limited and Malsi Estates solutions of healthcare resources in the U.S. Currently, MHS provides Limited, to Malsi Holdings Limited on June 1, 2006. solutions relating to nursing staff, through strategic alliances with multiple healthcare staffing companies in the U.S. MHS sources ADDITIONAL BUSINESS INVESTMENTS and enrolls nurses from various cities in India, including New Delhi, The Company had made following additional business investments Chandigarh, Kottayam (Kerala) and Chennai. These cities represent during the year under review: regions with a traditionally strong supply of nurses. Upon enrollment,

44 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

DIRECTORS’ REPORT

further investment of Rs. 129.50 crore in Max New York Life during Sl. Description 2003 Plan the year under review, taking the total equity contribution in Max No. Before Adjusted for New York Life to Rs. 536.50 crore as of March 31, 2007. split share split (a) Total number of options further investment of Rs. 21.61 crore in Max Healthcare during the granted till March 31, 2007. 2,78,986 13,94,930 (b) The pricing formula Rs. 10/- per share Rs. 2/- per share year under review, taking the total equity contribution in Max (c) Number of options vested Healthcare to Rs. 166.10 crore as of March 31, 2007. till March 31, 2007 1,26,666 6,33,330 (d) Number of options exercised till March 31, 2007 1,26,666 6,33,330 Loans given to Neeman Medical International B.V. (Neeman BV) (e) Total number of shares arising amounting to Rs. 33.27 crore has been converted into share capital from exercise of options 1,26,666 6,33,330 during the year under review, taking the total share capital (f) Number of options lapsed 3,967 19,835 (g) Variation in terms of options No variation upto Every option held contribution in Neeman BV to Rs. 33.35 crore as of March 31, 2007. March 20, 2007 prior to split of face value of Rs. 10 entitles MANAGEMENT DISCUSSION AND ANALYSIS five options of face value of Rs. 2 each to A review of the performance of businesses, including those of your option holders w.e.f. Company’s joint ventures and subsidiaries, is provided in the Management March 20, 2007. Discussion & Analysis section, which forms part of this Report. (h) Money realized by exercise of options (Rs. lacs) 12.67 12.67 (i) Total number of options in DIVIDEND force as on March 31, 2007 1,48,353 7,41,765 Your directors do not recommend any dividend in view of their decision (j) Number of options granted to senior management including to deploy the internal accruals in growing businesses of Life Insurance directors In FY 2006-07 145,319 7,26,595 and Healthcare. (k) Employees holding 5% or more of the total number of options granted during the year None None FIXED DEPOSITS (l) Employees granted options There are no overdue deposits as at the end of the financial year equal to or exceeding 1% or underreview. Your Company has not accepted/renewed any deposit up more of the issued capital during the year None None to the date of this Report. The diluted earning per share was Rs. 0.79 for the financial year ended EMPLOYEE STOCK OPTION PLANS March 31, 2007. The diluted earning per share for the previous year was (i) Your Company had instituted an 'Employee Stock Plan 2003 Plan’ Rs. 0.34. (’2003 Plan’), which was approved by the Board of Directors in (iii) In respect of stock options granted till March 31, 2007 under the August 2003 and by the shareholders in September 2003. The 2003 2003 Plan, the Company has calculated employee compensation Plan provides for grant of stock options aggregating not more than cost using intrinsic value of the stock options. Accordingly, an 5% of number of issued equity shares of the Company to eligible amount of Rs. 1386.65 lacs has been recognized as total compensation employees and directors of the Company. The 2003 Plan is charge for grants made in October 2003, March 2005, December administered by the Remuneration Committee appointed by the 2005 and June 2006, out of which, in the current financial year, Board of Directors. During the year under review, out of 4,550 Rs. 442.79 lacs has been taken to the profit and loss account as Options granted on December 15, 2005, 1516 options were vested expense. The additional details required to be disclosed in accordance on December 15, 2006 and upon exercise, 1516 equity shares of with SEBI (Employee Stock Option Scheme and Employee Stock Rs. 10/- each for cash at par were allotted on December 20, 2006. Purchase Scheme) Guidelines, 1999 relating to the 2003 Plan are given below: Consequent to the subdivision of each equity share of the Company of face value of Rs.10/- into five equity shares of face value of a) The employee compensation cost based on fair value of stock Rs. 2/- each, the unexercised portion of every option entitling the options granted in October 2003, March 2005, December 2005 option-holders of an equity share of Rs. 10/- each will result in five and June 2006 under the 2003 Plan is Rs. 1391.37 lacs, out of options entitling the option-holders an equity share of Rs. 2/- each which, in the current financial year, Rs. 444.02 lacs would have for every option exercised at an exercise price of Rs. 2/- per equity been recognized as compensation cost if the Company had share. used fair value basis instead of adopting intrinsic value basis of accounting for these stock options. (ii) The particulars of options granted, as on the date of this report, b) On fair value basis of recognizing the employee compensation under the aforesaid stock option plan as required under SEBI cost, profit after tax for the current financial year would have (Employee Stock Option Scheme and Employee Stock Purchase been Rs. 1421.24 lacs instead of Rs. 1422.01 lacs reported in the Scheme) Guidelines, 1999 is given below: profit and loss account.

MAX INDIA ANNUAL REPORT 2006-07 45 MAX INDIA LIMITED

DIRECTORS’ REPORT

c) Basic and diluted earnings per share would have remained Trading Co. (P) Ltd., (l) Boom Investments Private Limited, (m) PVT unchanged at Rs. 0.79, had the Company adopted fair value Investment Limited, (n) Pen Investments Limited, (o) Pivet Finances basis of recognizing the employee compensation cost due to Limited, (p) Dynavest India Private Limited. (q) Maxpak Investment insignificant amount of difference in the recognized expense Limited and (r) Trophy Holdings Private Limited. and fair value of the ESOP expense. d) The exercise price of the stock options on the grant date is Rs. DIRECTORS 10/- per share and the fair value of each option works out to During the year under review, Mr. Nitin Sibal, a nominee of Warburg Rs. 590.53 for December 2005 and Rs. 726.16 for June 2006 Pincus Group resigned from the Board of Directors of the Company. The grant. Board places on record its appreciation for the valuable contribution e) The computation of fair value of stock options granted under made by Mr. Nitin Sibal during his tenure as Director of the Company. the 2003 Plan has been done using Black Scholes Option Pricing Model. The following assumptions have been used in applying Mr. Anuroop Singh was appointed as an Additional Director to hold this options pricing model: office up to the ensuing Annual General Meeting of the Company. The i) Risk free interest rate of 7.15%, Company has received a notice under Section 257 of the Companies ii) Expected life of 1 year of these stock options for March Act, 1956 from a member, proposing the candidature of Mr. Anuroop 2005 grant, 3 years for December 2005 and 4 years for Singh for being appointed as a Director of the Company. June 2006 grant, iii) Expected volatility of 51% based on historical volatility of In accordance with the provisions of the Companies Act, 1956 and the the Company’s share, Articles of Association of the Company, Mr. Rajesh Khanna, iv) No dividend expectation based on current year’s dividend Mr. N. Rangachary, Mr. Piyush Mankad, and Mr. Bharat Sahgal retire by recommendation, and rotation at the ensuing Annual General Meeting and are eligible for re- v) Price of Rs. 598.60 for December 2005 and Rs. 733.70 for appointment. June 2006 grant being the latest available closing price of the Company’s share on the National Stock Exchange prior CAUTIONARY STATEMENT to the date of grant. Statements in this Report, particularly those which relate to Management Discussion and Analysis describing the Company’s objectives, projections, ADDITIONAL INFORMATION estimates and expectations may constitute “forward looking statements” Information in accordance with the provisions of Section 217(1)(e) of within the meaning of applicable laws and regulations, actual results the Companies Act, 1956, read with the Companies (Disclosures of might differ materially from those either expressed or implied in the Particulars in the Report of Board of Directors) Rules, 1988 are given statement depending on the circumstances. in the prescribed format annexed to this Report as Annexure -A. DIRECTORS’ RESPONSIBILITY STATEMENT PARTICULARS OF EMPLOYEES The Board of Directors of the Company confirms that: A statement giving particulars of employees under Section 217(2A) of (i) In the preparation of annual accounts, the applicable accounting the Companies Act, 1956 read with the Companies (Particulars of standards have been followed, along with proper explanation Employees) Rules, 1975 for the financial year ended March 31, 2007 is relating to material departures. annexed to this Report as Annexure-B. (ii) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are SUBSIDIARY COMPANIES reasonable and prudent, so as to give a true and fair view of the Statement pursuant to Section 212 of the Companies Act, 1956, relating state of affairs of the Company at the end of the financial year and to the subsidiaries of your Company, is annexed to this Report. of the profit or loss of the Company for that period. (iii) The Directors had taken proper and sufficient care for the AUDITORS maintenance of adequate accounting records in accordance with Price Waterhouse, Statutory Auditors of your Company, retire and offer the provisions of the Companies Act, 1956 for safeguarding the themselves for re-appointment. Your Company has received from them, assets of the Company and for preventing and detecting fraud and a certificate required under Section 224(1-B) of the Companies Act, other irregularities. 1956 to the effect that their re-appointment, if made, would be in (iv) The Directors had prepared the annual accounts on a going concern conformity with the limits specified in that Section. basis.

GROUP FOR INTERSE TRANSFER OF SHARES APPRECIATION As required under Clause 3(e) of Securities and Exchange Board of India Your Board would like to place on record its sincere appreciation for (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, the invaluable support and contribution made by its employees as also persons constituting Group within the meaning as defined in the its shareholders, bankers, joint venture partners and all other business Monopolies and Restrictive Trade Practices Act, 1969 for the purpose associates. of Regulation 10 to 12 of aforesaid SEBI Regulations are as follows: For and on behalf of the Board of Directors (a) Mr. Analjit Singh, (b) Mrs. Neelu Analjit Singh, (c) Ms. Piya Singh (d) Mr. Veer Singh, (e) Ms. Tara Singh, (f) Neelu Family Trust, (g) Medicare New Delhi ANALJIT SINGH Investment Limited, (h) Cheminvest Limited, (i) Liquid Investment and JULY 31, 2007 Chairman Trading Co., (j) Maxopp Investments Limited, (k) Mohair Investment &

46 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

Annexure - 'A'

PARTICULARS PURSUANT TO COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

A. CONSERVATION OF ENERGY (a) Energy Conservation measures taken The Company has taken several steps to conserve energy. Energy conservation continues to be high priority for existing as well as new projects. Various steps taken to bring about savings are :- Installation of energy management system in new speciality line commissioned in Mar 07 to control and monitor consumption of energy by various equipments. Installation of Variable Free Drivers (VFD) for fan of oven instead of starer. Usage of Natural light in new speciality line during day. Reduction in specific energy of Metalliser by optimising Metallisation Parameters. (b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy Detailed energy audit of plant is being undertaken in 2007-08. Energy saving projects / measures as may be identified during energy audit will be implemented accordingly. (c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods. It is expected that above measures will result in reduction in energy consumption and consequent cost of production between 3% to 5%. (d) Total energy consumption and energy consumption per unit as per Form A of the annexure of "Particulars pursuant to Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988. NOT APPLICABLE

B. RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION

I. RESEARCH AND DEVELOPMENT 1. Research & Development The R&D efforts of the Company are continuously directed towards development of new products, new applications, quality improvement and product innovation. Continuous research, in-house as well as on customer end, is being carried out. Constant efforts to develop new products every year are showing fruitful results and usage of BOPP film is continuously increasing year after year. Every year new additives are being developed and dependance on imported material is getting minimised.

2. Process Improvement and Development Improvement in efficiency of Thermal BOPP film by optimising process parameters. Improvement in quality of reprocessed granules to enhance captive consumption.

3. Benefits Derived Cost competitiveness, effectiveness and high quality products. Steady increase in efficiency and productivity. Scientific working has substantially improved the machine utilization, devices, processes, materials, systems and services.

4. Future Plan of Action High value added niche products to be continuously added to existing range, every year. Efficiency improvement to surpass international standards.

5. Expenditure on R&D Capital : 'Nil' Recurring : Rs. 16.88 lacs Total : Rs. 16.88 lacs R&D expenditure : 0.11% as % of net sales

II. TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION

1. EFFORTS MADE TOWARDS TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION Company has in-house development & R&D cell which perpetually develops new products. These products are commercialized after successful trials at customer end.

MAX INDIA ANNUAL REPORT 2006-07 47 MAX INDIA LIMITED

Annexure - 'A'

2. BENEFITS DERIVED AS A RESULT OF ABOVE EFFORTS This benefits in matching customers' requirements which further result into better margins and enhanced capacity utilization.

3. INFORMATION ABOUT IMPORTED TECHNOLOGY IN LAST 5 YEARS BOPP and Foil Business did not import any technology in the last 5 years.

C. FOREIGN EXCHANGE EARNING AND OUTGO I. Activities Relating to Exports, initiative taken to increase Exports, Development of new Exports markets, Exports plans Enhanced focus on more exports of high-value-added films. Increased presence in European market and exploring market in USA to establish MSP in thermal films. Increasing presence in Asian countries, specially Middle-East region. Enhanced exports of Leather Finishing Foils in Europe & China and efforts are on for further increase. Due to various initiatives taken in 2006-07, BOPP & Thermal Films are gaining acceptance and exports have started increasing. During 2006-07, export of BOPP Including thermal films have increased by 47% and exports of Leather finishing foil increased by 78% in value terms over 2005-06.

II. Total Foreign Exchange Earned And Used (RS. LACS) Year Ended Year Ended March 2007 March 2006 Earnings 3,081.17 2,041.95 Outgo 11,431.52 2,087.93

For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH JULY 31, 2007 Chairman

48 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED Chairman ANALJIT SINGH President & Chief President Financial Officer Sr. Manager - Corporate Manager - Corporate Sr. Finance Senior Chemist Vice President - Marketing Vice President Assistant Vice President - Assistant Vice President Legal Affairs General Manager - Finance General Chairman Designation Last Employment Held For and on behalf of the Board of Directors For and on behalf of the Board Organisation Indo Rama Synthetics India Ltd. HCL Technologies Ltd. HCL Technologies SRF Ltd. Ester Industries Ltd. EIH Limited Jubilant Orgnosys Ltd. Jubilant Orgnosys Max UK Ltd. 28 15 35 31 28 18 29 (Yrs.) Experience 07.02.2001 30.10.2001 01.05.2002 12.07.2004 09.10.1989 06.10.2005 17.08.2004 Date of Commencement of employment Qualification B.Com, FCA, FICWA, FCS FCA, FICWA, B.Com, M.Com, ACA, ACS B. Sc., LPRI B. B.Tech ,PGDBM B.Tech B. Com, L.L.B. B. B. Com (Hons), ACA. B. BA, BS, MBA (Boston) (In Rs.) 2,935,018 3,366,881 2,554,060 2,668,775 2,680,595 33,593,741 35,758,318 Remuneration General Management General Corporate Finance & Corporate Accounts Operations Operations Legal Matters Corporate Treasury Corporate General Management General Nature of duties Nature Designation Jt. Managing Director Vice President - Corporate Vice President Finance Chief Operating Officer- Chief Operating Leather Finishing Foil Chief Executive - BOPP Vice President - Legal Vice President Vice President & Treasurer Vice President Chairman 51 52 38 56 54 43 53 Age (Yrs.) Name Employed throughout the year and were in receipt of remuneration of not less than Rs. 24,00,000/- per annum of not less than Rs. of remuneration in receipt the year and were Employed throughout B. Anantharaman, Basur, Neeraj Basur, Kaushik, P. K. P. Kaushik, Mathur, S. K. Mathur, Nagar, Prabhat Nagar, Ratnam, Sujatha Singh, Analjit Employed for part of the year and were in receipt of remuneration of not less than Rs. 2,00,000/- per month of not less than Rs. of remuneration in receipt Employed for part of the year and were NONE None of the above employees is a relative of any director of the Company. of any director None of the above employees is a relative in nature. contractual are Anantharaman B. Analjit Singh and Mr. The services of Mr. of the Company. Equity Shares 2% or more None of the above employees hold by himself or alongwith his spo use and dependent children Remuneration includes salary, allowances, value of rent free accommodation, bonus, medical reimbursement, leave travel assistance, personal accident and health insurance, Company's contribution to Provident, Pension, Company's contribution to Provident, accident and health insurance, assistance, personal leave travel medical reimbursement, accommodation, bonus, free value of rent allowances, includes salary, Remuneration Gratuity and Superannuation fund, leave encashment and monetary value of perquisites. and Superannuation Gratuity Sl. No. 2 3 4 Notes : 1 Annexure-B OF EMPLOYEES PARTICULARS REPORT OF THE DIRECTORS' RULES, 1975 AND FORMING PART OF EMPLOYEES) (PARTICULARS (2A) READ WITH THE COMPANIES AS PER SECTION 217 INFORMATION 2007 FOR THE YEAR ENDED MARCH 31, A. 1 New Delhi 2007 31, JULY 2 3 4 5 6 7 B. B.

MAX INDIA ANNUAL REPORT 2006-07 49 MAX INDIA LIMITED

AUDITORS’ REPORT

TO THE MEMBERS OF MAX INDIA LIMITED (b) The Company has not taken any loans, secured or unsecured, 1. We have audited the attached Balance Sheet of Max India Limited, from companies, firms or other parties covered in the as at March 31, 2007, and the related Profit and Loss Account and register maintained under Section 301 of the Act. Cash Flow Statement for the year ended on that date annexed (iv) In our opinion and according to the information and thereto, which we have signed under reference to this report. These explanations given to us, having regard to the explanation financial statements are the responsibility of the Company’s that certain items purchased are of special nature for which management. Our responsibility is to express an opinion on these suitable alternative sources do not exist for obtaining financial statements based on our audit. comparative quotations, there is an adequate internal control system commensurate with the size of the Company and the 2. We conducted our audit in accordance with the auditing standards nature of its business for the purchase of inventory, fixed generally accepted in India. Those standards require that we plan assets and for the sale of goods and services. Further, on the and perform the audit to obtain reasonable assurance about whether basis of our examination of the books and records of the the financial statements are free of material misstatement. An audit Company, and according to the information and explanations includes examining, on a test basis, evidence supporting the amounts given to us, we have neither come across nor have been and disclosures in the financial statements. An audit also includes informed of any continuing failure to correct major weaknesses assessing the accounting principles used and significant estimates in the aforesaid internal control system. made by management, as well as evaluating the overall financial (v) (a) In our opinion and according to the information and statement presentation. We believe that our audit provides a explanations given to us, the particulars of contracts or reasonable basis for our opinion. arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained 3. As required by the Companies (Auditor’s Report) Order, 2003, as under that section. amended by the Companies (Auditor’s Report) (Amendment) Order, (b) In our opinion and according to the information and 2004, issued by the Central Government of India in terms of sub- explanations given to us, the transactions made in section (4A) of Section 227 of ‘The Companies Act, 1956’ of India pursuance of such contracts or arrangements and (the ‘Act’) and on the basis of such checks of the books and records exceeding the value of Rupees Five Lakhs in respect of of the Company as we considered appropriate and according to any party during the year have been made at prices which the information and explanations given to us, we further report are reasonable having regard to the prevailing market that: prices at the relevant time. (i) (a) The Company is maintaining proper records showing full (vi) The Company has not accepted any deposits from the public particulars including quantitative details and situation of within the meaning of Sections 58A and 58AA of the Act and fixed assets. the rules framed there under. (b) The fixed assets are physically verified by the management (vii) In our opinion, the Company has an internal audit system according to a phased programme designed to cover all commensurate with its size and nature of its business. the items over a period of three years, which in our opinion, (viii) The Central Government of India has not prescribed the is reasonable having regard to the size of the Company maintenance of cost records under clause (d) of sub-section and the nature of its assets. Pursuant to the programme, (1) of Section 209 of the Act for any of the products of the a portion of the fixed assets has been physically verified Company. by the management during the year and no material (ix) (a) According to the information and explanations given to discrepancies between the book records and the physical us and the records of the Company examined by us, in inventory have been noticed. our opinion, the Company is regular in depositing the (c) In our opinion and according to the information and undisputed statutory dues including provident fund, explanations given to us, a substantial part of fixed assets investor education and protection fund, employees’ state has not been disposed of by the Company during the year. insurance, income tax, sales tax, wealth tax, service tax, (ii) (a) The inventory (excluding stocks with third parties) has been customs duty, excise duty, cess and other material statutory physically verified by the management during the year. In dues as applicable with the appropriate authorities. respect of inventory lying with third parties, these have (b) According to the information and explanations given to substantially been confirmed by them. In our opinion, the us and the records of the Company examined by us, the frequency of verification is reasonable. particulars of dues of income tax, sales tax, wealth tax, (b) In our opinion, the procedures of physical verification of service tax, customs duty, excise duty and cess as at March inventory followed by the management are reasonable and 31, 2007 which have not been deposited on account of adequate in relation to the size of the Company and the a dispute, are disclosed in Notes 1(d) and 8 on Schedule nature of its business. 23B. (c) On the basis of our examination of the inventory records, (x) The Company has no accumulated losses as at March 31, 2007 in our opinion, the Company is maintaining proper records and it has not incurred any cash losses in the financial year of inventory. The discrepancies noticed on physical ended on that date or in the immediately preceding financial year. verification of inventory as compared to book records were (xi) According to the records of the Company examined by us and not material. the information and explanation given to us, the Company (iii) (a) The Company has not granted any loans, secured or has not defaulted in repayment of dues to any financial unsecured, to companies, firms or other parties covered in institution or bank or debenture holders as at the balance the register maintained under Section 301 of the Act. sheet date.

50 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

AUDITORS’ REPORT

(xii) The Company has not granted any loans and advances on the accepted auditing practices in India, and according to the basis of security by way of pledge of shares, debentures and information and explanations given to us, we have neither other securities. come across any instance of fraud on or by the Company, (xiii) The provisions of any special statute applicable to chit fund/ noticed or reported during the year, nor have we been informed nidhi / mutual benefit fund/societies are not applicable to the of such case by the management. Company. (xiv) In our opinion, the Company has maintained proper records 4. Further to our comments in paragraph 3 above, we report that: of transactions and contracts relating to dealing or trading in (a) We have obtained all the information and explanations, which shares, securities, debentures and other investments during to the best of our knowledge and belief were necessary for the year and timely entries have been made therein. Further, the purposes of our audit; such securities have been held by the Company in its own (b) In our opinion, proper books of account as required by law name. have been kept by the Company so far as appears from our (xv) In our opinion and according to the information and examination of those books; explanations given to us, the terms and conditions of the (c) The Balance Sheet, Profit and Loss Account and Cash Flow guarantees given by the Company, for loans taken by others Statement dealt with by this report are in agreement with the from banks or financial institutions during the year, are not books of account; prejudicial to the interest of the Company. (d) In our opinion, the Balance Sheet, Profit and Loss Account (xvi) In our opinion, and according to the information and and Cash Flow Statement dealt with by this report comply explanations given to us, on an overall basis, the term loans with the accounting standards referred to in sub-section (3C) have been applied for the purposes for which they were of Section 211 of the Act; obtained. (e) On the basis of written representations received from the (xvii) On the basis of an overall examination of the balance sheet directors, as on March 31, 2007 and taken on record by the of the Company, in our opinion and according to the Board of Directors, none of the directors is disqualified as on information and explanations given to us, there are no funds March 31, 2007 from being appointed as a director in terms raised on a short-term basis which have been used for long- of clause (g) of sub-section (1) of Section 274 of the Act; term investment. (f) In our opinion and to the best of our information and according (xviii)During the year, the Company has made preferential allotment to the explanations given to us, the said financial statements of shares to a Company covered in the register maintained together with the notes thereon and attached thereto give in under Section 301 of the Act. In our opinion and according the prescribed manner the information required by the Act to the information and explanations given to us, the price at and give a true and fair view in conformity with the accounting which such shares have been issued is not prejudicial to the principles generally accepted in India: interest of the Company. (i) in the case of the Balance Sheet, of the state of affairs (xix) There are no debentures outstanding as at the year end. of the Company as at March 31, 2007; (xx) The Company has not raised any money by public issues during (ii) in the case of the Profit and Loss Account, of the profit the year. for the year ended on that date; and (xxi) During the course of our examination of the books and records (iii) in the case of the Cash Flow Statement, of the cash flows of the Company, carried out in accordance with the generally for the year ended on that date.

V. NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse MAY 17, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 51 MAX INDIA LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

(RS. LACS)

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 3598.04 3491.03 Warrants against Share Capital 2 - 243.72 Reserves and Surplus 3 96727.02 92223.03 100325.06 95957.78 LOAN FUNDS Secured Loans 4 10084.23 2200.00 Unsecured Loans 5 - Loans and Debentures 61.82 97.66 - Advance from Others 17420.55 13220.55 27566.60 15518.21 Deferred Tax Liability (Net) 6 1104.89 524.50 128996.55 112000.49 APPLICATION OF FUNDS FIXED ASSETS 7 Gross Block 22017.07 10338.14 Less: Depreciation 5268.78 4840.00 Net Block 16748.29 5498.14 Capital Work in Progress 391.71 796.08 17140.00 6294.22

INVESTMENTS 8 105827.80 102497.60

CURRENT ASSETS, LOANS AND ADVANCES Inventories 9 1333.61 1134.76 Sundry Debtors 10 2970.63 2166.14 Cash and Bank Balances 11 814.96 490.17 Other Current Assets 12 - 54.03 Loans and Advances 13 4646.67 6575.87 9765.87 10420.97 Less: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 14 3740.36 2920.12 Provisions 15 630.12 4316.98 4370.48 7237.10

NET CURRENT ASSETS 5395.39 3183.87

MISCELLANEOUS EXPENDITURE 16 633.36 24.80 (To the extent not written off or adjusted) 128996.55 112000.49

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 23

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN N.C. SINGHAL Director Partner DR. S.S. BAIJAL Director Membership No. F-87228 N. RANGACHARY Director For and on behalf of B. ANANTHARAMAN Joint Managing Director Price Waterhouse Chartered Accountants NEERAJ BASUR Vice President-Corporate Finance V. KRISHNAN Company Secretary New Delhi MAY 17, 2007

52 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Sales 17661.12 14234.80 Less: Sales Return (120.74) (86.42) Excise Duty (2005.90) (1662.98) 15534.48 12485.40 Income from Investment Activities 17 2787.46 1478.01 Other Income 18 1249.00 918.31 19570.94 14881.72 INCREASE/(DECREASE) IN INVENTORY 19 82.84 (97.09) 19653.78 14784.63 EXPENDITURE Manufacturing and Other Expenses 20 16543.49 12869.11 Financial Expenses 21 491.77 953.54 Depreciation 7 576.08 610.48 17611.34 14433.13

PROFIT BEFORE TAX 2042.44 351.50 Tax Expense 22 620.43 (237.33) PROFIT AFTER TAX 1422.01 588.83

PROFIT BROUGHT FORWARD 58921.01 24370.17 60343.02 24959.00 Profit and Loss Account Balance Transferred on Amalgamation - 33065.15 Forfeiture of Warrants Subscription Money - 271.86 Transfer from Debenture Redemption Reserve - 625.00 BALANCE CARRIED FORWARD TO THE BALANCE SHEET 60343.02 58921.01

Earnings Per Share (Rs. per equity share of Rs. 2/- each) (Refer Notes B7 and B12 on Schedule 23) - Basic 0.79 0.35 - Diluted 0.79 0.34 Number of Shares used in computing earnings per share - Basic 17,92,23,238 16,73,90,085 - Diluted 18,04,86,557 17,57,51,280

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 23

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN N.C. SINGHAL Director Partner DR. S.S. BAIJAL Director Membership No. F-87228 N. RANGACHARY Director For and on behalf of B. ANANTHARAMAN Joint Managing Director Price Waterhouse Chartered Accountants NEERAJ BASUR Vice President-Corporate Finance V. KRISHNAN Company Secretary New Delhi MAY 17, 2007

MAX INDIA ANNUAL REPORT 2006-07 53 MAX INDIA LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES: NET PROFIT BEFORE TAX 2042.44 351.50

Adjustments for: Depreciation 576.08 610.48 Miscellaneous Expenditure Written Off 0.32 4.80 ESOP Compensation Expense 442.79 237.13 Net Loss on Sale of Fixed Assets 26.07 21.00 Net Profit on Sale of Investments (549.56) (427.45) Assets Written Off 37.05 - Bad Debts Written Off 5.83 37.51 Provision for Doubtful Debts and Advances 27.66 293.06 Provision for Leave Encashment 41.61 7.73 Provision for Gratuity (17.35) 12.49 Interest Expense 338.18 775.44 Interest Income (101.16) (281.77) Dividend Income from Non Trade Investments-Current (2136.74) (749.66) Liability/Provision No Longer Required Written Back (43.70) (10.63) Unrealised Foreign Exchange (Gain)/Loss (5.26) 71.82 TDS on Service/Other Operating Income (9.30) (9.44) Provision for Diminution in Value of Investment-Long Term - 18.96 OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 674.96 962.97

Adjustments for: Trade and Other Receivables (1449.63) (3061.49) Inventories (198.85) (66.65) Trade Payables 784.44 (160.20) Cash Generated From Operations (189.08) (2325.37)

Direct Taxes Refunded/(Paid) (3722.70) (35.97) Cash From/(Used In) Operating Activities (3911.78) (2361.34)

B. CASH FLOW FROM INVESTING ACTIVITIES Investments made (From preferential issue proceeds) (1893.45) (10263.52) Investments made (Others) (218361.69) (248397.58) Sale of Investments 219501.38 251192.30 Purchase of Fixed Assets (11518.93) (952.01) Sale of Fixed Assets 33.95 35.36 Proceeds from Sale of Investment in Subsidiaries 515.00 - Proceeds from Sale of Business - 1110.97 Interest Received (Net) 135.01 216.80 Dividend Income From Non Trade Investments-Current 2136.74 749.66 Cash From/(Used In) Investment Activities (9451.99) (6308.02)

54 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 C. CASH FLOW FROM FINANCING ACTIVITIES Preferential issue of shares - 11898.60 Issue of Shares against Exercise of Warrants 1893.45 3000.00 Shares Issue Expenses - (25.93) ESOPs Excercised 0.15 6.25 Interest Paid (253.43) (1164.31) Proceeds from Long Term Borrowings 7340.00 96.76 Repayment of Long Term Loans (550.00) (2673.73) Proceeds from Short Term Borrowings - 164.00 Repayment of Short Term Loans (35.84) (4116.00) Other Advances Received 4200.00 2160.00 Cash From/(Used In) Financing Activities 12594.33 9345.64

Increase/(Decrease) In Cash And Cash Equivalents (769.44) 676.28 Unrealised Foreign Exchange (Gain)/Loss on Cash and Cash Equivalent - 0.18

Net Increase/(Decrease) In Cash And Cash Equivalents (769.44) 676.10

Cash And Cash Equivalents As At March 31, 2006 440.17 (241.14) Cash and Cash Equivalents Transferred on Merger - 5.21 Cash And Cash Equivalents As At March 31, 2007 (329.27) 440.17 Net Increase/(Decrease) In Cash And Cash Equivalents (769.44) 676.10

Notes 1 The above Cash Flow Statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Cash, Cheques in Hand, Balances with Banks and Cash Credit: (RS. LACS) As at As at March 31, 2007 March 31, 2006

Cash in Hand 7.25 4.47 Cheques in Hand 6.56 - Balances with Banks 801.15 485.70 Cash Credit (1144.23) (50.00) (329.27) 440.17

3 Previous year’s figures have been regrouped wherever necessary to conform to current year’s classification.

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 23

The Schedules referred to above form an integral part of the Cash Flow For and on behalf of the Board of Directors Statement This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN N.C. SINGHAL Director Partner DR. S.S. BAIJAL Director Membership No. F-87228 N. RANGACHARY Director For and on behalf of B. ANANTHARAMAN Joint Managing Director Price Waterhouse Chartered Accountants NEERAJ BASUR Vice President-Corporate Finance New Delhi V. KRISHNAN Company Secretary MAY 17, 2007

MAX INDIA ANNUAL REPORT 2006-07 55 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL AUTHORISED (Refer Note B7 on Schedule 23) 46,00,00,000 Equity Shares of Rs. 2/- each (Previous year 9,20,00,000 Equity Shares of Rs. 10/- each) 9200.00 9200.00 8,00,000 Preference Shares of Rs. 100/- each (Previous year 8,00,000 Preference Shares of Rs. 100/- each) 800.00 800.00 10000.00 10000.00 ISSUED, SUBSCRIBED AND PAID UP (Refer Notes A9, B4, B7 and B9 on Schedule 23) 17,99,02,055 Equity Shares of Rs. 2/- each fully paid up (Previous year 3,49,10,310 Equity Shares of Rs. 10/- each fully paid up) 3598.04 3491.03 3598.04 3491.03

Paid up Share Capital includes: - 5,76,60,400 Equity Shares of Rs. 2/- each (Previous year 1,15,32,080 Equity Shares of Rs. 10/ each) allotted as fully paid up by way of bonus shares out of Securities Premium Account; and - 9,88,330 Equity Shares of Rs. 2/- each (Previous year 1,96,150 Equity Shares of Rs.10/- each) allotted under employees stock option plan

SCHEDULE-2 WARRANTS AGAINST SHARE CAPITAL (Refer Note B4 on Schedule 23) Upfront payment of Warrants convertible into Share Capital - 243.72 [Current year Nil Warrants (Previous year 10,68,585 Warrants)] - 243.72

SCHEDULE-3 RESERVES AND SURPLUS (Refer Notes A8, A9, B4, B9, B23 and B24 on Schedule 23) As at Additions Deletions/ As at April 1, 2006 Utilisation March 31, 2007 Securities Premium Account 24202.29 2039.23 - 26241.52 Employee Stock Option Outstanding 26.78 1051.67 8.92 1069.53 General Reserve 9072.95 - - 9072.95 Profit and Loss Account 58921.01 1422.01 - 60343.02 92223.03 4512.91 8.92 96727.02

As at As at March 31, 2007 March 31, 2006 SCHEDULE-4 SECURED LOANS (Refer Note B5 on Schedule 23)

Loans and Advances From Banks - Term Loan 8940.00 2150.00 - Fund Based Working Capital Facilities 1144.23 50.00 10084.23 2200.00 Amount repayable within one year Rs. 1135.71 Lacs (Previous year Rs. 500.00 Lacs)

56 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-5 UNSECURED LOANS

Other Loans From Banks 61.82 97.66 61.82 97.66

Advances from Others 17420.55 13220.55 (Refer Note B6 on Schedule 23) 17482.37 13318.21 Amount repayable to banks within one year Rs. 27.30 Lacs (Previous year Rs. 38.67 Lacs) SCHEDULE-6 DEFERRED TAX LIABILITY (NET) (Refer Notes A10 and B10 on Schedule 23)

Deferred Tax Liability Opening Balance 1005.94 1096.56 Movement during the year 611.75 (90.62) Closing Balance 1617.69 1005.94

Deferred Tax (Asset) Opening Balance (481.44) (295.85) Movement during the year (31.36) (185.59) Closing Balance (512.80) (481.44)

Net Deferred Tax Liability 1104.89 524.50

SCHEDULE-7 FIXED ASSETS (Refer Notes A3, A4, A5 and B2 on Schedule 23) (RS. LACS) Gross Block Depreciation Net Block Particulars As at Additions Deletions/ As at As at Additions Deletions/ As at As at As at April 1, Adjustments March 31, April 1, Adjustments March 31, March 31, March 31, 2006 2007 2006 2007 2007 2006 Tangible Assets Land (Freehold) 30.83 51.79 - 82.62 - - - - 82.62 30.83 Building 1325.60 1267.16 - 2592.76 353.84 42.13 - 395.97 2196.79 971.76 Leasehold Improvements 402.46 - 55.19 347.27 264.52 53.44 45.22 272.74 74.53 137.94 Plant and Machinery 7341.77 10474.09 - 17815.86 3585.01 386.30 - 3971.31 13844.55 3756.76 Furniture, Fittings and Equipments 795.51 52.80 96.88 751.43 482.96 51.78 56.79 477.95 273.48 312.55 Vehicles 322.24 27.81 85.91 264.14 77.08 26.48 38.90 64.66 199.48 245.16

Intangible Assets Software 119.73 49.65 6.39 162.99 76.59 15.95 6.39 86.15 76.84 43.14 Total 10338.14 11923.30 244.37 22017.07 4840.00 576.08 147.30 5268.78 16748.29 5498.14 Previous Year 10257.19 200.23 119.28 10338.14 4292.44 610.48 62.92 4840.00 Capital Work in Progress 391.71 796.08 17140.00 6294.22 Note : 1. Additions includes interest capitalised Rs. 212.48 Lacs (Previous year Nil). 2. Additions includes Foreign Exchange Fluctuations Rs. 91.35 Lacs (Previous year Nil). 3. Leasehold Improvements represents civil and other improvements at Company's leased premises. 4. Plant and Machinery includes an amount of Rs. 135.08 Lacs (Previous year Rs. 135.08 Lacs) paid to PSEB for drawing a power line representing assets not owned by the Company. The same is being depreciated over a period of five years. 5. The above includes vehicles hypothecated amounting to Rs. 137.62 Lacs (Previous year Rs. 181.57 Lacs). 6. Capital Work in Progress includes: - Pre-Operative expenses pending allocation and capitalisation Rs. 2.93 Lacs (Previous year Rs. 78.72 Lacs). - Capital Advance Rs. 130.01 Lacs (Previous year Rs. 608.77 Lacs).

MAX INDIA ANNUAL REPORT 2006-07 57 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006

SCHEDULE-8 INVESTMENTS (Refer Notes A6, B6, B14, B15 and B23 on Schedule 23)

a) Subsidiaries, at cost Equity Shares 79331.75 60903.20 Less: Provision for Diminution (3238.86) 76092.89 (3238.86) Preference Shares 1505.00 1505.00

b) Long Term-Non Trade, at cost (Quoted) Equity Shares 0.65 0.65

(Unquoted) Equity Shares 253.00 253.00 Less: Provision for Diminution (253.00) - (253.00)

c) Current Non Trade (Unquoted), at cost Units in Mutual Fund 28229.26 43327.61 105827.80 102497.60

Aggregate value of unquoted investments 105827.15 102496.95 Aggregate value of quoted investments 0.65 0.65 Market value of quoted investments 2.13 1.47

SCHEDULE-9 INVENTORIES (Refer Note A7 on Schedule 23)

Manufacturing Activities Raw Materials in Stores/Transit 743.42 655.19 Stores and Spares 302.76 274.98 Work in Process 231.27 169.82 Finished Goods 56.00 34.61

Investment Activities Stock of Securities 0.16 0.16 1333.61 1134.76

SCHEDULE-10 SUNDRY DEBTORS (Unsecured) Debts exceeding six months Considered Doubtful 176.42 168.47 Less: Provision for Doubtful Debts (176.42) (168.47) - - Other Debts Considered Good 2970.63 2166.14 2970.63 2166.14

58 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-11 CASH AND BANK BALANCES Cash in Hand 7.25 4.47 Cheques in Hand 6.56 - Balances with Scheduled Banks In Current Accounts 758.64 402.63 In Dividend Accounts 27.19 33.36 In Debenture Interest Accounts 15.32 15.90 Balances with Non-Scheduled Banks In Current Accounts - 33.81 814.96 490.17

SCHEDULE-12 OTHER CURRENT ASSETS Interest Receivable Considered Good - 54.03 Considered Doubtful 179.59 179.59 Less: Provision for Doubtful Interest (179.59) (179.59) - 54.03 Amounts due from companies under the same management - Pharmax Corporation Ltd. - 47.72 Maximum amount outstanding during the year from companies under the same management - Pharmax Corporation Ltd. 57.03 47.74

SCHEDULE-13 LOANS AND ADVANCES (Considered good, unless otherwise stated)

Secured Housing Loans 5.42 5.78

Unsecured Subsidiary Companies - Advances 1063.93 638.00 - Loans Considered Good 1593.31 3309.23 Considered Doubtful 665.14 665.14 Less: Provision for Doubtful Loans (665.14) 1593.31 (665.14) - Inter Corporate Deposits 358.00 959.55 - Security Deposit 58.02 58.02 - Share Application Money Pending Allotment 723.25 - Others - Advances recoverable in cash or in kind or for value to be received Considered Good 573.41 1350.20 Considered Doubtful 342.05 325.16 Less: Provision for Doubtful Advances (342.05) 573.41 (325.16) - Loans to Employees 8.32 11.78 - Inter Corporate Deposits Considered Doubtful 621.60 621.60 Less: Provision for Doubtful Deposits (621.60) - (621.60) - Balance with Excise Authorities 133.73 131.04 - Prepaid Expenses 25.57 28.12 - Security Deposits 103.71 84.15 4646.67 6575.87

MAX INDIA ANNUAL REPORT 2006-07 59 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-13 (Contd.) (RS. LACS)

As at As at March 31, 2007 March 31, 2006

Amount due from directors (Refer Note B11 on Schedule 23) 250.16 189.05 Maximum amount outstanding during the year from directors 314.73 247.12

Amounts due from companies under the same management - Max Healthcare Institute Ltd. 964.96 555.47 - Max New York Life Insurance Co. Ltd. 10.89 0.54 - Pharmax Corporation Ltd. 358.00 959.55 - Max Ateev Ltd. 674.49 680.41 - Max Estates Ltd. - 146.94 - Malsi Estates Ltd. - 535.74 - Neeman Medical International (Asia) Ltd. 367.34 221.69 - Max HealthStaff International Ltd. 1216.62 839.85 - Neeman Medical International NV 87.53 81.99 - Neeman Medical International BV - 1549.75

Maximum amount outstanding during the year from companies under the same management - Max Healthcare Institute Ltd. 964.96 3953.85 - Max New York Life Insurance Co. Ltd. 10.89 25.11 - Pharmax Corporation Ltd. 1317.55 959.85 - Max Ateev Ltd. 680.84 688.50 - Max Estates Ltd. 147.20 146.94 - Malsi Estates Ltd. 537.80 535.74 - Max Telecom Ventures Ltd. - 105.36 - Neeman Medical International (Asia) Ltd. 367.34 217.44 - Max HealthStaff International Ltd. 1216.62 834.18 - Neeman Medical International NV 87.53 81.99 - Neeman Medical International BV 2309.59 1580.97

SCHEDULE-14 CURRENT LIABILITIES (Refer Note B16 on Schedule 23)

Acceptances 36.09 46.72 Sundry Creditors Total outstanding dues of small scale industrial undertakings 33.08 7.78 Total outstanding dues of creditors other than small scale industrial undertakings 3344.32 2670.68 Subsidiary Companies 2.88 43.53 Investor Education and Protection Fund Unpaid Dividend 34.55 39.70 Unpaid Debenture Interest 12.76 13.32 Other Liabilities 187.00 93.47 Interest Accrued but not Due 89.68 4.92 3740.36 2920.12

SCHEDULE-15 PROVISIONS (Refer Notes A10 and A11 on Schedule 23)

Leave Encashment 110.48 68.87 Gratuity 58.43 75.78 Provision for Income Tax 5514.90 5516.88 Less: Advance Income Tax (5053.69) 461.21 (1344.55) 630.12 4316.98

SCHEDULE-16 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) (Refer Notes A13 and B13 on Schedule 23)

Preliminary Expenses 0.31 0.63 Deferred Employee Compensation 633.05 24.17 633.36 24.80

60 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-17 INCOME FROM INVESTMENT ACTIVITIES (Refer Notes A2, A6, B14 and B15 on Schedule 23)

Profit on Sale of Stock of Securities Opening Stock 0.16 7.73 Add: Purchases - - Less: Sales - 26.70 Less: Closing Stock 0.16 0.16 - 19.13 Dividend Income From Others Non Trade Investments-Long Term - 0.02 Non Trade Investments-Current 2136.74 749.56 Stock of Securities - 2136.74 0.08 Interest on Loans and Non Trade Investments (Gross)* Loans 89.95 279.67 Others 11.21 101.16 2.10 Profit on Sale of Investment in Subsidiary 504.99 1.86 Net Profit on Sale of Non Trade Investments-Current 44.57 425.59 2787.46 1478.01 * Tax deducted at source Rs. 20.19 Lacs (Previous year Rs. 62.76 Lacs)

SCHEDULE-18 OTHER INCOME (Refer Note A2 on Schedule 23) Job Work Charges* 234.20 270.65 Liabilities/Provisions No Longer Required Written Back 43.70 10.63 Gain on Foreign Exchange Fluctuation 183.15 58.86 Less: Loss on Foreign Exchange Fluctuation (47.47) 135.68 (101.46) Miscellaneous Income 835.42 679.63 1249.00 918.31 * Tax deducted at source Rs. 8.57 Lacs (Previous year Rs. 6.18 Lacs)

SCHEDULE-19 INCREASE/(DECREASE) IN INVENTORY

Opening Stock Work in Process 169.82 234.08 Finished Goods 34.61 67.44 204.43 301.52 Less: Closing Stock Work in Process 231.27 169.82 Finished Goods 56.00 34.61 287.27 204.43 Net Increase/(Decrease) 82.84 (97.09)

MAX INDIA ANNUAL REPORT 2006-07 61 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-20 MANUFACTURING AND OTHER EXPENSES

Manufacturing Raw Materials Consumed 10536.00 7657.27 Goods Purchased for Resale 7.22 16.56 Excise Duty on Scrap 41.72 39.55 Power and Fuel 1043.36 1031.61 Stores and Spares Consumed 259.17 257.35 Packing Material 373.27 320.37 Freight Inward 11.02 14.96 Repairs and Maintenance-Plant and Machinery 77.35 110.54 Processing Charges 111.35 104.15 12460.46 9552.36 Personnel Salaries, Wages and Bonus 2028.54 1435.10 Contribution to Provident and Other Funds 162.61 134.61 Recruitment 63.92 26.53 Staff Welfare 64.97 50.88 2320.04 1647.12 Administration and others Rent 182.87 182.32 Insurance 67.90 61.05 Rates and Taxes 7.44 134.24 Repairs and Maintenance Building 17.87 13.56 Others 209.46 206.73 Electricity and Water 33.49 28.44 Printing and Stationery 47.16 43.84 Travelling and Conveyance 334.46 225.06 Communication 74.65 71.01 Legal and Professional 245.62 195.24 Directors' Fee 7.29 7.89 Business Promotion 47.52 39.77 Commission 92.74 72.33 Trade Discount 214.51 165.21 Selling and Distribution 505.08 437.37 Advertisement and Publicity 9.51 25.18 Provision for Doubtful Debts and Advances 27.66 293.06 Loss on Sale/Disposal of Fixed Assets 26.08 21.23 Less: Profit on Sale/Disposal of Fixed Assets (0.01) 26.07 (0.23) Provision for Diminution in Long Term Investments - 18.96 Bad Debts Written Off 5.83 37.51 Fixed Assets and Spares Written Off 37.05 - Charity and Donation 0.62 1.65 Amortisation of Miscellaneous Expenditure 0.32 4.80 Miscellaneous 38.38 46.41 Less: Overheads Recovery* (Refer Note B26 on Schedule 23) (470.51) (663.00) 1762.99 1669.63

16543.49 12869.11 * Tax Deducted at source Rs. 3.26 Lacs (Previous year Rs. 4.99 Lacs)

62 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-21 FINANCIAL EXPENSES Interest on Debentures - 192.26 Term Loans 228.13 428.55 Short Term Loan - 132.69 Acceptances 24.12 14.20 Cash Credit 35.34 1.60 Others 50.59 6.14 Bank Charges 72.93 97.30 Finance Charges 80.66 80.80 491.77 953.54

SCHEDULE-22 TAX EXPENSE (Refer Notes A10 and B10 on Schedule 23)

Current Year Tax Wealth Tax 1.23 1.34 Fringe Benefit Tax 38.81 37.54

Add: Deferred Tax for the year 580.39 (276.21) 620.43 (237.33)

MAX INDIA ANNUAL REPORT 2006-07 63 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE–23

A SIGNIFICANT ACCOUNTING POLICIES 1 Accounting Convention The accompanying financial statements are prepared in accordance with Generally Accepted Accounting Principles in India (“GAAP”), under the historical cost convention, on the accrual basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956, as adopted consistently by the Company.

2 Revenue Recognition (a) Export sales are accounted on the basis of the date of bill of lading/airways bill. Other sales are accounted for at ex-factory prices on dispatch. (b) Income from investments is credited to revenue in the year in which it accrues. Income is stated in full with the tax thereon being accounted for under advance tax. (c) Dividend is recognised as income as and when the right to receive such payment is established.

3 Fixed Assets (a) Fixed Assets are stated at their original cost including freight, duties (net of CENVAT), taxes and other incidental expenses relating to acquisition and installation. (b) Expenses of revenue nature, which are related to project set-up are transferred to “Preoperative expenses pending capitalisation”. These expenses are allocated to fixed assets in the year of commencement of the related project. (c) Intangible assets are recognised if they are separately identifiable and the Company controls the future economic benefits arising out of them. All other expenses on intangible items are charged to the profit and loss account. Intangible assets are stated at cost less accumulated amortisation and impairment.

4 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset in accordance with Accounting Standard 16 issued by ICAI on “Borrowing Costs”. Other borrowing costs are recognized as an expense in the period in which they are incurred. Capitalisation of borrowing costs ceases when substantially all activities necessary to prepare the qualifying assets for its intended use are complete.

5 Depreciation (a) Depreciation is charged on straight-line method on a pro-rata basis at rates prescribed under Schedule XIV to the Companies Act, 1956. (b) Leasehold improvements are depreciated over respective lease periods. (c) Assets costing not more than Rs. 5,000 each individually are depreciated at 100%. (d) Software in the nature of intangible assets are depreciated over a period of six years.

6 Investments (a) Investments are either classified as current investments or long-term investments. The cost of investments includes acquisition charges such as brokerage, fees and duties. Current investments are carried at lower of cost and fair value. (b) Long-term investments are carried at cost and provisions are recorded to recognise any decline, other than temporary, in the carrying value of each investment.

7 Inventories (a) Inventories are valued at lower of cost and net realisable value. Cost for this purpose is calculated on a weighted average method. In respect of finished goods and work in process, appropriate overheads are loaded. (b) Stock of securities is valued at lower of cost and market value, determined category wise. Cost for this purpose is calculated under First In First Out Method.

8 Capital Subsidy Capital Subsidies, received under the state capital subsidy scheme are accounted for as capital reserve.

9 Employee Stock Option Scheme (a) The value of options is equal to the aggregate of the fair value of the options granted. Fair value is the option discount represented by the excess of market price on grant date over the exercise price of the option and is amortised on a straight line method basis over the vesting period in line with the Securities and Exchange Board of India (SEBI) Guidelines. (b) As and when the options are exercised, the same are accounted for as paid up capital to the extent of the face value and Share Premium to the extent of excess of market price over face value on grant date. (c) Options that lapse are reversed by a credit to employee compensation expense equal to the amortised portion of the value of the lapsed options and a credit to deferred employee compensation expense equal to the unamortised option.

10 Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. Provision for tax consists of current tax and deferred tax. A provision is made for income tax annually based on the tax

64 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. The differences that result between the profit offered for income tax and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognised only if there is virtual certainty that they will be realised and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

11 Employee Benefits (a) Gratuity In accordance with the Payment of Gratuity Act 1972, the Company provides gratuity, a benefit plan (the “Gratuity Plan”) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, based upon which, the Company contributes to a Master policy with Life Insurance Corporation of India. (b) Superannuation Certain employees of the Company are participants of a defined superannuation plan. The Company makes contributions under the superannuation plan to “Max India Limited Superannuation Fund” based on a specified percentage of each covered employee’s salary. (c) Provident Fund Eligible employees receive benefits from a provident fund, which is a defined contribution plan. The Company makes contributions under Provident Fund to “Max India Limited Employees Provident Fund Trust”. Both the employee and the Company make monthly contributions to the provident fund trust equal to a specified percentage of the covered employee’s salary. (d) Leave Encashment Accrual for leave encashment is made on the basis of actuarial valuation done at the year-end.

12 Foreign Exchange Transactions (a) Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at year- end rates. (b) The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions, other than relating to Fixed Assets, are recognised in the profit and loss account. (c) Exchange difference in respect of liabilities incurred to acquire fixed assets is adjusted to the carrying amount of fixed assets.

13 Miscellaneous Expenditure (a) Preliminary and Issue expenses are amortised over a period of 10 years, except cost incurred on raising of funds, which is being amortised over the life of the respective financial instrument. (b) Deferred employee compensation expense is amortised over the vesting period. (c) Other deferred revenue expenditure is amortised from the year they have been incurred/related projects commence operations, over 3 to 5 years based on the period over which future benefits are expected to be received.

14 Leases Leases of assets under which the lessor effectively retains all the risks and benefits of ownership are classified as operating lease. Payments made under operating lease are charged to Profit and Loss Account on a straight-line basis over the period of the lease.

15 Provision and Contingencies A provision is recognized when there is a present obligation as a result of past event and it is probable that an outflow of a resource will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each Balance Sheet date and adjusted to reflect the current estimates. Contingent liabilities are disclosed after an evaluation of the fact and legal aspects of the matter involved. B NOTES TO ACCOUNTS (RS. LACS) Current Year Previous Year 1 Contingent Liabilities a) Corporate guarantees 24000.00 24000.00 b) Claims against the Company not acknowledged as debts:- - Excise Duty 568.95 574.29 - Custom Duty 339.38 327.03 - Service Tax 332.30 - - Income Tax Refer Note B8 Refer Note B8 - Other 254.31 456.81 Total 1494.94 1358.13 c) Letter of Credit outstanding 1487.50 2157.61

MAX INDIA ANNUAL REPORT 2006-07 65 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

d) The Company had received show cause notices from the excise department under Central Excise Act, 1944 against which it had filed its appeals to the relevant authorities. As at year end, the Company had filed appeal to CESTAT against the following: (RS. LACS) Financial year to which the amount relates Amount 2001-2002 145.27 2004-2005 1.06 2005-2006 0.32

2 Capital Commitments (RS. LACS) Particulars Current Year Previous Year Estimated amount of contracts remaining to be executed 920.05 6255.22 on capital account and not provided for Less: Capital Advances 130.01 608.77 Balance Value of Contracts 790.04 5646.45 3 Concession in Custom Duty availed on Capital equipment imported during the year against export obligation undertaken under ‘Export Promotion Capital Goods’ Scheme is Rs. 2570.62 Lacs (Previous year Nil).

4 Pursuant to shareholders’ approval in Extra Ordinary General Meeting held on December 22, 2004, the Company had allotted 13,59,300 warrants to Madison Holdings Limited and Melany Holdings Limited (forming part of the Warburg Pincus group) and 27,18,585 warrants to the promoter group. Each warrant entitles the holder thereof to subscribe to one equity share of Rs. 10/- each in the Share Capital of the Company at a premium of Rs. 190/- per equity share. Each warrant is convertible into one equity share as per prevalent SEBI guidelines at any time before expiry of 18 months from the date of allotment, at the discretion of the Board of Directors. During the previous year, the warrants held by Madison Holdings Limited and Melany Holdings Limited were forfeited due to non-exercise and the amount received against said warrants of Rs. 271.86 Lacs has been transferred to Reserves. Out of warrants allotted to the promoter group, 10,68,585 warrants were outstanding as on March 31, 2006. Pursuant to Board of Directors’ approval in their meeting held on May 17, 2006, 6,00,000 equity shares of Rs. 10/- each at a premium of Rs. 190/- per equity share were allotted to Mr. Analjit Singh and 4,68,585 equity shares of Rs. 10/- each at a premium of Rs. 190/- per equity share were allotted to M/s Liquid Investment and Trading Company by conversion of the above warrants.

5 Loans (a) Term loans from Yes Bank Ltd amounting to Rs. 2400 Lacs (Previous year Rs. 1850 Lacs) is secured by a first pari passu charge on the fixed assets and second pari passu charge on the current assets of the Company, both present and future. (b) Term loan – I from Punjab National Bank amounting to Rs. 200 Lacs (Previous year Rs. 300 Lacs) is secured by first pari passu charge on immovable assets by way of joint equitable mortgage and by way of hypothecation of movable fixed assets of the Company. (c) Term loan - II from Punjab National Bank amounting to Rs. 3521 Lacs (Previous year Nil) is secured by a first pari passu charge on the fixed assets and second pari passu charge on the current assets of the Company, both present and future. (d) Term loan from Oriental Bank of Commerce amounting to Rs. 2819 Lacs (Previous year Nil) is secured by a first pari passu charge on the fixed assets and second pari passu charge on the current assets of the Company, both present and future. (e) Fund based working capital facilities from banks are secured by a first pari passu hypothecation charge on all current assets and a second hypothecation charge on immovable and movable fixed assets of the Company, both present and future.

6 In 2003-04, the Company had signed an amendment to the Joint Venture Agreement (“JVA”) with New York Life International Inc. (“NYLI”). In terms of the amended JVA, both the parties agreed that the Company shall not transfer or otherwise dispose its shareholding to an extent of 24% of the paid up issued share capital (“Restricted Shares”) of Max New York Life Insurance Company Ltd (“MNYL”) to any person other than NYLI. The parties also agreed that NYLI shall pay to the Company the aggregate par value equal to 24% of the paid up issued share capital of MNYL from time to time. The aforesaid payment may be applied by NYLI to purchase the Restricted Shares of MNYL from the Company, when and to the extent permitted pursuant to applicable laws by March 2010 or become repayable thereafter. The Company has received Rs. 17420.55 Lacs (Previous year Rs. 13220.55 Lacs) in aggregate from NYLI till March 31, 2007, in accordance with the aforesaid agreement.

7 Pursuant to shareholders approval in Extra-ordinary General Meeting of the Company held on February 26, 2007, each equity share of the Company, having a face value of Rs. 10/- each was subdivided into 5 fully paid equity shares of the face value of Rs. 2/- each, w.e.f. March 19, 2007.

8 Income Tax Cases (a) In the case of an erstwhile subsidiary of the Company, Max Telecom Ventures Ltd. (“MTVL”) (since merged with the Company with effect from December 1, 2005), a demand of Rs. 9503.93 Lacs was raised by the income tax authorities for the assessment year 1998-99 denying exemption under section 10(23G) of the Income Tax Act, 1961 on capital gains realized by MTVL from the sale of shares of Hutchison Max Telecom Limited. On appeal by MTVL, the CIT (Appeals) quashed the order of the Assessing Officer and the demand was

66 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

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cancelled. The tax authorities have filed an appeal against this order with the Income-Tax Appellate Tribunal ("ITAT"), which appeal is pending as on date. Subsequently, in the next assessment year, i.e. 1999-00, the above-mentioned transaction was once again sought to be taxed under a different head of income (i.e., business income) on a protective basis by the Assessing Officer as MTVL had asked the tax authorities to treat the transaction as that arising in AY 1999-00 and not in AY 1998-99. This, along with a few other additions, resulted in creation of a further demand of Rs. 25630.03 Lacs {which included the demand of Rs. 25002.53 Lacs on protective basis}. On appeal by MTVL, the CIT (Appeals) decided in favor of MTVL and cancelled the demand raised. The tax authorities have filed appeal against this order with ITAT, which appeal is pending as on date. On appeal by MTVL, the ITAT during the year concluded that the share sale transaction falls in the accounting period relating to AY 1998-99.

(b) The Company has received the following demands under section 156 relating to income tax assessments: (RS. LACS) Assessment year Demand 1999-2000 5.67 2000-2001 5.25 2001-2002 15.65 2002-2003 41.77 2004-2005 0.76 The above relate to certain disallowances and other matters and are in various stages of appeal with the CIT(Appeals)/ITAT.

Further, in the following cases, penalty under section 271(1)(c) of the Income Tax Act, 1961 has been levied for which the Company is in appeal before the CIT (Appeals): (RS. LACS) Assessment year Demand 1992-1993 19.05 1993-1994 14.63

9 Employee Stock Option Plan – 2003 (“the 2003 Plan”): The Company had instituted the 2003 Plan, which was approved by the Board of Directors in August 2003 and by the shareholders in September 2003. The 2003 Plan provides for grant of stock options aggregating not more than 5% of number of issued equity shares of the Company to eligible employees and directors of the Company. The 2003 Plan is administered by the remuneration committee appointed by the board of directors.

Details of the 2003 Plan are given below: (Nos.) Particulars Year Ended Year Ended March 31, 2007 March 31, 2006 Options outstanding, beginning of the year 22,750 3,12,250 Options granted during the year 7,26,595 22,750 Exercised during the year 7,580 3,12,250 Options outstanding, end of the year 7,41,765 22,750

Adjusted after share split (Refer note B7 above) 10 Deferred Tax The break up and movement of deferred tax assets and deferred tax liabilities into major component is given below: (RS. LACS) Particulars Opening As at Movement Closing As at April 01, 2006 During the Year March 31,2007 Deferred Tax Liability Depreciation 979.33 638.25 1617.58 Deferred Revenue Expenses and preoperative expenditure 26.50 (26.50) - Deduction u/s 35D/35DD 0.11 - 0.11 1005.94 611.75 1617.69 Deferred Tax (Asset) Deduction u/s 43B (70.62) (8.79) (79.41) Other Provisions (410.82) (22.57) (433.39) (481.44) (31.36) (512.80) Net Deferred Tax Liability/(Asset) 524.50 580.39 1104.89 Note: Deferred tax assets are created to the extent of their realisability in future.

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11 Directors’ Remuneration Directors’ remuneration paid/provided for in the accounts: (RS. LACS) Particulars Current Year Previous Year (a) Salary, wages and allowances 562.30 148.18 (b) Contribution to provident fund and superannuation fund 24.30 24.30 (c) Value of perquisites 38.63 0.44 Total 625.23 172.92 The above does not include leave encashment, gratuity and ESOP. Notes: During the year, the Company paid remuneration to the executive directors in accordance with the resolutions passed by the Remuneration Committee of the Board of Directors and the Shareholders. An amount of Rs. 230.44 Lacs (Previous year Rs. 153.85 Lacs) was paid to the executive directors in excess of the limits prescribed under Section II of Part II of Schedule XIII to the Companies Act, 1956. The Company is in the process for obtaining requisite approvals from the Central Government for the same. In view of the aforesaid, the excess amounts of Rs. 230.44 Lacs for the current year and Rs. 21.43 Lacs * for the earlier years, received by the concerned directors, are held by them in trust for the Company. Remuneration for current year also includes an amount of Rs. 162.31 Lacs (Previous year Nil) relating to earlier years for which the Company has received Central Government approval during the year.

* Includes Rs. 5.77 Lacs held by a former director.

12 Earnings per Share (Also refer Note B7) Calculation of EPS (Basic and Diluted) Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Basic Profit after tax (Rs. Lacs) 1422.01 588.83 Weighted average number of Equity Shares 17,92,23,238 16,73,90,085 EPS (Rupees) 0.79 0.35 Equity Share Details (Nos) Outstanding as at the beginning of the year 17,45,51,550 13,62,42,800 Issued on May 17, 2006 53,42,925 - Issued on December 20, 2006 7,580 - Issued on June 06, 2005 - 3,79,96,500 Issued on March 07, 2006 - 3,12,250 Outstanding as at the end of the year 17,99,02,055 17,45,51,550 Diluted Profit after tax (Rs. Lacs) 1422.01 588.83 Weighted average number of Equity Shares 18,04,86,557 17,57,51,280 EPS (Rupees) 0.79 0.34 Equity Share Details (Nos) Outstanding as at the beginning of the year 17,99,17,225 15,69,44,475 ESOP granted under the 2003 Plan 7,26,595 22,750 Issued on June 06, 2005 - 3,79,96,500 Convertible Warrants allotted/forfeited on June 06, 2005 - (1,50,46,500) Outstanding as at the end of the year 18,06,43,820 17,99,17,225

Reconciliation of denominators used for calculating basic and diluted earnings per share:

Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Denominator used for computing basic Earnings Per Share 17,92,23,238 16,73,90,085 Add :-Dilutive impact of - (i) ESOPs exercised under the 2003 Plan 20,632 2,90,865 (ii) ESOPs granted under the 2003 Plan 5,69,332 6,670 (iii) Convertible Warrants 6,73,355 80,63,660 Denominator used for computing diluted Earnings Per Share 18,04,86,557 17,57,51,280

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13 Miscellaneous Expenditure (RS. LACS) Particulars As at Additions Amortised As at April 01, 2006 during the year March 31, 2007 Preliminary Expenses 0.63 - 0.32 0.31 Deferred Employee Compensation* 24.17 1051.67 442.79 633.05 24.80 1051.67 443.11 633.36 * Amortisation has been charged to salaries, wages and bonus. 14 On June 1, 2006, the Company sold its entire stake in Max Estates Ltd. and Malsi Estates Ltd. (both wholly owned subsidiaries) to Malsi Holdings Ltd. for a consideration of Rs. 515 Lacs. The profit on divestment of stake of Rs. 504.99 Lacs is included under the head “Income from Investment Activities”.

15 Investments The details of investments are given below:

As at March 31, 2007 As at March 31, 2006 Particulars Face Numbers Value Numbers Value Value (Rs.) (Rs. Lacs) (Rs. Lacs)

SUBSIDIARIES, AT COST Equity Shares Max Estates Ltd. # 10 - - 50,000 5.01 Malsi Estates Ltd. # 10 - - 50,000 5.01 Max Ateev Ltd. 10 3,14,43,600 3144.36 3,14,43,600 3144.36 Provision for Diminution (3144.36) (3144.36) Max New York Life Insurance Company Ltd. 10 53,65,00,014 53650.00 40,70,00,014 40700.00 Max Healthcare Institute Ltd. 10 16,61,00,000 16610.00 14,44,89,127 14448.91 Pharmax Corporation Ltd. 1 4,71,17,247 1420.65 4,71,17,247 1420.65 Neeman Medical International (Asia) Ltd. 10 41,66,813 416.68 41,66,813 416.68 Max UK Ltd. GBP 1 2,99,742 213.00 2,99,742 213.00 Max Healthstaff International Ltd. 10 39,45,000 447.87 39,45,000 447.87 Neeman Medical International BV Euro 500 38 3334.69 36 7.21 Max Visions Inc. USD 30 10,000 94.50 10,000 94.50 Provision for Diminution (94.50) (94.50) 76092.89 57664.34 Preference Shares Pharmax Corporation Ltd.-9% CRPS 100 15,00,000 1500.00 15,00,000 1500.00 Neeman Medical International (Asia) Ltd. 10 50,000 5.00 50,000 5.00 1505.00 1505.00 LONG TERM NON TRADE (QUOTED), AT COST Equity Shares ICICI Bank Ltd. 10 250 0.65 250 0.65 0.65 0.65 LONG TERM NON TRADE (UNQUOTED), AT COST Equity Shares Investment Research & Information Services Ltd. 10 2,30,000 253.00 2,30,000 253.00 Less: Provision for diminution (253.00) (253.00) - -

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As at March 31, 2007 As at March 31, 2006 Particulars Face Numbers Value Numbers Value Value (Rs.) (Rs. Lacs) (Rs.Lacs)

CURRENT NON TRADE (UNQUOTED), AT COST Units in Mutual Fund ABN AMRO FTP-Series 6-Quarterly Plan-C Dividend 10 5,13,25,701 5132.57 - - Birla Sun Life Cash Manager-IP–Daily Dividend 10 - - 10,00,578 100.08 DSP Merrill Lynch Liquidity Fund – Institutional–Daily Dividend 1000 20,003 200.07 2,42,656 2427.04 DSP Merrill Lynch Liquid Plus-Institutional– Daily Dividend 1000 2,55,403 2554.29 - - DSP Merrill Lynch Fixed Term Plan– Series 1C-Dividend 10 - - 7,50,00,000 7500.00 Grindlays Fixed Maturity-21st Plan- Dividend 10 - - 5,04,71,000 5047.10 HDFC Cash Management Fund Savings Plan- Daily Dividend 10 - - 1,72,40,701 1833.79 HSBC Cash Fund-Institutional- Weekly Dividend 10 58,43,853 585.04 - - HSBC Floating Rate Fund-Short Term-Institutional Option-Daily Dividend 10 - - 65,73,091 658.18 Kotak FMP-Series-XV & XVI-Dividend 10 - - 9,59,50,319 9595.05 Kotak FMP 3M Series 14-Dividend 10 5,00,00,000 5000.00 - - Kotak Liquid-Institutional Premium- Daily Dividend 10 6,67,515 81.62 - - Principal Cash Management Fund Liquid Option 10 - - 94,31,329 943.20 Instl. Prem. Plan-Dividend Reinvestment Daily Principal Pnb Fixed Maturity Plan-91 Days-Series I 10 - - 5,04,91,823 5049.20 Prudential ICICI Institutional Liquid Plan– SI- Daily Dividend 10 - - 2,52,90,316 2529.03 Reliance FMF Quarterly Plan III Series II Dividend Option 10 - - 3,00,00,000 3000.00 Reliance FHF-I Quarterly Plan I Series IV Dividend Option 10 1,90,00,000 1900.00 - - Standard Chartered FMP-Quarterly Series 6-Dividend 10 7,90,01,564 7900.16 - - Tata Liquid-Super High Investment Fund-Daily Dividend 1000 2,86,479 2871.27 4,16,771 4644.94 UTI Liquid Cash Plan Institutional–Daily Dividend 1000 1,96,601 2004.24 - - 28229.26 43327.61

TOTAL 105827.80 102497.60

# Also see note B14

Purchases Sales Face Name of the Investment value per Shares/Units Value Shares/Units Value Share (Numbers) (Rs. Lacs) (Numbers) (Rs. Lacs) (Rupees)

MOVEMENT IN INVESTMENTS IN SUBSIDIARIES Max New York Life Insurance Company Ltd. 10 12,95,00,000 12950.00 - - Max Healthcare Institute Ltd. 10 2,16,10,873 2161.09 - - Neeman Medical International BV EURO 500 2 3327.48 - - Max Estates Ltd. 10 - - 50,000 117.80 Malsi Estates Ltd. 10 - - 50,000 397.20

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Purchases Sales Face Name of the Investment value per Shares/Units Value Shares/Units Value Share (Numbers) (Rs. Lacs) (Numbers) (Rs. Lacs) (Rupees)

MOVEMENT IN CURRENT NON TRADE INVESTMENTS (UNQUOTED): ABN AMRO FTP-Series – Quarterly Plan – 10 25,21,03,180 25409.13 20,07,77,480 20276.56 Dividend ABN AMRO Floating Rate Fund-IP- Daily Dividend 10 5,12,43,392 5126.52 5,12,43,392 5126.52 Birla Cash Plus-Instt Premium- Daily Dividend 10 3,03,93,584 3045.28 3,13,94,162 3145.36 DSP Merrill Lynch FRF-Daily Dividend 1000 7,84,325 7844.82 10,06,978 10071.79 DSP Merrill Lynch Liquid Plus Fund- 1000 5,17,350 5174.04 2,61,948 2619.75 Daily Dividend DSP Merrill Lynch FMP - Dividend 1000 13,840 138.44 7,63,840 7638.44 HDFC Cash Management Fund Saving Plan 10 83,670 8.90 1,73,24,371 1842.69 - Daily Dividend HSBC Cash Fund Institutional Plus- Daily Dividend 10 93,89,551 939.48 1,59,62,641 1597.66 HSBC Cash Fund Institutional Plus- 10 1,25,83,482 1259.71 67,39,629 674.67 Weekly Dividend Kotak Liquid Institutional Premium- 10 13,21,76,090 16162.62 13,15,08,575 16081.00 Daily Dividend Kotak FMP 3M Series - Dividend 10 12,57,25,133 12626.12 17,16,75,451 17221.17 Principal Cash Management Fund – 10 6,79,87,056 6799.18 7,74,18,385 7742.38 Liquid Institutional-Daily Dividend Principal Pnb Fixed Maturity FMP - 10 1,74,27,436 1742.74 6,79,19,259 6791.94 91 Days-dividend Prudential ICICI Liquid Super Institutional 10 1,75,73,471 1757.35 4,28,63,787 4286.38 – Daily Dividend Reliance Fixed Horizon Fund Monthly/ 10 57,67,68,205 53027.53 58,77,68,205 54127.53 Quarterly Plan– Dividend Reliance Fixed Horizon Fund Monthly/ 10 12,90,00,000 12978.70 12,90,00,000 12978.70 Quarterly Plan - Growth Reliance Liquidity Fund – Daily Dividend 10 15,53,13,826 15536.20 15,53,13,826 15536.20 Standard Chartered Liquidity Manager 1000 5,70,162 5702.19 5,70,162 5702.19 Plus – Daily Dividend Standard Chartered Fixed Maturity Plan- 10 7,92,50,891 7925.09 5,07,20,327 5072.03 Dividend Tata Liquid Super High Investment Fund- 1000 3,61,540 4029.44 7,78,312 8674.38 Daily Dividend Tata Floating Rate Short Term Institutional 10 1,13,39,596 4212.73 1,10,53,117 1341.47 Plan - Daily Dividend Tata Fixed Horizon Fund Series 5 Scheme 10 6,94,64,658 6946.49 6,94,64,658 6946.49 C/D - Dividend Templeton India TMA Institutional 1000 1,96,524 1965.73 1,96,524 1965.73 Plan-Daily Dividend Templeton India TMA Super Institutional 1000 1,99,528 1995.78 1,99,528 1995.78 Plan-Daily Dividend UTI Liquid Cash Plan Institutional- Daily Income 1000 1,96,601 2004.24 - -

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16 Small scale industries The dues of small scale industrial undertakings to whom the Company owes any sum outstanding for more than thirty days as at the Balance Sheet date are Hitkari Industries Limited, Protective Packaging Solutions, Soma Block Board & Ply, Saraswati Packers, Triyami Packaging Pvt. Ltd., Wasco Industries. Additionally, the Company is in the process of identifying Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006. Therefore, it is not possible for the Company to ascertain whether payment to such enterprises has been made within 45 days from the date of acceptance of goods supplied or services rendered by such enterprise and to make requisite disclosure.

17 Segment Reporting (a) Business Segments The Company has considered business segment as the primary segment for disclosure. The products/ services included in each of the reported business segments are as follows: * Speciality Plastic Products - The manufacturing facility located at Railmajra, Nawanshahr (Punjab), produces packaging films supported with polymers of propylene, leather finishing transfer foils and related products. * Business Investments - The Company has business investments in companies operating in the areas of Life Insurance, Healthcare and Clinical Research businesses. These investments along with its treasury investments have been combined to form Business Investment Segments. The above business segments have been identified considering: (i) The nature of products and services (ii) The differing risks and returns (iii) Organisational structure of the group, and (iv) The internal financial reporting systems.

Segment Revenue consists of revenue from external customers only since there are no significant inter segment transfers. Segment Result is the difference of segment revenue and segment operating expenses. Unallocated Assets include assets pertaining to the corporate office such as loans, advance and deposits. Unallocated Liabilities include tax provisions and interest bearing loans not directly related to any business segment. Unallocated Expenses - Expenses incurred at corporate office relate to various business segments. As there is no reasonable basis of allocating this expenditure to various segments, the same are shown as unallocated reconciling expenses. Interest expense is not treated as part of a segment expense and is reflected as a separate line item, except interest on loans allocated to business segment.

(b) Geographical Segments The Company has considered geographical segment as secondary reporting segment for disclosure. For this purpose, the revenues are bifurcated based on location of customers in India and outside India (primarily Europe and North America). Primary Segments (RS. LACS) Particulars Specialty Business Total Plastic Products Investments a) Segment Revenue from: Sales to External Customers 16310.63 - 16310.63 (13123.44) (-) (13123.44) Income from Investment Activities - 2776.25 2776.25 (-) (1475.91) (1475.91) Other Income 312.14 - 312.14 (324.29) (-) (324.29) Total Segment Revenue 16622.77 2776.25 19399.02 (13447.73) (1475.91) (14923.64) Interest Income 11.21 (2.10) Unallocated Income 160.71 [(44.02)] Total Revenue 19570.94 (14881.72)

b) Segment Results 1590.15 2776.25 4366.40 (1429.15) (1456.95) (2886.10) Interest Income 11.21 (2.10) Less:- Unallocated Expenses 1882.06 (1583.16) Interest Expense 453.11 (953.54)

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Primary Segments (RS. LACS) Particulars Specialty Business Total Plastic Products Investments

Profit Before Tax 2042.44 (351.50) Provision for Taxation (Includes Provision for Deferred Tax Liabilities) 620.43 ((237.33)) Profit After Tax 1422.01 (588.83) c) Carrying Amount of Segment Assets 21951.67 109636.84 131588.51 (9638.56) (108436.59) (118075.15) Unallocated Assets 1778.52 (1162.33) Total Assets 133367.03 (119237.48) d) Segment Liabilities 10302.82 2.88 10305.70 (2140.42) (43.53) (2183.95) Unallocated Liabilities 22736.27 (21095.86) Total Liabilities 33041.97 (23279.81) e) Cost to Acquire Tangible and Intangible Fixed Assets 11894.84 - 11894.84 (122.90) (-) (122.90) Unallocated 28.46 (77.33) Total Addition 11923.30 (200.23) f) Depreciation and Amortisation Expense 481.42 - 481.42 (513.98) (-) (513.98) Unallocated Depreciation and Amortization 94.98 (101.30) Total Depreciation and Amortisation 576.40 (615.28) g) Non-Cash Expenses other than Depreciation and Amortisation 32.81 - 32.81 (37.34) (291.96) (329.30) Unallocated Non Cash Expenses 63.80 (41.23) Total 96.61 (370.53)

Secondary Segments (RS. LACS) Particulars India Outside India Total a) Revenue from External Customers 16212.93 3186.09 19399.02 (12790.40) (2133.24) (14923.64) b) Carrying Amount of Segment Assets by Location of Assets 126626.58 4961.93 131588.51 (114573.45) (3501.81) (118075.26) c) Cost to Acquire Tangible and Intangible Fixed Assets by Location of Assets 11894.84 - 11894.84 (122.90) (-) (122.90) Notes : (i) Reconciliation of revenue – Sales shown above includes Scrap sale of Rs. 776.16 Lacs (Previous year Rs. 638.04 Lacs) classified as Other Income in Profit and Loss Account. (ii) Figures in brackets are for previous year.

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18 Related Parties (as identified by the management) are classified as:

Subsidiaries Max New York Life Insurance Company Ltd., Max Ateev Ltd., Neeman Medical International BV, Neeman Medical International NV, Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A., Max Medical Services Ltd., Max Healthcare Institute Ltd., Alps Hospital Pvt. Ltd. (w.e.f. April 6, 2006), , Max UK Ltd., Pharmax Corporation Ltd., Neeman Medical International (Asia) Ltd., Max HealthStaff International Ltd. (w.e.f June 30, 2005), Max Estates Ltd.*, Malsi Estates Ltd.*, Max Asia Pac Ltd.**, Max Telecom Ventures Ltd.**

Joint Ventures and Associates Max HealthStaff International Ltd. (till June 29, 2005), CMax Infocom Pvt. Ltd. (till April 16, 2005)

Key Management Personnel (Directors) Mr. Analjit Singh, Mr. B Anantharaman

Relatives of Key Management Personnel Mr. Veer Singh

Enterprises over which Key Management Liquid Investments & Trading Company, New Delhi House Services Ltd., Medicare Investments Personnel have Significant Influence Ltd., Maxopp Investments Ltd., Cheminvest Ltd., Pivet Finances Ltd., Lakeview Enterprises, Delhi Guest House Pvt Ltd., Trophy Holdings Pvt. Ltd., Boom Investments Pvt. Ltd., M.V. Healthcare Services Pvt. Ltd., ND Callus Info Services Pvt. Ltd.,Malsi Holdings Ltd., Dynavest India Pvt. Ltd., Scorpio Beverages Pvt. Ltd., Trophy Guest Houses & Resorts Pvt. Ltd., Trophy Estates Pvt. Ltd., Gaylord Impex Ltd., Pen Investments Ltd., Mohair Investment, PVT Investment Ltd., TVP Investments Pvt. Ltd., BAS Investments Pvt. Ltd., Vitasta Estate Pvt. Ltd., Terra Planet Estate Pvt. Ltd., Malsi Estates Ltd. (w.e.f. June 1, 2006), Max Estates Ltd. (from June 1, 2006 to August 31, 2006)

Employee Benefit Funds Max India Ltd. Employees Provident Fund Trust, Max India Ltd. Superannuation Fund

* Subsidiaries till May 31, 2006 ** Subsidiaries till November 30, 2005

74 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business are as follows: (RS. LACS) Particulars Subsidiaries Joint Key Relatives Enterprises Employee Ventures and Management of key over which Benefit Funds Associates Personnel Management Key Personnel Management Personnel have Significant Influence 1 Fixed Assets Transferred 0.27 - - - - - (9.99) (-) (-) (-) (-) (-) 2 Fixed Assets Purchased ------(0.03) (-) (-) (-) (-) (-) 3 Deposits and Advances given - - 234.49 - - - (-) (-) (165.16) (-) (-) (-) 4 Loans Taken ------(-) (-) (-) (-) (164.00) (-) 5 Deposits and Advances Accepted ------(8.15) (-) (-) (-) (-) (-) 6 Loans given 1530.84 - - - - - (1348.59) (108.00) (-) (-) (-) (-) 7 Income and Reimbursement - Interest Income 89.96 - - - - - (268.94) (9.10) (-) (-) (1.63) (-) - Reimbursement of Expenses 587.46 - - - 12.90 - (1154.42) (4.50) (-) (-) (17.38) (-) 8 Expense - Services Received - - - - 134.28 - (-) (-) (-) (-) (107.33) (-) - Interest Paid ------(-) (-) (-) (-) (63.74) (-) - Other Expenses 255.66 - - 9.08 50.26 - (207.35) (-) (-) (9.08) (52.61) (-) - Directors’ Remuneration - - 625.23 - - - (-) (-) (172.92) (-) (-) (-) - Company’s Contribution - - - - - 79.08 to Trust (-) (-) (-) (-) (-) (71.78) 9 Investments - Made 15110.09 - - - - - (10730.00) (-) (-) (-) (250.00) (-) - Share Application Money 723.25 - - - - - Pending Allotment (-) (-) (-) (-) (-) (-) - Sold - - - - 515.00 - (-) (1218.11) (-) (-) (-) (-) -Conversion of Loan into Equity 3327.48 - - - - - (4070.00) (-) (-) (-) (-) (-) 10 Amount Outstanding - Corporate Guarantee 24000.00 - - - - - (24000.00) (-) (-) (-) (-) (-) - Against Loan given 2616.46 - - - - - (4933.92) (-) (-) (-) (-) (-) - Interest Receivable ------(47.71) (-) (-) (-) (-) (-) - Other Receivable 1121.94 - 250.16 - - - (969.02) (-) (189.05) (-) (-) (-) - Other Payable 2.88 - - - 19.24 - (43.53) (-) (-) (-) (8.54) (-) Other relevant information - i) The above excludes sitting fees Rs. 7.29 Lacs (Previous year Rs. 7.89 Lacs) paid to non-executive directors. ii) Previous year’s figures are given in brackets.

MAX INDIA ANNUAL REPORT 2006-07 75 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

19 Leases Accounting for leases has been done in accordance with Accounting Standard-19 issued by the ICAI. Following are the details of lease transactions for the year:

(a) Finance Lease The Company does not have any finance lease arrangement.

(b) Operating Lease (i) Lease rentals recognised in the Profit and Loss account for the year is Rs. 182.87 Lacs (Previous year Rs. 182.32 Lacs). (ii) The Company has entered into operating leases for its office and for employees’ residence that are renewable on a periodic basis and cancellable at Company’s option. The Company has not entered into sublease agreements in respect of these leases. (iii) The total of future minimum lease payments under non-cancellable leases are as follows: (RS. LACS) Particulars March 31, 2007 March 31, 2006 Not later than one year - 6.41 Later than 1 year and not later than 5 years - - Total - 6.41

ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPH 3, 4C AND 4D OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956:

20 Details of Stock of Securities: Equity Shares Particulars Current Year Previous Year Numbers Value (Rs. Lacs) Numbers Value (Rs. Lacs) Opening Balance 8,27,466 0.16 8,70,305 7.73 Sales - - 42,839 26.70 Closing Stock 8,27,466 0.16 8,27,466 0.16

21 A. (i) Installed Capacity and Actual Production

Product Unit Installed Capacity * Actual Production (Annual) BOPP Film Tonnes 29,150# 15,182.96** (11,550) (13,374.89) Soft Leather Finishing Foil Lacs (SFT) 320 118.90 (320) (104.55) Figures in brackets are for previous year Notes: Licensed capacity is not applicable. * Annual installed capacities are certified by the management. ** Includes captive consumption 3198.61 Tonnes (Previous year 3203.05 Tonnes). # Includes additional capacity 17,600 Tonnes installed during the year. (ii) Stock of Finished Goods Product Unit Opening Stock Closing Stock Quantity Value Quantity Value (Rs. Lacs) (Rs. Lacs) Manufactured BOPP Film Tonnes 26.03 24.54 25.59 46.47 (53.80) (58.22) (26.03) (24.54) Soft Leather Finishing Foil Lacs (SFT) 0.54 2.36 0.89 3.10 (0.40) (1.87) (0.54) (2.36) Traded Soft Leather Finishing Foil Lacs (SFT) 0.73 7.71 0.61 6.43 (0.66) (7.35) (0.73) (7.71) Total 34.61 56.00 (67.44) (34.61) Figures in brackets are for previous year

76 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(iii) Turnover Product Unit Quantity Value (Rs. Lacs) a) Manufactured Goods BOPP Film Tonnes 11984.79 16554.25 (10199.61) (13238.81) Soft Leather Finishing Foil Lacs (SFT) 118.55 1092.95 (104.41) (966.58) b) Traded Goods Soft Leather Finishing Foil Lacs (SFT) 0.84 13.92 (1.85) (29.41) Total 17661.12 (14234.80) Figures in brackets are for previous year

(iv) Purchase of Finished Goods Product Unit Current Year Previous Year Quantity Value Quantity Value (Rs. Lacs) (Rs. Lacs) Soft Leather Finishing Foil Lacs (SFT) 0.72 7.22 1.92 16.56 Total 0.72 7.22 1.92 16.56

(v) Raw Materials Consumed Materials Unit Current Year Previous Year Quantity Value Quantity Value (Rs. Lacs) (Rs. Lacs) Polypropylene Tonnes 10148.01 6593.48 9,684.99 5443.48 Polypropylene Compounds Tonnes 1086.79 1113.17 997.52 1030.97 Others * - 2829.35 - 1182.82 Total 10536.00 7657.27 * It is not practicable to furnish quantitative information in view of large number of items, each being less than ten percent in value of total.

(vi) Consumption of Raw Materials, Stores and Spares

Materials Current Year Previous Year Value % of Value % of (Rs. Lacs) Consumption (Rs. Lacs) Consumption Raw Materials - Imported 3535.32 33.55 2212.74 28.90 - Indigenous 7000.68 66.45 5444.53 71.10 Total 10536.00 100.00 7657.27 100.00 Store and Spares - Imported 64.04 24.71 57.72 22.43 - Indigenous 195.13 75.29 199.63 77.57 Total 259.17 100.00 257.35 100.00

B. Value of Imports calculated on CIF Basis (RS. LACS) Particulars Current Year Previous Year Raw Materials 3366.93 1887.79 Components and Spare Parts 153.89 65.66 Capital Goods 7721.92 0.26 Trading Goods 5.15 11.90 Total 11247.89 1965.61

MAX INDIA ANNUAL REPORT 2006-07 77 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

C. Expenditure in Foreign Currency* (RS. LACS) Particulars Current Year Previous Year Legal and Professional 112.79 32.64 Technical Know-how 7.28 - Others 63.56 89.68 Total 183.63 122.32 * Excludes amounts spent on Investments

D. Earnings in Foreign Currency (RS. LACS) Particulars Current Year Previous Year Exports on FOB basis 3081.17 2041.95 Total 3081.17 2041.95

22 Auditors’ Remuneration (RS. LACS) Particulars Current Year Previous Year Audit fees (including service tax) 13.48 13.78 Out of pocket expenses 0.78 0.36 Total 14.26 14.14

23 Preferential Issue Proceeds Details of additions: (RS. LACS) Particulars Current Year Previous Year Opening balance - 2255.40 Addition: On preferential allotment of shares 1893.45 15198.60 Total 1893.45 17454.00 Utilizations: Investments in subsidiary companies 1893.45 10263.52 Redemption of debentures, repayment of loans and interest thereon - 7190.48 Closing Balance - -

24 Securities Premium Account (i) Details of additions: (RS. LACS) Particulars Current Year Previous Year 1. On preferential allotment of shares 2030.31 14438.67 2. Exercise of Stock Option 8.92 253.33 3. Transfer pursuant to the Scheme of Amalgamation - 3865.79 Total 2039.23 18557.79

(ii) Details of utilization: (RS. LACS) Particulars Current Year Previous Year 1. Legal and Professional - 17.54 2. Custodian Fee and Share Transfer Stamp Fee - 8.38 3. Utilized/adjusted pursuant to the Scheme of Amalgamation - 9832.24 Total - 9858.16

78 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

25 During the year, Rs. 16.88 Lacs (Previous year Rs. 15.54 Lacs) has been charged to the Profit and Loss account relating to Research and Development expenditure under the head Raw Material – Consumed.

26 During the year, the Company shared the services of some of its employees and facilities with group companies. Consequently, the share of costs attributable to these companies has been charged out to the relevant group company.

27 Shareholders in Extra-ordinary General Meeting of the Company held on March 23, 2007 approved issuance of equity shares or any such instruments / securities to Qualified Institutional Buyers under Chapter XIII-A of the Securities & Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000, in one or more tranches, for an aggregate amount upto Rs. 1000 Crores. Subsequent to the year end, the Company has received in-principle approvals from National Stock Exchange and Bombay Stock Exchange.

28 Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year’s classification.

For and on behalf of the Board of Directors

N.C. SINGHAL Director DR. S.S. BAIJAL Director N. RANGACHARY Director B. ANANTHARAMAN Joint Managing Director

New Delhi NEERAJ BASUR Vice President-Corporate Finance MAY 17, 2007 V. KRISHNAN Company Secretary

MAX INDIA ANNUAL REPORT 2006-07 79 MAX INDIA LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 0 8 0 3 1 State Code 1 6

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Others N I L 1 0 7 0 1

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 1 2 8 9 9 6 5 5 1 2 8 9 9 6 5 5 SOURCES OF FUND Paid-up Capital Reserves and Surplus 3 5 9 8 0 4 9 6 7 2 7 0 2 Secured Loans Unsecured Loans 1 0 0 8 4 2 3 6 1 8 2 Advances from Others Deferred Tax Liability(Net) 1 7 4 2 0 5 5 1 1 0 4 8 9 APPLICATION OF FUNDS Net Fixed Assets Investments 1 7 1 4 0 0 0 1 0 5 8 2 7 8 0 Net Current Assets Misc. Expenditure 5 3 9 5 3 9 6 3 3 3 6 Accumulated Losses N I L IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 1 9 6 5 3 7 8 1 7 6 1 1 3 4

+- Profit before Tax +- Profit after Tax 2 0 4 2 4 4 1 4 2 2 0 1 +- Basic Earning Per Share in Rupees Dividend Rate (%) 0 . 7 9 N I L +- Diluted Earning Per Share in Rupees 0 . 7 9

V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY Item Code No. (ITC Code) 3 9 2 0 . 2 0

Product Description F I L M S S U P P O R T E D W I T H P O L Y M E R S O F P R O P Y L E N E

80 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED

DISCLOUSRE OF LOANS/ADVANCES AND INVESTEMENTS

AS REQUIRED UNDER CLAUSE 32 OF THE LISTING AGREEMENT FOR THE FINANCIAL YEAR ENDED MARCH 31, 2007 (RS. LACS) Amount Outstanding S.No. Name As of Maximum amount March 31, 2007 during the year I. Loans and advances in the nature of loans A. To Subsidiaries A.1 Max Ateev Ltd. 674.49 680.84 A.2 Pharmax Corporation Ltd. 358.00 1317.55 A.3 Max HealthStaff International Ltd. 1216.62 1216.62 A.4 Neeman Medical International (Asia) Ltd. 367.34 367.34

B. To Associates Nil Nil

C. Where there is no repayment schedule or repayment beyond seven years Nil Nil

D Where there is no interest or interest below Section 372A of Companies Act Nil Nil

E To firms/Companies in which directors are interested Nil Nil

II. Investments by the loanee in the shares of parent company and subsidiary company when the company has made loan or advance in the nature of loan Nil Nil

MAX INDIA ANNUAL REPORT 2006-07 81 MAX INDIA LIMITED Chairman Holding Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Company Subsidiary Company's 31.03.2007 interest as at interest incorporating Year/Period of Year/Period Changes Since Close of Financial ANALJIT SINGH NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL For the Previous (Rs. Lacs) (Rs. Financial Years NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL Company's Account For the For and on behalf of the Board of Directors For and on behalf of the Board Current (Rs. Lacs) (Rs. Net aggregate amount of Net aggregate which are dealt within the which are after deducting its losses or Financial Year Subsidiary Company's profits vice-versa, so far as it concerns Members of Holding Company NIL 317.42 (110.17) (155.07) (977.93) (379.53) (897.80) (2413.21) (9255.54) (3755.35) (5383.82) (5244.20) For the Previous (28247.98) (Rs. Lacs) (Rs. Financial Years 1.96 3.53 Company's Account (3.66) 320.45 195.14 (27.26) (270.98) (390.35) (532.27) (132.84) (420.67) Net aggregate amount of Net aggregate For the Current versa, so far as it concerns (4419.13) (1950.15) (Rs. Lacs) (Rs. Subsidiary Company's profits Members of Holding Company which are not dealt within the which are after deducting its losses or vice- Financial Year Extent of Holding 73.25% 72.85% 72.85% 72.85% 85.20% 74.25% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% (ii) Financial Year of Subsidiary Company Financial Year Holding Company's interest as at close of Holding Company's interest 53,65,00,014 Equity Shares of Rs. 10 each 10 of Rs. Equity Shares 53,65,00,014 16,61,00,000 Equity Shares of Rs. 10 each 10 of Rs. Equity Shares 16,61,00,000 1,41,42,535 Equity Shares of Rs. 10 each 10 of Rs. Equity Shares 1,41,42,535 40,700 Equity Shares of Rs. 10 each 10 of Rs. Equity Shares 40,700 41,66,813 Equity Shares of Rs. 10 each 10 of Rs. Equity Shares 41,66,813 4,71,17,247 Equity Shares of Re. 1 each Equity Shares 4,71,17,247 3,14,43,600 Equity Shares of Rs. 10 each 10 of Rs. 3,14,43,600 Equity Shares 3,945,000 Equity Shares of Rs. 10 each 10 of Rs. 3,945,000 Equity Shares 38 Ordinary Shares of Euro 500 each of Euro Shares 38 Ordinary 125 Ordinary Shares of Euro 500 each of Euro Shares 125 Ordinary 494,699 Common Nominative Shares of 494,699 Common Nominative Shares US$ 1 each (Note 5) 325 Shares 2,99,742 Ordinary Shares of GBP 1 each Shares 2,99,742 Ordinary (i) Shareholding relate to which 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 31.03.2007 Accounts Financial Year Held through Max Healthcare Institute Ltd. Max Healthcare Held through Max Medical Services Ltd. Held through Netherlands Neeman Medical International B.V., Held through Neeman Medical International N.V., Netherlands Held through 366.08 Lacs. is US$ 750,000 equivalent Rs. value of 325 shares Paid indicate loss. in brackets Figures STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212(3) AND 212(5) OF THE COMPANIES ACT,1956 OF THE COMPANIES AND 212(5) SECTION 212(3) PURSUANT TO REGARDING SUBSIDIARY COMPANIES STATEMENT Domestic: Company Ltd. Life Insurance Max New York Max Healthcare Institute Ltd. Max Healthcare Max Medical Services Ltd. (Note 1) Alps Hospital Pvt. Ltd. (Note 2) Neeman Medical International (Asia) Ltd. Pharmax Corporation Ltd. Pharmax Corporation Max Ateev Ltd. Max Healthstaff International Ltd. Overseas: Neeman Medical International B.V. Neeman Medical International N.V. (Note 3) Neeman Medical International Latin America, S.A. (Note 4) Neeman Medical International Inc., USA (Note 4) Max UK Ltd., Name of the Subsidiary Company Notes: 1. 2. 3. 4. 5. 6. New Delhi 2007 31, JULY

82 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS AUDITORS’ REPORT

REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS year ended on that date. These financial statements have been OF MAX INDIA LIMITED audited by other auditors whose reports have been furnished to us, 1. We have audited the attached Consolidated Balance Sheet of Max and our opinion, insofar as it relates to the amounts included in India Limited and its subsidiaries as at March 31, 2007, the respect of these subsidiaries, is based solely on the report of the Consolidated Profit and Loss Account for the year ended on that other auditors. date annexed thereto, and the Consolidated Cash Flow Statement for the year ended on that date, which we have signed under 4. We report that the consolidated financial statements have been reference to this report. These consolidated financial statements prepared by the Company in accordance with the requirements of are the responsibility of the Company’s management. Our responsibility Accounting Standard 21, Consolidated Financial Statements, issued is to express an opinion on these consolidated financial statements by the Institute of Chartered Accountants of India and on the basis based on our audit. of the separate audited financial statements of Max India Limited and its subsidiaries included in the consolidated financial statements. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan 5. On the basis of the information and explanations given to us and and perform the audit to obtain reasonable assurance about whether on consideration of the separate audit reports on individual audited the financial statements are prepared, in all material respects, in financial statements of Max India Limited and its aforesaid accordance with an identified financial reporting framework and subsidiaries, in our opinion, the consolidated financial statements are free of material misstatement. An audit includes examining, on give a true and fair view in conformity with the accounting principles a test basis, evidence supporting the amounts and disclosures in generally accepted in India: the financial statements. An audit also includes assessing the (a) in the case of the Consolidated Balance Sheet, of the consolidated accounting principles used and significant estimates made by state of affairs of Max India Limited and its subsidiaries as at management, as well as evaluating the overall financial statement March 31, 2007; presentation. We believe that our audit provides a reasonable basis (b) in the case of the Consolidated Profit and Loss Account, of the for our opinion. consolidated results of operations of Max India Limited and its subsidiaries for the year ended on that date; and 3. We did not audit the financial statements of certain subsidiaries, (c) in the case of the Consolidated Cash flow Statement, of the whose financial statements reflect total assets of Rs. 9.75 crores as consolidated cash flows of Max India Limited and its subsidiaries at March 31, 2007 and total revenues of Rs. 38.46 crores for the for the year ended on that date.

V. NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse MAY 17, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 85 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2007

(RS. LACS)

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 3598.04 3491.03 Warrants against Share Capital 2 - 243.72 Reserves and Surplus 3 56663.61 60423.47 60261.65 64158.22 LOAN FUNDS Secured Loans 4 35278.12 22524.22 Unsecured Loans 5 - Loans and Debentures 3169.11 2477.70 - Advances from Others 17420.55 13220.55 55867.78 38222.47

Deferred Tax Liability (Net) 6 2644.76 1590.07 Policyholders' Liabilities 156709.19 74424.00 Funds for Future Appropriations-Policyholders 625.67 498.88 Minority Interest (Refer Note B4 on Schedule 28) 11886.53 9355.65 287995.58 188249.29 APPLICATION OF FUNDS FIXED ASSETS 7 Gross Block 78476.19 47711.78 Less: Depreciation 18870.52 14850.21 Net Block 59605.67 32861.57 Capital Work in Progress 3230.68 11829.96 62836.35 44691.53

INVESTMENTS 8 212349.07 137255.51

CURRENT ASSETS, LOANS AND ADVANCES Inventories 9 2190.83 1487.07 Sundry Debtors 10 15208.03 8864.51 Cash and Bank Balances 11 5823.87 3636.91 Other Current Assets 12 2995.21 1808.03 Loans and Advances 13 22817.37 16231.71 49035.31 32028.23 Less: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 14 36878.05 22478.19 Provisions 15 498.11 3708.25 37376.16 26186.44

NET CURRENT ASSETS 11659.15 5841.79

MISCELLANEOUS EXPENDITURE 16 1151.01 460.46 (To the extent not written off or adjusted) 287995.58 188249.29 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 28

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date V. NIJHAWAN N.C. SINGHAL Director Partner DR. S.S. BAIJAL Director Membership No. F-87228 N. RANGACHARY Director For and on behalf of B. ANANTHARAMAN Joint Managing Director Price Waterhouse Chartered Accountants Vice President-Corporate Finance New Delhi NEERAJ BASUR MAY 17, 2007 V. KRISHNAN Company Secretary

86 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Sales 20964.37 16422.20 Less: Sales Returns (120.75) (86.42) Excise Duty (2005.90) (1662.98) 18837.72 14672.80 Service Income 17 163052.35 86148.21 Income from Investment Activities 18 14339.93 51942.71 Other Income 19 3122.98 1114.30 199352.98 153878.02

INCREASE/(DECREASE) IN INVENTORY 20 82.84 (97.10) 199435.82 153780.92 EXPENDITURE Manufacturing, Trading and Direct Expenses 21 139991.80 74258.46 Personnel Expenses 22 31451.70 19379.64 General and Administration Expenses 23 25940.98 19764.56 Financial Expenses 24 2978.16 3248.85 Depreciation 7 4622.02 3603.25 204984.66 120254.76

PROFIT/(LOSS) BEFORE TAX (5548.84) 33526.16 Tax Expense 25 1572.53 3966.41 PROFIT/(LOSS) AFTER TAX (7121.37) 29559.75 Funds for Future Appropriations - Policyholders (126.79) (498.88) Consolidation Adjustments 26 2275.11 1885.12 NET PROFIT/(LOSS) (4973.05) 30945.99

PROFIT/(LOSS) BROUGHT FORWARD 12901.13 (18941.72) Forfeiture of Warrants Subscription Money - 271.86 PROFIT BEFORE APPROPRIATIONS 7928.08 12276.13 Appropriations 27 - 625.00 PROFIT CARRIED FORWARD TO THE BALANCE SHEET 7928.08 12901.13

Earnings Per Share (Rs. per equity share of Rs. 2/- each) (Refer Notes B12 and B17 on Schedule 28) Basic (2.77) 18.49 Diluted (2.77) 17.61 Number of Shares used in computing earnings per share Basic 179,223,238 167,390,085 Diluted 180,486,557 175,751,280

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 28

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date V. NIJHAWAN N.C. SINGHAL Director Partner DR. S.S. BAIJAL Director Membership No. F-87228 N. RANGACHARY Director For and on behalf of B. ANANTHARAMAN Joint Managing Director Price Waterhouse Chartered Accountants NEERAJ BASUR Vice President-Corporate Finance New Delhi V. KRISHNAN Company Secretary MAY 17, 2007

MAX INDIA ANNUAL REPORT 2006-07 87 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) Before Tax (5548.84) 33526.16

Adjustments for: Depreciation 4622.02 3603.25 Interest Expense 2561.47 2745.45 Interest Income (8635.91) (4790.06) Dividend Income from Non Trade Investments (2413.79) (861.74) Net (profit) / loss on Sale of Fixed Assets 11.99 25.97 Net (profit) / loss on Sale of Investments (2448.19) (43963.80) Unrealised Gain on Investments (842.01) (2260.31) Amortisation of Miscellaneous Expenditure 45.39 52.81 Fixed Assets and Spares Written off 110.35 23.43 Bad Debts Written off 8.36 45.67 Provision for Doubtful Debts and Advances 162.17 387.33 Liabilities / Provisions No Longer Required Written Back (1073.91) (55.44) Provision for Diminution in Value of Investment-Long Term - 18.96 Provision for Diminution in Value of Fixed Assets 19.85 - Other Provisions (874.25) (113.33) ESOP Compensation Expense 545.66 393.14 Change in Policyholder Reserves 82285.19 38392.57 Operating Profit Before Working Capital Changes 68535.55 27170.06

Adjustments for: Trade and Other Receivables (13296.15) (6564.68) Inventories (703.76) (119.07) Trade and Other Payables 15666.82 4715.83 Provisions for Retirement Benefits 41.21 240.75 Cash Generated From Operations 70243.67 25442.89 Direct Taxes Refunded/(Paid) (Net) (4051.43) (347.02) Cash From / (Used in) Operating Activities 66192.24 25095.87

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (24120.25) (11061.75) Sale of Fixed Assets 281.38 165.57 Investments made (From Preferential Issue Proceeds) (1893.45) (10263.52) Investments made (Others) (532019.60) (417967.93) Sale of Investments 460580.47 389128.16 Interest Received 7439.92 5952.23 Dividend Received on Non Trade Investments 2382.36 79.52 Proceeds from Sale of Business - 1110.97 Other Loans (385.58) (3421.46) Proceeds from Sale of Investment in Subsidiaries 515.00 - Cash and Cash Equivalents Acquired on Subsidiarisation 0.58 29.30 Cash From / (Used In) Investing Activities (87219.17) (46248.91)

88 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

C. CASH FLOW FROM FINANCING ACTIVITIES Preferential Issue of Shares 1893.45 11898.66 Issue of Warrants - 3000.00 Increase in Share Capital (Minority Share in Subsidiaries) 4550.00 13880.73 ESOPs Exercised 0.15 6.25 Shares Issue Expenses (48.75) (25.93) Proceeds from Long Term Borrowings 12510.25 11744.11 Repayment of Long Term Loans (550.00) (11386.29) Proceeds from Short Term Borrowings 3063.10 164.00 Repayment of Short Term Loans (105.55) (5206.25) Proceeds from Other Advances 4200.00 2160.00 Interest Paid (3107.22) (3768.22) Cash From / (Used In) Financing Activities 22405.43 22467.06

Net Increase / (Decrease) in Cash and Cash Equivalents 1378.50 1314.02 Impact of Foreign Exchange Fluctuations 15.32 200.26 Cash and Cash Equivalents - Opening Balance 3260.87 1746.59 Cash and Cash Equivalents - Closing Balance 4654.69 3260.87 Notes 1 The above Cash Flow Statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Cash, Cheques in Hand and Balances with Banks:

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 Cash in Hand 45.27 7.06 Stamps in Hand - 4.86 Cheques in Hand 70.31 1282.35 Fixed Deposits 1.00 - Cash Credit (1144.23) (350.60) Balances with Banks 5682.34 2317.20 Total 4654.69 3260.87 3 Previous year's figures have been regrouped wherever necessary to conform to current year’s classification.

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 28

The Schedules referred to above form an integral part of the Cash For and on behalf of the Board of Directors Flow Statement This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN N.C. SINGHAL Director Partner DR. S.S. BAIJAL Director Membership No. F-87228 N. RANGACHARY Director For and on behalf of B. ANANTHARAMAN Joint Managing Director Price Waterhouse Chartered Accountants NEERAJ BASUR Vice President-Corporate Finance New Delhi V. KRISHNAN Company Secretary MAY 17, 2007

MAX INDIA ANNUAL REPORT 2006-07 89 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL Authorised (Refer Note B12 on Schedule 28) 46,00,00,000 Equity Shares of Rs. 2/- each 9200.00 9200.00 (Previous year 9,20,00,000 Equity Shares of Rs. 10/- each) 8,00,000 Preference Shares of Rs. 100/- each (Previous year 8,00,000 Preference Shares of Rs. 100/- each) 800.00 800.00 10000.00 10000.00

Issued, Subscribed and Paid Up (Refer Notes A10, B9 and B12 on Schedule 28) 17,99,02,055 Equity Shares of Rs. 2/- each fully paid up (Previous year 3,49,10,310 Equity Shares of Rs.10/- each fully paid up) 3598.04 3491.03 3598.04 3491.03

Paid up Share Capital includes: - 5,76,60,400 Equity Shares of Rs. 2/- each (Previous year 1,15,32,080 Equity Shares of Rs. 10/- each) allotted as fully paid up by way of bonus shares out of Securities Premium Account; and - 9,88,330 Equity Shares of Rs. 2/- each (Previous year 1,96,150 Equity Shares of Rs.10/- each) allotted under Employees Stock Option Plan

SCHEDULE-2 WARRANTS AGAINST SHARE CAPITAL (Refer Note B9 on Schedule 28) Upfront Payment of Warrants Convertible into Share Capital - 243.72 [Current Year Nil Warrants (Previous year 10,68,585 Warrants)] - 243.72

SCHEDULE-3 RESERVES AND SURPLUS (Refer Notes A9, B9, B12, B28 and B33 on Schedule 28) As at Additions Deletions/ As at April 1, 2006 Utilisation March 31, 2007

Capital Reserve 0.39 - - 0.39 Securities Premium Account 36722.26 2039.23 1068.00 37693.49 Employee Stock Option Outstanding 596.78 1292.75 20.00 1869.53 Amalgamation Reserve 633.56 - 633.56 - Revaluation Reserve 117.21 - - 117.21 Foreign Currency Translation Reserve 379.17 673.32 1070.55 (18.06) General Reserve 9072.97 - - 9072.97 Profit and Loss Account 12901.13 2275.11 7248.16 7928.08 60423.47 6280.41 10040.27 56663.61

As at As at March 31, 2007 March 31, 2006 SCHEDULE-4 SECURED LOANS (Refer Note B10 on Schedule 28) Loans and Advances from Banks Term Loan 10133.89 2373.62 Fund Based Working Capital Facilities 1144.23 350.60 Term Loans from Financial Institutions 24000.00 19800.00 35278.12 22524.22 Amount repayable within one year Rs. 1739.55 Lacs (Previous year Rs. 723.62 Lacs)

90 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-5 UNSECURED LOANS Short Term Loans Bridge Loan From Bank 3000.00 - Foreign Currency Loans - 2266.13 Other Loans From Banks 169.11 211.57 3169.11 2477.70

Advances from Others 17420.55 13220.55 (Refer Note B11 on Schedule 28) 20589.66 15698.25

Amount repayable to banks within one year Rs. 3064.53 Lacs (Previous year Rs. 78.02 Lacs)

SCHEDULE-6 DEFERRED TAX LIABILITY (Refer Notes A11 and B15 on Schedule 28) Deferred Tax Liability - Opening Balance 2206.02 2131.98 - Movement during the year 1177.26 74.04 - Closing Balance 3383.28 2206.02

Deferred Tax (Asset) - Opening Balance (615.95) (695.00) - Movement during the year (122.57) 79.05 - Closing Balance (738.52) (615.95)

Net Deferred Tax Liability 2644.76 1590.07

SCHEDULE-7 FIXED ASSETS (Refer Notes A4, A5, A6, A15, B3, B6 and B33 on Schedule 28) (RS. LACS) Gross Block Depreciation Net Block As at Additions Deletions/ Translation As at As at For the Year Deletions/ Translation As at As at As at April 1, Adjustments Reserve March 31, April 1, Adjustments Reserve March 31, March 31, March 31, 2006 2007 2006 2007 2007 2006

Tangible Assets Land (Freehold) 949.83 51.79 602.20 (8.33) 391.09 - - - - - 391.09 949.83 Land (Leasehold) 1144.85 597.07 - - 1741.92 - - - - - 1741.92 1144.85 Building 2328.76 8663.94 10.05 (7.27) 10975.38 526.18 163.94 0.81 (2.31) 687.00 10288.38 1802.58 Leasehold Improvements 5830.84 1704.81 120.55 - 7415.10 2216.68 905.88 86.02 - 3036.54 4378.56 3614.16 Plant and Machinery 16047.95 16919.39 36.57 0.06 32930.83 5059.88 1285.76 11.81 0.01 6333.84 26596.99 10988.07 R&D Equipments 31.10 - - (0.82) 30.28 16.07 2.77 - (0.54) 18.30 11.98 15.03 Vehicles 1357.88 337.89 427.52 (1.56) 1266.69 485.76 179.24 217.22 (0.98) 446.80 819.89 872.12 Furniture, Fittings and Equipments 8668.27 3382.56 367.16 (3.37) 11680.30 4373.83 1535.83 249.12 (3.16) 5657.38 6022.92 4294.44

Intangible Assets Software 3028.39 801.11 29.00 (1.23) 3799.27 1446.26 516.31 28.51 (1.24) 1932.82 1866.45 1582.13 Goodwill 7525.69 1531.56 1667.43 - 7389.82 - - - - - 7389.82 7525.69 Technical Know-how 798.22 57.29 - - 855.51 725.55 32.29 - - 757.84 97.67 72.67

Total 47711.78 34047.41 3260.48 (22.52) 78476.19 14850.21 4622.02 593.49 (8.22) 18870.52 59605.67 32861.57 Previous Year 40891.21 7140.35 370.14 50.36 47711.78 11369.19 3603.25 129.18 6.95 14850.21 Capital Work in Progress 3230.68 11829.96 62836.35 44691.53 Notes:- a) Additions during the year include interest cost capitalised Rs. 306.76 Lacs (Previous year Rs. 1.28 Lacs). b) Additions includes Foreign Exchange Fluctuations Rs. 91.35 Lacs (Previous year Nil). c) Plant and Machinery includes an amount of Rs. 135.08 Lacs (Previous year Rs. 135.08 Lacs) paid to PSEB for drawing a power line representing assets not owned by the Company. The same is being depreciated over a period of five years. d) Vehicles includes vehicles hypothecated amounting to Rs. 300.42 Lacs (Previous year Rs. 372.90 Lacs). e) Capital work in progress includes: - Capital Advances Rs. 1106.92 Lacs (Previous year Rs. 1558.93 Lacs) - Interest being borrowing cost Rs. 220.64 Lacs (Previous year Rs. 291.83 Lacs). - Pre-operative Expenses Pending allocation and capitalisation Rs. 220.93 Lacs (Previous year Rs. 2493.28 Lacs). f) Leasehold Improvements represents civil and other improvements at Group's leased premises.

MAX INDIA ANNUAL REPORT 2006-07 91 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-8 INVESTMENTS (Refer Notes A7, B1 and B2 on Schedule 28)

Life Insurance Business: a) Long Term-Non Trade, at cost (Quoted) Government Securities * 76819.56 53632.13 Equity Shares** 36496.41 8834.32 Bonds*** 49399.36 20841.86

(Unquoted) Units in Mutual Fund - 1346.72 Term Deposit 1500.00 651.49

b) Current-Non Trade, at cost (Quoted) Government Securities 973.07 857.32 Bonds - 707.88

(Unquoted) Commercial Paper/Certificate of Deposit 6404.66 442.49 Units in Mutual Fund**** 1909.06 1262.63 Term Deposits 10041.24 - 183543.36 88576.84 Other Business: a) Long Term-Trade, at cost (Unquoted) Equity Shares 300.75 -

b) Long Term-Non Trade, at cost (Quoted) Equity Shares 0.65 0.65

(Unquoted) Equity Shares 253.00 253.00 Less: Provision for Diminution (253.00) - (253.00)

c) Current-Non Trade, at cost (Unquoted) Units in Mutual Fund - Others 28504.31 48678.02 28805.71 48678.67

212349.07 137255.51

Aggregate value of unquoted investments 48660.02 52381.35 Aggregate value of quoted investments 163689.05 84874.16 Market value of quoted investments 163077.71 82347.67

* Includes Rs. 68074.79 Lacs (Previous year Rs. 46888.66 Lacs) earmarked for Life Insurance Policyholders ** Net of credit in fair value change account amounting to Rs. 332.57 Lacs (Previous year Nil) *** Includes Rs. 40781.59 Lacs (Previous year Rs. 10473.71 Lacs) earmarked for Life Insurance Policyholders **** Net of credit in fair value change account amounting to Rs. 14.13 Lacs (Previous year Rs. 7.60 Lacs)

92 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006

SCHEDULE-9 INVENTORIES (Refer Note A8 on Schedule 28) Manufacturing Activities Raw Materials in Stores/Transit 743.42 655.19 Stores and Spares 680.49 274.98 Work in Process 231.27 169.82 Finished Goods 56.00 34.61 Trading Activities Stock-in-Trade 479.49 352.31 Investment Activities Stock of Securities 0.16 0.16 2190.83 1487.07

SCHEDULE-10 SUNDRY DEBTORS Unsecured Debts exceeding six months Considered Good 4132.17 825.14 Considered Doubtful 730.05 685.29 Less: Provision for Doubtful Debts (730.05) 4132.17 (685.29) Other Debts Considered Good 11075.86 8039.37 15208.03 8864.51 Amount due from directors during the year Nil (Previous year Rs. 0.28 Lacs) Maximum amount outstanding from directors during the year Rs. 0.28 Lacs (Previous year Rs. 0.38 Lacs)

SCHEDULE-11 CASH AND BANK BALANCES (Refer Note B21 on Schedule 28) Cash in Hand 45.27 7.06 Cheques in Hand 70.31 1282.35 Balances with Scheduled Banks In Current Accounts 5566.67 2152.39 In Dividend Accounts 27.19 33.36 In Debenture Interest Accounts 15.31 15.90 In Fixed Deposit Accounts* 26.00 25.19 Margin Money 0.33 0.25 Stamps in Hand - 4.86 Balances with Non-Scheduled Banks In Current Accounts 72.65 109.17 In Escrow Accounts 0.14 6.38 5823.87 3636.91 * held under lien by various authorities Rs. 25.00 Lacs (Previous year Rs. 25.19 Lacs)

SCHEDULE-12 OTHER CURRENT ASSETS Interest Receivable* Considered Good 2995.21 1808.03 Considered Doubtful 179.59 179.59 Less: Provision for Doubtful Interest (179.59) 2995.21 (179.59) 2995.21 1808.03 * Includes interest accrued on investments Rs. 2394.24 Lacs (Previous year Rs. 1341.36 Lacs)

MAX INDIA ANNUAL REPORT 2006-07 93 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-13 LOANS AND ADVANCES (Considered Good, Unless Otherwise Stated) (Refer Note A11 on Schedule 28) Secured Housing Loans 5.42 6.06 Loans to Policyholders 102.83 15.63

Unsecured Advances recoverable in cash or in kind or for value to be received Considered Good 11153.27 8592.80 Considered Doubtful 373.38 353.28 Less: Provision for Doubtful Advances (373.38) 11153.27 (353.28) Loans to Employees 9.37 12.48 Other Loans 3977.88 3592.30 Inter Corporate Deposits Considered Good - - Considered Doubtful 180.00 180.00 Less: Provision for Doubtful Advances (180.00) - (180.00) Balance with Excise Authorities 133.74 131.04 Prepaid Expenses 2296.78 342.45 Security Deposits Considered Good 3366.53 2860.37 Considered Doubtful 36.00 17.04 Less: Provision for Doubtful Deposits (36.00) 3366.53 (17.04)

Advance Income Tax 7103.69 - Less : Provision for Income Tax (5831.67) 1272.02 -

Other Current Assets - Unit Linked Business 499.53 678.58 22817.37 16231.71 Balance outstanding from directors of Rs. 250.16 Lacs (Previous year Rs. 189.05 Lacs). (Refer Note B16 on Schedule 28) Maximum amount outstanding from directors during the year Rs. 314.73 Lacs (Previous year Rs. 247.12 Lacs)

SCHEDULE-14 CURRENT LIABILITIES Acceptances 36.09 46.72 Sundry Creditors Total Outstanding Dues of Small Scale Industrial Undertakings 33.62 10.10 Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 21319.39 14638.83 Advances From Policyholders 6665.42 3119.51 Claims Outstanding (Includes Claims Pending Investigation) 1456.64 1199.14 Bonus Payable to Policyholders 3838.30 1645.46 Advance Income Received 743.36 272.13 Investor Education and Protection Fund Unpaid Dividend 34.55 39.70 Unpaid Debenture Interest 12.76 13.32 Interest Accrued But Not Due 156.63 47.01 Other Liabilities 2581.29 1446.27 36878.05 22478.19

94 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-15 PROVISIONS (Refer Note A12 on Schedule 28) Leave Encashment 262.35 184.77 Gratuity 235.76 272.13 Provision for Income Tax - 5731.06 Less: Advance Income Tax - (2479.71) 498.11 3708.25

SCHEDULE-16 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) (Refer Notes A14 and B18 on Schedule 28) Preliminary, Share and Debenture Issue Expenses 14.16 27.82 Deferred Employee Compensation 1130.85 394.83 Deferred Revenue Expenditure 6.00 37.81 1151.01 460.46

(RS. LACS) For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-17 SERVICE INCOME (Refer Note A3 on Schedule 28) Life Insurance Premium 150028.01 78812.54 Less: Premium on Reinsurance Ceded (1486.21) (840.87) 148541.80 77971.67 Healthcare Business1 13605.44 7093.86 Clinical Research Business2 427.14 775.17 Placement Revenue 243.77 36.86 Other Services3 234.20 270.65 163052.35 86148.21 1 Tax deducted at source Rs. 475.43 Lacs (Previous year Rs. 134.16 Lacs) 2 Tax deducted at source Rs. 6.36 Lacs (Previous year Rs. 13.98 Lacs) 3 Tax deducted at source Rs. 5.75 Lacs (Previous year Rs. 6.18 Lacs)

MAX INDIA ANNUAL REPORT 2006-07 95 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-18 INCOME FROM INVESTMENT ACTIVITIES (Refer Notes A3 and B19 on Schedule 28) Profit on Sale of Stock of Securities Opening Stock 0.16 7.73 Less: Sales - 26.70 Less: Closing Stock 0.16 0.16 - 19.13 Dividend Income from Non Trade Investments-Long Term 2.99 0.02 Non Trade Investments-Current 2410.80 861.64 Stock of Securities - 2413.79 0.08 Interest on Loans and Non Trade Investments (Gross)4 Government Securities5 5767.03 3540.92 Bonds6 1935.13 777.79 Loans 490.13 375.01 Fixed Deposits 157.81 24.06 Others 285.81 8635.91 72.28

Surplus on De-Subsidiarisation 504.99 1.86 Profit on Sale of Investments-Long Term 1600.07 43106.88 Profit on Sale of Investments-Current 343.16 902.73 Unrealised Gain on Investments 842.01 2260.31 14339.93 51942.71 4 Tax Deducted at Source Rs. 168.20 Lacs (Previous year Rs. 62.79 Lacs) 5 Net of amortisation of Rs. 172.74 Lacs (Previous year Rs. 143.11 Lacs) 6 Net of amortisation of Rs. (-) 123.98 Lacs (Previous year Rs. (-) 36.79 Lacs)

SCHEDULE-19 OTHER INCOME Liabilities/Provisions No Longer Required Written Back 1073.91 55.44 Net Gain on Foreign Exchange Fluctuation 440.65 - Miscellaneous Income* 1608.42 1058.86 3122.98 1114.30 * Tax deducted at source Rs. 36.52 Lacs (Previous year Rs. 65.98 Lacs)

SCHEDULE-20 INCREASE/(DECREASE) IN INVENTORY Opening Stock Work in Process 169.82 234.09 Finished Goods 34.61 67.44 204.43 301.53 Less: Closing Stock Work in Process 231.27 169.82 Finished Goods 56.00 34.61 287.27 204.43 Net Increase/(Decrease) 82.84 (97.10)

96 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-21 MANUFACTURING, TRADING AND DIRECT EXPENSES Manufacturing and Trading Expenses Raw Materials Consumed (Refer Note B29 on Schedule 28) 10536.00 7657.27 Goods Purchased for Resale 7.22 16.56 Excise Duty on Scrap 41.72 39.55 Power and Fuel 1043.36 1031.61 Stores and Spares Consumed 259.17 257.35 Packing Material 373.26 320.37 Freight Inward 11.02 14.96 Repairs and Maintenance-Plant and Machinery 77.35 175.05 Processing Charges 111.35 104.15 12460.45 9616.87 Direct Expenses Life Insurance Business Agents' Commission 22852.34 13447.44 Increase in Policy Reserves 82285.19 38392.57 Policy Issuance Costs 6173.18 3776.43 Death Claims/Other Benefits 8337.33 4253.88 119648.04 59870.32 Healthcare Business Consumption of Medical Consumables 1807.44 476.15 Cost of Goods Sold - Pharmacy 2926.27 2005.56 Professional and Consultancy Fee 2385.75 1414.01 Outside Lab Investigation 105.22 64.63 Repairs and Maintenance-Medical Equipments 147.94 74.20 Patient Catering Expenses 182.70 92.00 7555.32 4126.55 Healthcare Staffing Business Candidate Related Expenses 136.25 64.79

Clinical Research Business Clinical Trial Expenses 191.74 579.93 139991.80 74258.46

SCHEDULE-22 PERSONNEL EXPENSES Salaries, Wages and Bonus 26135.67 15899.96 Contribution to Provident and Other Funds 942.60 834.03 Recruitment 3511.34 2125.33 Staff Welfare 862.09 520.32 31451.70 19379.64

MAX INDIA ANNUAL REPORT 2006-07 97 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-23 GENERAL AND ADMINISTRATION EXPENSES (Refer Note B24 on Schedule 28) Rent 3137.36 2249.43 Insurance 243.09 256.33 Rates and Taxes 1535.69 1288.73 Repairs and Maintenance: Building 234.75 146.96 Others 4151.18 2560.85 Electricity and Water 1416.41 830.00 Printing and Stationery 1290.39 889.30 Travelling and Conveyance 3550.87 2730.39 Communication 2544.53 2048.89 Legal and Professional 2144.83 1759.61 Directors' Fee 8.07 7.89 Business Promotion 100.64 124.03 Commission 92.74 72.67 Trade Discount 214.51 165.21 Selling and Distribution 1209.88 437.37 Advertisement and Publicity 2293.00 2681.32 Provision for Doubtful Debts and Advances 162.17 387.33 Net Loss on Sale/Disposal of Fixed Assets 11.99 25.97 Loss on Sale of Investments-Long Term 0.03 47.52 Loss on Sale of Investments-Current - 0.14 Provision for Diminution in Long Term Investments - 18.96 Provision for Diminution in Fixed Assets 19.85 - Bad Debts Written Off 8.36 45.67 Fixed Assets and Spares Written Off 110.35 23.43 Charity and Donation 17.05 26.17 Amortisation of Miscellaneous Expenditure 45.39 52.81 Net Loss on Foreign Exchange Fluctuation - 268.44 Miscellaneous 1412.28 637.23 Less: Overheads Recovered* (14.43) (18.09) 25940.98 19764.56 * Tax deducted at source Rs. 0.62 Lacs (Previous year Rs. 0.62 Lacs)

SCHEDULE-24 FINANCIAL EXPENSES Interest on: Debentures - 192.26 Short Term Loan 22.27 132.69 Acceptances 24.12 14.20 Term Loans 2375.66 2382.43 Cash Credit 81.48 3.62 Others 57.94 20.25 Bank Charges 335.45 326.09 Finance Charges 81.24 177.31 2978.16 3248.85

98 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-25 TAX EXPENSE (Refer Notes A11 and B15 on Schedule 28) Current Year Tax Income Tax 103.87 3777.58 Wealth Tax 5.79 8.63 Fringe Benefit Tax 408.18 346.12 Add:- Deferred Tax for the year 1054.69 (165.92) 1572.53 3966.41

SCHEDULE-26 CONSOLIDATION ADJUSTMENTS Transfer to Minority Interest 1730.48 2996.05 Transfer for Movement in Investments during the year 544.63 (1308.18) Change in Value of Investments in Associates as per AS-23 - 197.25 (Refer Note B2 on Schedule 28) 2275.11 1885.12

SCHEDULE-27 APPROPRIATIONS Transfer to Debenture Redemption Reserve - 625.00 - 625.00

MAX INDIA ANNUAL REPORT 2006-07 99 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

SCHEDULE–28 A SIGNIFICANT ACCOUNTING POLICIES 1 Accounting Convention The consolidated financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (“GAAP”) under the historical cost convention, except as disclosed in the accounting policies given below, on an accrual basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956, in so far as applicable to the consolidated financial statements. The financial statements of Max New York Life Insurance Company Limited, a subsidiary company, which are included in these consolidated financial statements, are prepared in accordance with the accounting principles prescribed by the Insurance Regulatory and Development Authority (Preparation of Financial Statement and Auditor’s Report of Insurance Companies) Regulations, 2002, the accounting standards issued by the Institute of Chartered Accountants of India and the requirements of the Insurance Act 1938, Insurance Regulatory and Development Authority Act, 1999, and the regulations framed thereunder and the Companies Act, 1956, to the extent applicable and the practices prevailing within the insurance industry in India.

2 Basis of Consolidation The consolidated financial statements are prepared in accordance with the principles and procedures laid down by the accounting standard on Consolidated Financial Statements issued by the ICAI. The subsidiaries of Max India Ltd. (“Company”) have been defined as those entities in which the Company owns directly or indirectly more than one half of the voting power or otherwise has power to exercise control over the composition of the Board of Directors of such entities. Max India Ltd. and its subsidiaries are herein after referred to as Group Companies or Group. The financial statements of subsidiaries are consolidated from the date on which the control is transferred to a Group Company and are excluded from consolidation from the date such control ceases. The financial statements of all Group Companies have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating all intra- group balances and transactions and resulting unrealised gains/losses. The consolidated financial statements are prepared applying uniform accounting policies in use by the Company.

3 Revenue Recognition a) Life Insurance Business: Premium is recognised as income when due. Uncollected premium on lapsed policies is not recognised as income until reinstated. For linked business, premium income is recognized when the associated units are allotted. In case of linked business, top-up premiums (i.e. premium paid in excess of annual target premium as per policy contract) are recognised as single premium. Fees on linked policies including fund charges, etc are recovered from the linked fund in accordance with the terms and conditions of the policies. Reinsurance premium ceded is accounted at the time of recognition of premium income in accordance with the treaty or in-principle arrangement with the re-insurers. b) Clinical Research Business: Revenue from services is recognised by reference to the stage of completion of clinical study projects subscribed with pharmaceutical companies. Revenue from services is recognised with reference to the stage of completion of clinical data management service projects subscribed with pharmaceutical companies. c) Healthcare Business: Revenue from healthcare services is recognised on the performance of related service and includes pharmacy services on patients undergoing treatment and pending billing. Revenue from pharmacy sale is recognised on delivery of goods. Income from Healthcare Service Providers is recognised on the performance of related services as per terms of contracts. d) Healthcare Staffing Business: (i) Revenue from overseas placement of healthcare staff is recognized on the basis of time sheets received from customers on accrual basis. (ii) Interest Income is recognized on a time proportion basis taking into account the amounts invested and the rate of interest. Income is stated in full with the tax thereon being accounted for under advance tax. e) Lease Rentals In respect of lease rentals on operating leases, revenue is recognised proportionately over the period of the related agreements. f) Export sales are accounted for on the basis of the date of bill of lading/airway bill. Other sales are accounted for at ex-factory prices on dispatch. g) Income from investments is credited to revenue in the year in which it accrues. Income is stated in full with the tax thereon being accounted for under advance tax. h) Dividend is recognised as and when the right to receive such payment is established.

4 Fixed Assets (a) Fixed Assets are stated at their original cost including freight, duties (net of CENVAT), taxes and other incidental expenses relating to acquisition and installation. (b) Expenses of revenue nature, which can be regarded as incidental and related to project set-up are transferred to “Pre-operative Expenses Pending Capitalisation”. These expenses are allocated to fixed assets/deferred revenue in the year of commencement of the related project.

100 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(c) Assets, which are revalued, are stated at the revalued amounts. The resultant increase in carrying amounts is credited to the revaluation reserve. Depreciation relating to the revalued amounts is adjusted against the revaluation reserve.

(5) Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset in accordance with Accounting Standard 16 on “Borrowing Costs”. Other borrowing costs are recognised as an expense in the period in which they are incurred. Capitalisation of borrowing costs ceases when substantially all activities necessary to prepare the qualifying assets for its intended use or sale are complete.

(6) Depreciation (a) Depreciation is charged on straight-line method on a pro-rata basis at rates estimated by the management based on the economic useful life of the assets, which are not lower than the rates prescribed under Schedule XIV to the Companies Act, 1956. (b) Leasehold improvements are depreciated over respective lease periods. (c) Assets costing not more than Rs. 5,000 each individually are depreciated at 100%. (d) Intangible assets are amortised over a period of 3-6 years based on management’s estimate of economic useful life of the assets.

(7) Investments (a) Investments are classified into current investments and long-term investments. The cost of investments includes acquisition charges such as brokerage, fees and duties. Current investments are carried at lower of cost and fair value. (b) Long-term investments are valued at cost. Provision for diminution is made to recognise a decline, other than temporary, in the carrying value of each investment. (c) Life insurance business: Investments are made in accordance with the Insurance Act, 1938 and the Insurance Regulatory and Development Authority (Investment) Regulations, 2000. Investments are recorded at cost on date of purchase, which includes brokerage and statutory levies, if any and excludes interest paid, if any, on purchase. Diminution in the value of investment, other than temporary decline, is charged to revenue /profit and loss account as applicable. i) Classification Investments intended to be held for a period less than twelve months or maturing within twelve months from the balance sheet date are classified as short term. All other investments are classified as long-term investments. ii) Valuation - shareholders' investments and non-linked policyholders' investments Debt securities, which include government securities, are considered as 'held to maturity' and measured at historical cost. The premium/discount, if any, on purchase of debt securities is recognised and amortised in the revenue account or the profit and loss account, as the case may be, over the remaining period to maturity on the basis of their intrinsic yield. Listed equity shares, as at balance sheet date, are valued at fair value, being the last quoted closing price on the National Stock Exchange (NSE) and in case the same is not available, then on the Stock Exchange, Mumbai (BSE). Equity shares, awaiting listing, are valued at historical cost subject to provision for diminution. Investments in mutual fund units are valued at fair value at previous day's net asset value. Unrealised gains/losses due to changes in fair value of listed equity shares and mutual fund units are credited/debited to the 'Fair Value Change Account'. Realised gains/loss on debt securities is the difference between the sale consideration and the amortised cost, which is computed on weighted average basis, as on the date of sale. Sale consideration for the purpose of realised gain/loss is net of brokerage and taxes, if any and excludes interest accrued till transaction settlement date. In case of listed equity shares /mutual fund units, the profit/loss on actual sale of investment includes the accumulated changes in the fair value, previously recognised under "Fair Value Change Account". iii) Valuation – Linked Investments In case of Linked business - Government securities are valued at the rate obtained from CRISIL (Credit Rating Information Services of India Ltd.). Debt securities other than Government Securities are valued on the basis of Bond Valuer (CRISIL). Listed equity shares are valued at fair value, being the last quoted closing price on NSE and in case the same is not available, then on the BSE. Mutual fund units are taken at the previous day's net asset values. Unrealised gains and losses are recognised in the Profit and Loss account. Realised gain/loss on securities is the difference between the sale consideration and the book value, which is computed on weighted average basis, as on the date of sale. Sale consideration for the purpose of realised gain/loss is net of brokerage and taxes, if any and includes interest received on sales. iv) Transfer of Investments Investments are transferred to policyholders from shareholders at lower of book value (amortised cost) or market value. Inter-fund transfer of investments relating to linked business are effected at market price on date of transfer.

8 Inventories (a) Inventories are valued at lower of cost and net realisable value. Cost for this purpose is calculated on a weighted average method except in the case of medical supplies where cost is calculated on First In First Out basis. In respect of finished goods and work in process, appropriate overheads are loaded.

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(b) Stock of securities is valued at lower of cost and market value, determined category wise. Cost for this purpose is calculated under First In First Out Method.

9 Capital Subsidy Capital Subsidies, received under the state capital subsidy scheme, are accounted for as capital reserve.

10 Employee Stock Option Scheme Max India Limited (a) The value of options is equal to the aggregate of the fair value of the options granted. Fair value is the option discount represented by the excess of the market price on grant date over the exercise price of the option and is amortised on a straight line method basis over the vesting period in line with the Securities and Exchange Board of India (SEBI) Guidelines. (b) As and when the options are exercised, the same will be accounted for as paid up capital to the extent of the face value and share premium to the extent of excess of market price over face value on grant date. (c) Options that lapse are reversed by a credit to employee compensation expense equal to the amortised portion of the value of the lapsed options and a credit to deferred employee compensation expense equal to the unamortised option.

Max New York Life Insurance Company Limited and Max Healthcare Institute Limited The value of options is equal to the aggregate of the fair value of the options granted. Fair value is the option discount represented by excess of market price on grant date (in absence of a trading market price, it is the value of the equity shares - at which the share capital was last injected by the holding company) or net asset value of the company, whichever is higher over the exercise price. The fair value of the options (including any incremental value) is amortised on a straight line basis over the vesting period. As and when the options are exercised, the same are accounted for as paid up capital to the extent of the face value. Options that lapse are reversed by a credit to employee compensation expense equal to the amortised portion of the value of the lapsed options and a credit to deferred employee compensation expense equal to the unamortised option.

11 Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. Provision for tax consists of current tax and deferred tax. A provision is made for income taxes annually based on the tax liability computed at rates as per local laws of the country in which each Group Company is incorporated after considering applicable tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. The differences that result between the profit offered for income taxes and the profit as per financial statements are identified and, thereafter, a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. Deferred tax assets are recognised only if there is virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

12 Employee Benefits (a) Gratuity In accordance with the Payment of Gratuity Act 1972, the Company provides gratuity, a benefit plan (the “Gratuity Plan”) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, based upon which, the Company contributes all the ascertained liabilities to a Master policy with Life Insurance Corporation of India. (b) Superannuation Certain employees of the Company are participants of a defined superannuation plan. The Company makes contributions under the superannuation plan to “Max India Limited Superannuation Fund” based on a specified percentage of each covered employee’s salary. (c) Provident Fund Eligible employees receive benefits from a provident fund, which is a defined contribution plan. The Company makes contributions under Provident Fund to “Max India Limited Employees Provident Fund Trust”. Both the employee and the Company make monthly contributions to the provident fund trust equal to a specified percentage of the covered employee’s salary. (d) Leave Encashment Accrual for leave encashment is made on the basis of actuarial valuation done at the year end. Other Group Companies within India have various schemes of retirement benefits namely provident fund, superannuation and gratuity. Contributions made to these benefit plans are charged to revenue every year. Accruals for gratuity and leave encashment are made on the basis of actuarial valuation done at the year end. Group Companies situated outside India have employee benefit schemes as per their respective local laws.

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13 Foreign Exchange Transactions (a) Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at year end rates. (b) The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions, other than relating to Fixed Assets, are recognised in the Profit and Loss account. (c) Exchange difference in respect of liabilities incurred to acquire fixed assets from a country outside India is adjusted to the carrying amount of respective fixed assets. (d) For consolidation of accounts, in respect of Group Companies situated outside India, the assets and liabilities are translated at closing rate whereas the revenue and expenses are translated using the average rate during the year. The resultant gain or loss arising out of such translation is recognised in a separate reserve “Foreign Currency Translation Reserve” as required under Accounting Standard-11 revised.

14 Miscellaneous Expenditure (a) Preliminary and share issue expenses are amortised over a period of 5 to 10 years, except cost incurred on raising of funds, which is being amortised over the life of the respective financial instrument. (b) Deferred employee compensation expense is amortised over the vesting period. (c) Other deferred revenue expenditure is amortised from the year they have been incurred/related projects commence operations, over 3 to 5 years based on the period over which future benefits are expected to be received.

15 Leases Assets given under operating lease are shown in the Balance Sheet under fixed assets and are depreciated on a basis consistent with the depreciation policy of the company. Lease income is recognised in the Profit and Loss account on accrual basis. Assets acquired on finance lease are recognised in the financial statements at an amount equal to the fair value of the leased asset at the inception of the lease. The depreciation policy for such assets is consistent with that for depreciable assets that are owned by the Group. Operating lease expense is recognised in the Profit and Loss account on a straight-line basis over the lease term.

16 Benefits for Life Insurance Policy Holders Benefits paid consists of the policy benefit amount and claim settlement costs, if any. Maturity claims are accounted when due for payment. Surrender, death and other claims are recognised for when intimated. An additional provision is made for benefits incurred but not reported. Repudiated claims disputed before judicial authorities are provided for based on management prudence considering the facts and evidences available in respect of such claims. Reinsurance recoverables, where applicable, are accounted in the same period. Withdrawals under linked policies are accounted in respective schemes along with cancellation of associated units.

17 Policyholders’ Acquisition Cost In the life insurance business, policyholders’ acquisitions costs, including commissions, are expensed in the year in which these are incurred.

18 Liability for Life Insurance Policies in Force The estimated liability for life policies in force is determined by the appointed actuary of Max New York Life Insurance Company Ltd. (“MNYL”), pursuant to his annual investigation of the life insurance business , using methods and assumptions that conform with regulations issued by Insurance Regulatory and Development Authority (Actuarial Report and Abstract) Regulations, 2000 and Professional Guidance notes issued by the Actuarial Society of India (ASI). The liability is so calculated that together with future premium payments and investment income, all future claims (including bonus entitlements to policyholders) and expenses are met.

19 Contributions to Policyholders’ Account (Technical Account) Contribution to Policyholders’ Account (Technical Account) is made as decided by the board of directors of MNYL and approved by the Shareholders.

20 Provision and Contingencies A provision is recognized when there is a present obligation as a result of past event and it is probable that an outflow of a resource will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each Balance Sheet date and adjusted to reflect the current estimates. Contingent liabilities are disclosed after an evaluation of the fact and legal aspects of the matter involved.

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1 The consolidated financial statements have been prepared in accordance with Accounting Standard 21, Consolidated Financial Statements, issued by the ICAI. The consolidated financial statements comprises the financial statements of Max India Ltd. and its subsidiaries, listed below: Name of the Subsidiary Country of Proportion of Proportion of Incorporation ownership as at ownership as at March 31, 2007 March 31, 2006 Indian Subsidiaries 1 Max New York Life Insurance Company Ltd. India 73.25% 73.01% 2 Max Healthcare Institute Ltd. India 72.85% 70.01% 3 Max Medical Services Ltd.1 India 100% 100% 4 Alps Hospital Pvt. Ltd.2 India 100% - 5 Neeman Medical International (Asia) Ltd. India 100% 100% 6 Pharmax Corporation Ltd. India 85.20% 85.21% 7 Max Ateev Ltd. India 100% 100% 8 Max HealthStaff International Ltd. India 100% 100% 9 Max Estates Ltd.# India - 100% 10 Malsi Estates Ltd.# India - 100% Foreign Subsidiaries 1 Neeman Medical International BV Netherlands 100% 100% 2 Neeman Medical International NV3 Netherlands 100% 72.86% 3 Neeman Medical International, Latin America, S.A.4 Costa Rica 74.25% 74.25% 4 Neeman Medical International Inc.4 United States of America 100% 100% 5 Max UK Ltd. United Kingdom 100% 100%

Notes: 1 – Held through Max Healthcare Institute Ltd. 2 – Held through Max Medical Services Ltd. (Refer Note 2 Below) 3 – Held through Neeman Medical International BV, Netherlands (Refer Note 20 Below) 4 – Held through Neeman Medical International NV, Netherlands # Subsidiaries till May 31, 2006 (Refer Note 19 Below) 2 New Subsidiary (a) Alps Hospital Private Ltd. (“ALPS”) On April 6, 2006, Max Medical Services Ltd., a wholly owned subsidiary of Max Healthcare Institute Limited, acquired 40,700 equity shares representing 100% equity share capital of ALPS, a Company engaged in the business of providing healthcare services, for a consideration of Rs. 1347.66 Lacs. By virtue of the above, ALPS became a wholly owned subsidiary of Max Medical Services Ltd. (b) Max HealthStaff International Ltd. (“HealthStaff”) HealthStaff is a company engaged in the business of healthcare staffing services. As of April 1, 2005, the Company held 1,972,500 equity shares of HealthStaff, which translated into an ownership interest and voting power equal to 50%. On June 30, 2005, the Company further acquired 1,972,500 equity shares, representing the balance 50% equity share capital of HealthStaff for Rs. 250.63 Lacs. By virtue of the above, HealthStaff became a wholly owned subsidiary of the Company. Accordingly, the share of losses in HealthStaff accounted for in line with AS 23 in the consolidated financial statements for the financial year ended March 31, 2005 amounting to Rs. 197.25 lacs were reversed during previous year.

3 Reserves shown in the consolidated balance sheet represent the Group’s share in the respective reserves of the Group Companies. Goodwill arising on consolidation is shown under fixed assets (Refer Schedule 7).

4 The movement in share of minority interests is as follows: (RS. LACS) Name of the Subsidiary Balance as on Increase Profit/(Loss) Adjustment* Balance as on April 1, 2006 in Capital for the year March 31, 2007

Max New York Life Insurance Co. Ltd. 4470.32 4550.00 (1613.87) 92.36 7498.81 Max Healthcare Institute Ltd. 4885.33 - (608.73) 111.12 4387.72 Total 9355.65 4550.00 (2222.60) 203.48 11886.53 * The adjustments in minority interest consist of changes in the shareholding pattern in Max Healthcare Institute Ltd. and Max New York Life Insurance Company Ltd.

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(RS. LACS)

5 Contingent Liabilities Current Year Previous Year a) Corporate Guarantees 27500.00 26900.00 b) Claims not Acknowledged as Debts: - Excise Duty 715.60 722.83 - Customs 339.38 327.03 - Income Tax Refer Note B8 Refer Note B8 - Service Tax 332.30 - - Sales Tax 39.39 39.39 - Other 1260.58 1181.21 - Uncalled Liability of Shares Partly Paid 11.21 - - Potential Liability in respect of Repudiated Policyholders Claims 64.76 211.61 c) Bank Guarantees 32.25 26.25 d) Letter of Credit outstanding 1504.87 2220.75 e) Arrears of Dividend on Preference Shares 40.55 39.92 f) Corporate Dividend Tax 5.69 5.13

6 Capital Commitments (RS. LACS) Particulars Current Year Previous Year Estimated amount of contracts remaining to be executed on capital account and not provided for 4537.62 9606.17 Less: Capital Advances 1106.92 1558.93 Balance value of contracts 3430.70 8047.24

7 Concession in Custom Duty availed on Capital equipment imported during the year against export obligation undertaken under ‘Export Promotion Capital Goods’ Scheme is Rs. 2570.62 Lacs (Previous year Nil).

8 Income Tax Cases Max India Ltd. (a) In the case of an erstwhile subsidiary of the Company, Max Telecom Ventures Ltd. (“MTVL”) (since merged with the Company with effect from December 1, 2005), a demand of Rs. 9503.93 Lacs was raised by the income tax authorities for the assessment year 1998-99 denying exemption under section 10(23G) of the Income Tax Act, 1961 on capital gains realized by MTVL from the sale of shares of Hutchison Max Telecom Limited. On appeal by MTVL, the CIT (Appeals) quashed the order of the Assessing Officer and the demand was cancelled. The tax authorities have filed an appeal against this order with the Income-Tax Appellate Tribunal ("ITAT"), which appeal is pending as on date. Subsequently, in the next assessment year, i.e. 1999-00, the above-mentioned transaction was once again sought to be taxed under a different head of income (i.e., business income) on a protective basis by the Assessing Officer as MTVL had asked the tax authorities to treat the transaction as that arising in AY 1999-00 and not in AY 1998-99. This, along with a few other additions, resulted in creation of a further demand of Rs. 25630.03 Lacs {which included the demand of Rs. 25002.53 Lacs on protective basis}. On appeal by MTVL, the CIT (Appeals) decided in favor of MTVL and cancelled the demand raised. The tax authorities have filed appeal against this order with ITAT, which appeal is pending as on date. On appeal by MTVL, the ITAT during the year concluded that the share sale transaction falls in the accounting period relating to AY 1998-99. (b) The Company has received the following demands under section 156 relating to income tax assessments:

Assessment year Demand (Rs. Lacs) 1999-2000 5.67 2000-2001 5.25 2001-2002 15.65 2002-2003 41.77 2004-2005 0.76 The above relate to certain disallowances and other matters and are in various stages of appeal with the CIT(Appeals)/ITAT. Further, in the following cases, penalty under section 271(1)(c) of the Income Tax Act, 1961 has been levied for which the Company is in appeal before the CIT (Appeals):

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Assessment year Demand (Rs. Lacs) 1992-1993 19.05 1993-1994 14.63 Max Ateev Ltd. (“Max Ateev”) There are certain income-tax proceedings pending against the Company at various stages of appeal, which, alongwith the tax demand (if any) are detailed below: Assessment year Appeal Pending Before Demand (Rs. Lacs) 2001-2002 Income-tax Appellate Tribunal 1.11 2003-2004 CIT(Appeals) - 2004-2005 CIT(Appeals) 53.68 Max Healthcare Institute Ltd. For the assessment year 2003-2004, the Assessing Officer vide order under section 143(3) read with section 142(2A) of the Income-tax Act, 1961, has reduced the returned loss of Rs. 4087.10 Lacs to Rs. 2929.38 Lacs by making various disallowances. An appeal against the said order has been filed to the CIT (Appeals), which is pending disposal.

Max New York Life Insurance Company Ltd. (“MNYL”) For the assessment year 2002-2003, the Assessing Officer has reduced the returned loss of Rs. 6684.09 Lacs to Rs. 6482.08 Lacs by making disallowance of Rs. 202.01 Lacs u/s 92CA(3) of the Income-tax Act, 1961 relating to Transfer Pricing. Similarly, for the Assessment Years 2003-04 & 2004-05, the returned losses have been reduced from Rs. 7408.37 Lacs to Rs. 7331.92 Lacs and from Rs. 7563.42 Lacs to Rs. 7285.17 Lacs respectively by the Assessing Officer by making similar disallowances. Appeals against the above orders have been filed to the CIT (Appeals), which are pending disposal.

9 Pursuant to shareholders’ approval in Extra Ordinary General Meeting held on December 22, 2004, the Company had allotted 13,59,300 warrants to Madison Holdings Limited and Melany Holdings Limited (forming part of the Warburg Pincus group) and 27,18,585 warrants to the promoter group. Each warrant entitles the holder thereof to subscribe to one equity share of Rs. 10/- each in the Share Capital of the Company at a premium of Rs. 190/- per equity share. Each warrant is convertible into one equity share as per prevalent SEBI guidelines at any time before expiry of 18 months from the date of allotment, at the discretion of the Board of Directors. During the previous year, the warrants held by Madison Holdings Limited and Melany Holdings Limited were forfeited due to non-exercise and the amount received against said warrants of Rs. 271.86 Lacs has been transferred to Reserves. Out of warrants allotted to the promoter group, 10,68,585 warrants were outstanding as on March 31, 2006. Pursuant to Board of Directors’ approval in their meeting held on May 17, 2006, 6,00,000 equity shares of Rs. 10/- each at a premium of Rs. 190/- per equity share were allotted to Mr. Analjit Singh and 4,68,585 equity shares of Rs. 10/- each at a premium of Rs. 190/- per equity share were allotted to M/s Liquid Investment and Trading Company by conversion of the above warrants.

10 Loans Max India Ltd. (a) Term loans from Yes Bank Ltd amounting to Rs. 2400 Lacs (Previous year Rs. 1850 Lacs) is secured by a first pari passu charge on the fixed assets and second pari passu charge on the current assets of the Company, both present and future. (b) Term loan – I from Punjab National Bank amounting to Rs. 200 Lacs (Previous year Rs. 300 Lacs) is secured by first pari passu charge on immovable assets by way of joint equitable mortgage and by way of hypothecation of movable fixed assets of the Company. (c) Term loan - II from Punjab National Bank amounting to Rs. 3521 Lacs (Previous year Nil) is secured by a first pari passu charge on the fixed assets and second pari passu charge on the current assets of the Company, both present and future. (d) Term loan from Oriental Bank of Commerce amounting to Rs. 2819 Lacs (Previous year Nil) is secured by a first pari passu charge on the fixed assets and second pari passu charge on the current assets of the Company, both present and future. (e) Fund based working capital facilities from banks are secured by a first pari passu hypothecation charge on all current assets and a second hypothecation charge on immovable and movable fixed assets of the Company, both present and future.

Max Healthcare Institute Ltd. (“MHIL”) MHIL has availed term loans to finance its hospital project and details of loans sanctioned and availed till date are as follows: (a) Rs. 10500 Lacs from Housing Development Finance Corporation Ltd. (sanctioned amounts Rs 10500 Lacs) (b) Rs. 6000 Lacs from Infrastructure Development Finance Company Ltd. (sanctioned amounts Rs 6000 Lacs) (c) Rs. 7500 Lacs from Export Import Bank of India (sanctioned amounts Rs 7500 Lacs) The above term loans are secured by way of: - Equitable mortgage of the immovable properties of MHIL and a party having business arrangements with that company - Hypothecation of moveable fixed assets of MHIL and its subsidiary - Corporate guarantees by the Company.

Pharmax Corporation Limited (“Pharmax”) Term loan from Canara Bank amounting to Rs. 1193.89 Lacs (Previous year Rs. 223.62 Lacs) availed by Pharmax is secured against charge of monthly lease rentals receivable from various lessee and equitable mortgage of undivided share of freehold property at Okhla, New Delhi.

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11 In 2003-04, the Company had signed an amendment to the Joint Venture Agreement (“JVA”) with New York Life International Inc. (“NYLI”). In terms of the amended JVA, both the parties agreed that the Company shall not transfer or otherwise dispose its shareholding to an extent of 24% of the paid up issued share capital (“Restricted Shares”) of Max New York Life Insurance Company Ltd (“MNYL”) to any person other than NYLI. The parties also agreed that NYLI shall pay to the Company the aggregate par value equal to 24% of the paid up issued share capital of MNYL from time to time. The aforesaid payment may be applied by NYLI to purchase the Restricted Shares of MNYL from the Company, when and to the extent permitted pursuant to applicable laws by March 2010 or become repayable thereafter. The Company has received Rs. 17420.55 Lacs (Previous year Rs. 13220.55 Lacs) in aggregate from NYLI till March 31, 2007, in accordance with the aforesaid agreement

12 Pursuant to shareholders approval in Extra-ordinary General Meeting of the Company held on February 26, 2007, each equity share of the Company, having a face value of Rs. 10/- each was subdivided into 5 fully paid equity shares of the face value of Rs. 2/- each, w.e.f. March 19, 2007.

13 Actuarial Assumptions – Life Insurance Business MNYL’s Appointed Actuary has determined valuation assumptions that conform with Regulations issued by the IRDA and professional guidance notes issued by the Actuarial Society of India (ASI). Details of assumptions are given below: (a) Interest: This has been based on the yield on the fund, and expected yields on future investments determined by projecting assets and liabilities together. A long-term estimate of 7.75% (Previous year - 7.35%) for participating business and 7.02% (Previous year - 7.02%) for non-participating business and riders have been used. The long term rates has then been reduced by margins for adverse deviations of 1.25% (Previous year - 1.5%) for non-participating business, 0.75% (Previous year - 0.75%) for participating business. Gross unit growth rates of 6.5% to 8.35% p.a. (Previous year - 6.5% to 8.35% p.a.) depending on the funds type have been used which were further reduced by a margin of adverse deviation of 1.5% p.a. (Previous year - 1.5% p.a.) (b) Mortality: This has been based on an analysis of experience and assumptions used in the previous annual valuation. For some products, the basis used varies from 65% (Previous year - 75%) of Indian Assured Lives table (IALT) 1994-96 ultimate in year one increasing to 80% (Previous year - 90%) in year five and thereafter. For others, 80% to 180% (Previous year - 80% to 150%) of IALT 1994-96 ultimate has been used throughout. The mortality assumption has been increased by a margin for adverse deviation of 10% (Previous year - 10%) for all products. (c) Morbidity: The ASI has recommended the CIBT93 study of UK for morbidity incident rates due to lack of any published Indian experience. Proportions of 95% to 300% (Previous year - 95% to 300%) of these tables have been used which were further increased by a margin for adverse deviation of 15% (Previous year – 15%). (d) Expenses: The per policy maintenance expenses used are based on projected expenses for the year when company acquires a stable level of business. These are further increased by margins for adverse deviation of 5% (Previous year - 5%) for participating policies and 10% (Previous year - 10%) for non-participating policies. (e) Inflation: An assumption of 6% p.a. (Previous year - 6% p.a.) for expense inflation has been used. (f) Commission: Allowed for at actual rates paid and is up to 7.5% (Previous year - 7.5%) for the 2nd and 3rd years and up to 5% (Previous year - 5%) for subsequent years. (g) Lapses: Lapses have been allowed for in the range of 1% to 15% (Previous year - 1% to 15%) during the 2nd year, 1% to 10% (Previous year - 1% to 10%) during the 3rd year and 1% to 3% (Previous year - 1% to 3%) thereafter. For unit linked business a 10% (Previous year - 10%) lapse rate was used after the 2nd year. These were further reduced by margins for adverse deviation of 20% (Previous year - 20%) for participating policies and 50% (Previous year - 50%) for non-participating policies. (h) Future bonuses: Provision is made for future bonuses based on estimated expected bonus payouts consistent with valuation assumptions and policyholders’ reasonable expectations. Overall, the valuation assumptions provide a conservative set of bases.

14 Employee Stock Option plans Max India Limited Employee Stock Option Plan – 2003 (“the 2003 Plan”): The Company had instituted the 2003 Plan, which was approved by the Board of Directors in August 2003 and by the Shareholders in September 2003. The 2003 Plan provides for grant of stock options aggregating not more than 5% of number of issued equity shares of the Company to eligible employees and directors of the Company. The 2003 Plan is administered by the remuneration committee appointed by the board of directors. Details of the 2003 Plan are given below: (NOS.) Particulars Year Ended Year Ended March 31, 2007 March 31, 2006 Options outstanding, beginning of the year 22,750 3,12,250 Options granted during the year 7,26,595 22,750 Exercised during the year 7,580 3,12,250 Options outstanding, end of the year 7,41,765 22,750 Adjusted after share split (Refer note 12 above)

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Max New York Life Insurance Company Limited The company currently has following employee stock option plans:

Employee Share Based Payment Plans (a) Employee Share Payment Based Plan 2003 (ESBP 2003): The plan was approved by the Board of Directors in October, 2003 and by the shareholders in November, 2003. The plan covers selected employees of the company and it provides for issue of 80,00,000 shares of Rs. 10/- each at an exercise price of Re. 1/- per 1,000 fully paid shares. To administer and implement the plan, the company has setup an ESBP Trust. Under the plan, Nil shares were outstanding at the beginning of the period. The company has accrued for an ESBP cost amounting to Nil (Previous year Rs 25.13 Lacs). No further options have been granted under this plan. (b) Employee Share Based Payment Plan 2004 (ESBP 2004): The plan was approved by the Board of Directors in September 2005. The plan covers selected employees of the company and it provides for issue of 59,00,000 shares of Rs. 10/- each at an exercise price of Re. 1/- per 1000 fully paid shares. The options were granted with effect from July 1, 2004 and are to vest on July 1, 2009 if the employee is in service with the company as on the vesting date. The company is under the process of finalising the scheme and is also setting up a Trust to administer and implement the options granted. As per the management estimate, the appropriate basis for the fair value of each share is the face value of paid up equity share of the company, as injected last by the promoters given the net asset value is lower. Under the plan, 57,00,000 shares were outstanding at the beginning of the year out of which 2,00,000 got lapsed due to attrition during the year. Accordingly, the company has accrued for an ESBP cost amounting to Rs. 102.87 Lacs (Previous year Rs. 130.87 Lacs). (c) Employee Share Based Payment Plan 2006 (ESBP 2006): The plan was announced in July 2006 and approved by Board of Directors in March 2007. The plan covers selected employees of the company and it provides for issue of 25,00,000 shares of Rs. 10/- each at an exercise price of Rs. 10/- per fully paid shares. The options were granted with effect from July 1, 2006 and 75% are to vest on July 1, 2009 and balance 25% on July 1, 2010 if the employee is in service with the company as on the vesting date. The company is under the process of finalising the scheme and is also setting up a Trust to administer and implement the options granted. As per the management estimate, the appropriate basis for the fair value of each share is the face value of Paid up Equity Share of the company, as injected last by the promoters given the net asset value is lower. However, the company has not accrued any ESBP cost under this plan till March 31, 2007. A summary of status of Employee Stock Based Plans is given below: (NOS.) Particulars Year Ended Year Ended March 31, 2007 March 31, 2006 Outstanding at the beginning of the year 57,00,000 69,00,000 Add: granted during the year 25,00,000 - Less: Forfeited/lapsed during the year 2,00,000 2,00,000 Exercised during the year - 10,00,000 Outstanding at the end of the year 80,00,000 57,00,000

Max Healthcare Institute Limited Employee Stock Option Plan – 2006 (“the 2006 Plan”): The company has instituted the 2006 Plan, which was approved by the Board of Directors on July 31, 2006 and subsequently by the Shareholders on August 10, 2006. The 2006 Plan provides for grant of stock options aggregating not more than 5% of number of issued equity shares of the company to eligible employees of the company. The 2006 Plan is administered by the remuneration committee appointed by the Board of Directors. The options can be exercised during two to four years from the vesting date. Details of the 2006 Plan are given below: (NOS.) Particulars Year Ended Year Ended March 31, 2007 March 31, 2006 Options outstanding, beginning of the year - - Options granted during the year 19,26,000 - Options forfeited/lapsed during the year (2,56,000) - Options outstanding, end of the year 16,70,000 -

108 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

15 Deferred Tax The movement of deferred tax is given below: (RS. LACS) Particulars As at Reversed Provision Adjustment As at April 01, 2006 during the year during the year March 31, 2007 Deferred Tax Liability Depreciation 2026.38 122.13 1370.39 (36.49) 3238.15 Deferred Revenue Expenses and 221.10 - (17.74) (46.72) 156.64 Preoperative Expenditure Deduction u/s 35D/35DD 6.49 - (3.10) - 3.39 Liability for Increase in Surcharge (47.95) - - 33.05 (14.90) Total 2206.02 122.13 1349.55 (50.16) 3383.28 Deferred Tax (Assets) Deduction u/s 43B (122.15) - (30.64) 1.18 (151.61) Other Provisions (493.80) 19.08 (114.44) 2.25 (586.91) Total (615.95) 19.08 (145.08) 3.43 (738.52) Net Deferred Tax Liability/(Asset) 1590.07 103.05 1204.47 (46.73) 2644.76 Note: Deferred tax assets are created to the extent of their realisability in future.

16 Directors’ Remuneration Directors’ remuneration paid/provided for in the accounts: (RS. LACS) Particulars Current Year Previous Year (a) Salary, wages and allowances 562.30 148.18 (b) Contribution to provident fund and superannuation fund 24.30 24.30 (c) Value of perquisites 38.63 0.44 Total 625.23 172.92 The above does not include leave encashment, gratuity and ESOP. Notes: During the year, the Company paid remuneration to the executive directors in accordance with the resolutions passed by the Remuneration Committee of the Board of Directors and the Shareholders. An amount of Rs. 230.44 Lacs (Previous year Rs. 153.85 Lacs ) was paid to the executive directors in excess of the limits prescribed under Section II of Part II of Schedule XIII to the Companies Act, 1956. The Company is in the process for obtaining requisite approvals from the Central Government for the same. In view of the aforesaid, the excess amounts of Rs. 230.44 Lacs for the current year and Rs. 21.43 Lacs* for the earlier years, received by the concerned directors, are held by them in trust for the Company. Remuneration for current year also includes an amount of Rs. 162.31 Lacs (Previous year Nil) relating to earlier years for which the Company has received Central Government approval during the year. * Includes Rs. 5.77 Lacs held by a former director.

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17 Earnings per Share Calculation of EPS (Basic and Diluted) Particulars Year Ended Year Ended March 31, 2007 March 31, 2006 Basic Profit after tax (Rs. Lacs) (4973.05) 30945.99 Weighted average number of Equity Shares 17,92,23,238 16,73,90,085 EPS (Rupees) (2.77) 18.49 Equity Share Details (Nos.) Outstanding as at the beginning of the year 17,45,51,550 13,62,42,800 Issued on May 17, 2006 53,42,925 - Issued on December 20, 2006 7,580 - Issued on June 06, 2005 - 3,79,96,500 Issued on March 07, 2006 - 3,12,250 Outstanding as at the end of the year 17,99,02,055 17,45,51,550

Diluted Profit after tax (Rs. Lacs) (4973.05) 30945.99 Weighted average number of Equity Shares 18,04,86,557 17,57,51,280 EPS (Rupees) (2.77) 17.61 Equity Share Details (Nos.) Outstanding as at the beginning of the year 17,99,17,225 15,69,44,475 ESOP granted under the 2003 Plan 7,26,595 22,750 Issued on June 06, 2005 - 3,79,96,500 Convertible Warrants allotted/forfeited on June 06, 2005 - (1,50,46,500) Outstanding as at the end of the year 18,06,43,820 17,99,17,225

Reconciliation of denominators used for calculating basic and diluted earnings per share (NOS.) Particulars Year Ended Year Ended March 31, 2007 March 31, 2006 Denominator used for computing basic Earnings Per Share 17,92,23,238 16,73,90,085 Add :- Dilutive impact of - (i) ESOPs exercised under the 2003 Plan 20,632 2,90,865 (ii) ESOPs granted under the 2003 Plan 5,69,332 6,670 (iii) Convertible Warrants 6,73,355 80,63,660 Denominator used for computing diluted Earnings Per Share 18,04,86,557 17,57,51,280

18 Miscellaneous Expenditure (RS. LACS) Particulars As at Additions Adjusted/ Amortised As at April 1, 2006 Transfer during the year March 31, 2007 Preliminary and Issue Expenses 27.82 - (0.08) 13.58 14.16 Deferred Employee Compensation * 394.83 1301.67 (19.99) 545.66 1130.85 Deferred Revenue Expenditure 37.81 - - 31.81 6.00 460.46 1301.67 (20.07) 591.05 1151.01 * Amortisation has been charged to Salaries, Wages and Bonus.

19 On June 1, 2006, the Company sold its entire stake in Max Estates Ltd. and Malsi Estates Ltd. (both wholly owned subsidiaries) to Malsi Holdings Ltd. for a consideration of Rs. 515 Lacs. The profit on divestment of stake of Rs. 504.99 Lacs is included under the head “Income from Investment Activities”.

110 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

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20 On August 31, 2006, Neeman BV acquired 33 shares of Euro 500 each of Neeman Medical International NV (“Neeman NV”) from Alda Ltd. By virtue of the above, Neeman NV became a wholly owned subsidiary of Neeman BV. Also, as part of the agreement, loan of Rs. 2293.82 Lacs repayable by Neeman NV to Alda Ltd. (erstwhile shareholder) and loan of Rs. 1004.26 Lacs given by Max Asia Pac Limited (erstwhile holding company of Neeman BV) to Alda Ltd. have been assumed by Neeman BV. In addition, as part of the aforesaid transaction, an amount of Rs. 338.72 Lacs was also paid by Neeman BV to Alda Ltd. Consequently, the net balance appearing in the books of Neeman BV amounting to Rs. 950.84 Lacs, which is no longer payable, has been written back.

21 Detail of Balances with Non-scheduled Banks (RS. LACS) Name of the Bank Balance as on Maximum Balance Balance as on Maximum Balance March 31, 2007 Outstanding March 31, 2006 Outstanding during 2006-07 during 2005-06 In Current Accounts Wachovia Bank 3.86 168.40 39.08 313.06 Barclay Bank Plc 21.52 58.10 29.73 29.73 Rabo Bank 47.27 725.17 6.55 1062.73 Hongkong and Shanghai Banking Corporation - 523.25 33.81 530.04 Total 72.65 109.17 In Escrow Accounts Banco Nacional De Costa Rica 0.05 0.26 0.05 0.26 Banco De San Jose 0.09 6.33 6.33 41.56 Total 0.14 6.38

22 Segment Reporting a) Business Segments The Company has considered business segment as the primary segment for disclosure. The products/ services included in each of the reported business segments are as follows: l Speciality Plastic Products - The holding company’s manufacturing facility located at Railmajra, Nawanshahr (Punjab), produces packaging films supported with polymers of propylene, leather finishing transfer foils and related products. l Life Insurance – This segment relates to the nation wide life insurance business carried out by one of the Company’s subsidiaries. l Healthcare Business – One of the Company’s subsidiaries is engaged in the delivery of healthcare services in the National Capital Territory of Delhi through its primary, secondary and tertiary health care delivery centers. This also includes revenue from leasing of medical and other equipments. l Clinical Research – Consists of business activities relating to conduct of ethical medical research involved in drug development process as a Clinical Research Service provider. The group of subsidiaries involved in this business segment offer study management services, project management services, data base management services, monitoring services and clinical trial pharmacy supply chain management services to the pharmaceutical, medical device, biotechnology and contact research organizations worldwide. l Business Investments – Include investments of the holding company in downstream companies having interest in telecom and connectivity services industries and treasury investments. l Healthcare Staffing – Includes business activities relating to sourcing, training and placing healthcare personnel in India and abroad. l Others – The leasing activities undertaken by one of the Company’s subsidiary are classified under this segment. The above business segments have been identified considering: (i) The nature of products and services (ii) The differing risks and returns (iii) Organisational structure of the group, and (iv) The internal financial reporting systems. Segment Revenue consists of revenue from external customers and revenue from other segments. Segment Result is the difference of segment revenue and segment operating expenses. Unallocated Assets include assets pertaining to the holding company’s corporate office such as, loans, advances and deposits. Unallocated Liabilities include tax provisions and interest bearing loans not directly related to any business segment. Unallocated Expenses - Expenses incurred at corporate office of the holding company relate to various business segments. As there is no reasonable basis of allocating this expenditure to various segments, the same are shown as unallocated reconciling expenses. Interest expense is not treated as part of a segment expense and is reflected as a separate line item, except interest on loans allocated to business segment. The segment information has been prepared in conformity with the accounting policies adopted for preparing and presenting these financial statements. b) Geographical Segments The Company has considered geographical segment as secondary reporting segment for disclosure. For this purpose, the revenues are bifurcated based on location of customers in India and outside India.

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SEGMENT INFORMATION

PRIMARY SEGMENT (RS. LACS) Particulars Speciality Healthcare Business Life Healthcare Clinical Others Total Plastic Business Investment Insurance Staffing Research Products Services Services a. Segment Revenue from Sales to External Customers 16310.63 3303.25 - - - - - 19613.88 [13123.44] [2187.40] [-] [-] [-] [-] [-] [15310.84] Service Income 234.20 13605.44 - 148541.80 243.77 427.14 - 163052.35 [270.65] [7093.86] [-] [77971.67] [36.86] [775.17] [-] [86148.21] Service/Interest Income from - 1369.03 89.96 - - 68.44 232.19 1759.62 Inter Segments [-] [1071.83] [266.31] [-] [-] [59.79] [270.67] [1668.60] Income from Investment Activities - 135.81 2686.30 10719.93 - 4.62 21.32 13567.98 [-] [399.90] [44003.44] [7193.19] [-] [3.16] [121.87] [51721.56] Other Income 77.95 71.64 - 483.69 9.37 31.28 288.20 962.13 [34.28] [12.53] [-] [111.66] [18.69] [26.83] [252.30] [456.29] Total Segment Revenue 16622.78 18485.17 2776.26 159745.42 253.14 531.48 541.71 198955.96 [13428.37] [10765.52] [44269.75] [85276.52] [55.55] [864.95] [644.84] [155305.50] Less: Inter segment revenue 1759.62 [1668.60] Segment Revenue from External Customers 197196.34 [153636.90] Add: Unallocated Revenue 1384.69 [19.89] Add: Interest Income 771.95 [221.23] Total Revenue 199352.98 [153878.02]

b. Segments Results 1413.32 (269.07) 2686.30 (5377.70) (385.28) (408.77) 269.25 (2071.95) [1429.15] [(640.78)] [43611.57] [(4871.51)] [(350.48)] [(1711.00)] [431.63] [37898.58] Interest Income 771.95 [221.23] Sub-total (1300.00) [38119.81] Less: Unallocated Expenses 1309.34 [1344.79] Interest Expenses 2939.50 [3248.86] Profit/(Loss) before Tax (5548.84) [33526.16] Provision for Taxation 1572.53 (Includes Provision for Deferred Tax) [3966.41] Profit/(Loss) after Tax (7121.37) [29559.75]

c. Carrying Amount of Segment Assets 25726.70 62162.55 28263.92 212721.41 297.11 5660.25 3531.31 338363.25 [9638.56] [40164.75] [49267.24] [106703.34] [259.57] [12402.22] [9914.17] [228349.85] Add: Unallocated Assets 3050.53 [1162.36] Cost of Control 7389.83 [7525.69] Less: Inter Group Advances 23431.87 [22602.27] Total Assets 325371.74 [214435.63]

d. Segment Liabilities 10321.89 21111.66 - 183880.97 1348.93 6401.16 1490.89 224555.50 [2140.42] [4059.73] [43.53] [89062.18] [918.13] [20066.43] [2790.16] [119080.58] Add: Unallocated Liabilities 52099.93 [44443.55] Less: Inter Group Advances 23431.87 [22602.27] Total Liabilities 253223.56 [140921.86]

112 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS

(RS. LACS) Particulars Speciality Healthcare Business Life Healthcare Clinical Others Total Plastic Business Investment Insurance Staffing Research Products Services Services e. Cost to Acquire Tangible and 11894.84 14529.32 - 4634.56 121.96 214.40 1092.31 32487.39 Intangible Fixed Assets [122.90] [2003.60] [-] [2429.96] [201.31] [19.47] [0.24] [4777.48] Unallocated 1560.02 [2362.87] Total Addition 34047.41 [7140.35] f. Depreciation and Amortisation Expenses 481.42 1633.00 - 2263.88 67.34 64.08 62.71 4572.43 [513.98] [1090.75] [-] [1793.58] [40.45] [64.31] [51.68] [3554.75] Unallocated Depreciation and Amortization 94.98 [101.31] Total Depreciation and Amortization 4667.41 [3656.06] g. Non-cash Expenses other than Depreciation 32.81 147.47 - 357.42 7.71 1018.75 0.72 1564.88 and Amortisation [37.34] [85.97] [291.96] [49.77] [0.29] [38.06] [4.41] [507.80] Unallocated Non Cash Expenses 63.81 [41.23] Total 1628.69 [549.03]

SECONDARY SEGMENT (RS. LACS) Particulars India North Europe South Asia Total America Canada America Australia a. Revenue from External Customers 193444.54 497.16 2469.13 319.33 466.18 197196.34 [150934.75] [273.14] [1519.09] [520.03] [389.89] [153636.90] b. Carrying Amount of Segment Assets by Location of Assets 333183.84 4492.98 553.01 44.77 88.65 338363.25 [211960.88] [186.55] [14537.58] [548.21] [1116.63] [228349.85] c. Cost to Acquirer Tangible and Intangible Fixed Assets 34037.67 9.74 - - - 34047.41 by Location of Assets [7132.12] [7.36] [-] [0.87] [-] [7140.35]

Sales shown above includes Scrap sale of Rs. 776.16 Lacs (Previous year Rs. 638.04 Lacs) classified as other income in Profit and Loss Account. Previous year’s figures are given in [ ] brackets.

23 Related Parties (as identified by the management) are classified as: Joint Ventures and Associates Max HealthStaff International Ltd. (till June 29, 2005), CMax Infocom Pvt. Ltd. (till April 16, 2005) Key Management Personnel (Directors) Mr. Analjit Singh, Mr. B Anantharaman Relatives of Key Management Personnel Mr. Veer Singh Enterprises over which Key Management Liquid Investments & Trading Company, New Delhi House Services Ltd., Medicare Investments Personnel have Significant Influence Ltd., Maxopp Investments Ltd., Cheminvest Ltd., Pivet Finances Ltd., Lakeview Enterprises, Delhi Guest House Pvt Ltd., Trophy Holdings Pvt. Ltd., Boom Investments Pvt. Ltd., M.V. Healthcare Services Pvt. Ltd., ND Callus Info Services Pvt. Ltd., Malsi Holdings Ltd., Dynavest India Pvt. Ltd., Scorpio Beverages Pvt. Ltd., Trophy Guest Houses & Resorts Pvt. Ltd., Trophy Estates Pvt. Ltd., Gaylord Impex Ltd., Pen Investments Ltd., Mohair Investment, PVT Investment Ltd., TVP Investments Pvt. Ltd., BAS Investments Pvt. Ltd., Vitasta Estate Pvt. Ltd., Terra Planet Estate Pvt. Ltd., Malsi Estates Ltd. (w.e.f. June 1, 2006), Max Estates Ltd. (from June 1, 2006 to August 31, 2006) Employee Benefit Funds Max India Ltd. Employees Provident Fund Trust, Max India Ltd. Superannuation Fund

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Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business are as follows: (RS. LACS) Particulars Joint Key Relatives of Key Enterprises over Employee Ventures and Management Management which Key Benefit Funds Associates Personnel Personnel Management Personnel have Significant Influence 1 Deposits and Advances Accepted / Given - 234.49 - - - (-) (165.16) (-) (-) (-) 2 Loans Taken - - - - - (-) (-) (-) (171.00) (-) 3 Loans Given - - - 20.00 - (108.00) (-) (-) (-) (-) 4 Incomes and Reimbursement - Interest Income - - - 0.06 - (9.09) (-) (-) (1.71) (-) - Reimbursement of Expenses - - - 18.91 - (4.50) (-) (-) (19.43) (-) 5 Expense - Services Received - 625.22 - 237.74 - (-) (172.92) (-) (183.02) (-) - Interest Paid - - - - - (-) (-) (-) (68.35) (-) - Other Expenses - - 10.82 113.69 - (-) (-) (9.08) (86.55) (-) - Company’s Contribution to Trust - - - - 79.08 (-) (-) (-) (-) (71.78) 6 Investments Made - Actual - - - - - (-) (-) (-) (250.00) (-) -Investments Sold - - - 515.00 - (-) (-) (-) (-) (-) 7 Amount Outstanding - Interest Receivable - - - - - (-) (-) (-) (0.06) (-) - Other Receivable - 250.16 0.15 3.47 - (-) (189.04) (-) (0.10) (-) - Other Payable - - - 61.01 - (-) (-) (-) (18.47) (-) Other relevant information - i) The above excludes sitting fees Rs. 7.29 Lacs (Previous year Rs. 7.89 Lacs) paid to non-executive directors. ii) Previous year’s figures are given in brackets.

114 MAX INDIA ANNUAL REPORT 2006-07 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

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24 Leases Accounting for leases has been done in accordance with Accounting Standard-19 issued by the ICAI. Following are the details of lease transactions for the year: (a) Finance Lease The Company does not have any finance lease agreement. (b) Operating Lease (i) Lease rentals recognised in the Profit and Loss account for the year is Rs. 3137.36 Lacs (Previous year Rs. 2249.43 Lacs). (ii) The Company has entered into operating leases for its office and for employees’ residence, vehicles for transportation, furniture that are renewable on a periodic basis. The total of future minimum lease payments under non-cancellable leases are as follows: (RS. LACS) Particulars March 31, 2007 March 31, 2006 Not later than one year 609.59 1145.56 Later than 1 year and not later than 5 years 787.80 4204.65 Later than five years 228.81 13144.25 Total 1626.20 18494.46

25 Movement in Policyholders’ Liability (RS. LACS) Particulars Current Year Previous Year Opening Balance 74424.00 36031.43 Add: Transfer to reserve 75379.15 34167.06 Add: Bonus payable to policyholders 6906.04 4225.51 Closing Balance 156709.19 74424.00

26 Max Medical Services Limited (a) As at December 10, 2001 the company had entered into an agreement with a healthcare service provider to construct a hospital building. The construction, as aforesaid had been completed and the building handed over as on March 31, 2005 to the healthcare service provider for a consideration of Rs. 2431.00 Lacs. The said consideration is repayable in equal installments over 26.5 years from the handover date. In addition, since the receipt of the consideration is spread over a long period, an income amounting to Rs. 209.63 Lacs (Previous year Rs. 127.73 Lacs) which is based on a fixed percentage of the turnover of the healthcare service provider has been accrued in these accounts and disclosed under Loans and Advances. (b) The company had entered into an agreement with a healthcare service provider on December 10, 2001 for supply of medical, other equipments and fixtures for an initial term of 30 years. Under the terms of the lease, the company is responsible for: (i) Acquisition of equipment including its repair and servicing; (ii) Ensuring adequate insurance coverage for the assets; and (iii) Replacement of any existing equipment or suitable equipment in lieu thereof As per terms, lease rentals based on a fixed percentage of the turnover of the healthcare service provider are due to the company on a monthly basis. Accordingly, as at March 31, 2007 an amount of Rs. 1048.14 Lacs (Previous year Rs. 638.65 Lacs) has been accrued as lease rentals. The lease rent being contingent on turnover, cannot be quantified for any future periods and disclosed under Loans and Advances.

27 Preferential Issue Proceeds Details of additions and utilizations (RS. LACS) Particulars Current Year Previous Year Opening Balance - 2255.40 Addition: On preferential allotment of shares 1893.45 15198.60 Total 1893.45 17454.00 Utilizations: Investments in subsidiary companies 1893.45 10263.52 Redemption of debentures, repayment of loans and interest thereon - 7190.48 Closing Balance - -

MAX INDIA ANNUAL REPORT 2006-07 115 MAX INDIA LIMITED CONSOLIDATED STATEMENT OF ACCOUNTS

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28 Securities Premium Account (i) Details of additions: (RS. LACS) Particulars Current Year Previous Year 1. On preferential allotment of shares 2030.31 23063.67 2. Exercise of Stock Option 8.92 253.33 Total 2039.23 23317.00

(ii) Details of utilizations: (RS. LACS) Particulars Current Year Previous Year 1. Legal and Professional - 17.55 2. Custodian Fee and Share Transfer Stamp Fee - 8.38 3. Diminution in Goodwill (Refer Note 33 below) 1033.87 - 4. Fees for increase in authorized capital and other expenses in connection with share issue* 34.13 94.42 Total 1068.00 120.35 * Adjusted for transfer to minority Rs. 14.62 lacs

29 During the year, Rs. 16.88 Lacs (Previous year Rs. 15.54 Lacs) has been charged to the Profit and Loss account relating to Research and Development expenditure under the head Raw Material – Consumed. 30 Additions/deletions in the schedule of Reserves and Surplus (Schedule 3) include adjustments in respect of consolidation level accounting in accordance with Accounting Standard 21. 31 Shareholders in Extra-ordinary General Meeting of the Company held on March 23, 2007 approved issuance of equity shares or any such instruments / securities to Qualified Institutional Buyers under Chapter XIII-A of the Securities & Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000, in one or more tranches, for an aggregate amount upto Rs. 1000 Crores. Subsequent to the year end, the Company has received in-principle approvals from National Stock Exchange and Bombay Stock Exchange. 32 Due to adverse business conditions and continued operating losses, Neeman Medical International Latin America, S.A. decided to close its operations effective October 31, 2006. 33 Pursuant to the scheme of amalgamation, approved by the Hon’ble High Court of Punjab and Haryana on May 11, 2006 (“Scheme”), the entire business and whole undertaking of Max Telecom Ventures Limited and Max Asia Pac Ltd., Hong Kong (both wholly owned subsidiaries) were transferred as a going concern and became vested in the Company, Max India Limited w.e.f. the Appointed Date i.e. December 1, 2005. As per the approved scheme, diminution in the value of investments of Max Asia Pac Ltd. acquired by the Company and diminution in the value of any other investments/assets/loans of the Company, to the extent considered appropriate by the Board of Directors of the Company, could be charged by the Company to its Capital Reserve Account and Amalgamation Reserve Account and Securities Premium Account, in this order of utilization and to the extent required. Accordingly, the Board of Directors of the Company have evaluated the aforesaid asset values and have approved the utilization of reserves for writing off goodwill relating to Neeman Medical International, Latin America, S.A. The detail of such utilization to the extent it impacts these financial statements is given below: (RS. LACS) Charged to Particulars Diminution Amalgamation Reserve Share Premium Goodwill 1667.43 633.56 1033.87

34 Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year’s classification.

For and on behalf of the Board of Directors

N.C. SINGHAL Director DR. S.S. BAIJAL Director N. RANGACHARY Director B. ANANTHARAMAN Joint Managing Director

New Delhi NEERAJ BASUR Vice President-Corporate Finance MAY 17, 2007 V. KRISHNAN Company Secretary

116 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 DIRECTORS’ REPORT

Your directors have pleasure in presenting the Seventh Annual Report The rural distribution network in Punjab with unique hub and spoke of your Company with the audited accounts for the financial year ended model ensured that we reached the rural population to the last mile March 31, 2007. without compromising on our high quality of advice model. A special mention of the Direct Sales Team (DST), which set new PERFORMANCE HIGHLIGHTS benchmark in productivity will not be out of place. At the end of the Highlights for the year ended March 31, 2007 are as under: financial year, your Company had around 500 direct sales staff in DST (Rs. in crore) channel. Particulars Current Year Previous Year Overall, your Company now has a network of 172 offices in 120 locations. (March 31, 2007) (March 31, 2006) It employs 4,590 people (2,620 last year). Income Premium Income (net) 1,485.4 779.7 SERVICE DELIVERY INITIATIVES Income from Investments Service is key to better customer and agent satisfaction. Customer is - Policyholder 93.1 62.4 the focal point in all the activities of your Company. To further enhance - Shareholder 14.1 7.8 our service to the customers, distribution portal was launched during Other Income 5.1 1.3 the financial year. This dedicated portal will provide access to all the Total Income 1,579.7 851.2 information related to the policies to the agents and will help enhance their service levels to the customers. The customer service team was Less: Expense Commission 213.4 134.5 strengthened during the year and we now have more than 125 people Operating expenses (excl. depreciation) 514.9 326.9 strong customer service team. The improvement in customer service is Depreciation 22.6 17.9 evident from the fact that your Company has crossed 1 million policies Benefits Paid 83.1 42.5 in force. Provision for Reserves 822.9 383.9 Several customer service initiatives were introduced such as tele-servicing Total Expenses 1,656.9 905.7 of policy requests, medicals at home, SMS on demand where field agents could request SMS to be sent to focus audience, e-mail alerts to agents Max New York Life continued its high growth trajectory during the on key events on the policy such as policy enforcement, premium financial year 2006-07. Premium income has grown a 91% over the reminder etc. Also, a robust quality program is underway to improve previous year. Over 552,000 policies were sold, up from over 423,000 our communication with customers and agents. All our service delivery the previous year. The cumulative sum assured is now over Rs. 43,000 processes and service centers have been ISO 9000: 2001 certified. Six crore. The first-year premium increased 106% to Rs. 912 crore. Renewal Sigma projects have helped improve our operations and enhanced the premium also registered an impressive increase of 72%. customer focus in your Company. Use of technology to better service our customers has been another GROWING REACH focus area for your Company. During the year, your Company launched In a vast and diversified market like India, the geographical reach is of distribution portal which allows the agent advisors access to all the critical importance. Agency distribution continues to be the primary information related to policies of their customers on touch of the button. channel of distribution, well supported by alternate distribution channels This has helped in significantly improving the ability of your Company’s such as bancassurance, corporate agents and a dedicated rural distribution. agent advisors to quickly provide the renewal notices and receipts as During the financial year, the number of agent advisors has increased well as the status of their investments. to over 25,000, a net growth of 63% over last year. We continued to Operations team which works at the backend provided all the necessary focus on quality of advice model in our agency distribution. Our agent support to the distribution team by continuously improving their advisors are considered to be the best in the industry. This reflects in efficiency and hence meeting the growing demands of the fast growing 345 agent advisors meeting the MDRT norms. Your Company is confident business of your Company. of continuing amongst the top 50 MDRT companies in the world. Financial Year 2006-07 has been an eventful year for the Agency channel. BONUS PAYMENT Your Company expanded its reach with 48 new offices. The agency The Company has declared bonuses (dividends) based on the underlying channel now has a presence in 83 cities through 117 offices. performance of the participating fund for the year 2006-07. The bonus Agency sales recorded a growth of 106% touching Rs.650 crore during is payable in respect of eligible policies on third and greater policy the year as compared to Rs. 313 crore in the last financial year. anniversaries falling due in the 12 months period commencing 1st July 2007. The Corporate Agency and Broker channel continues to grow at over 100% in new business. Your Company has grown its corporate agency HUMAN RESOURCES channel by 160% and contributed Rs. 171 crore of the Company’s new Your Company recognizes that success of an organization depends on business sales. Our large corporate relationships include Peerless and the robust intellectual capital it owns. Since inception, Max New York Amsure. These corporations helped us expand our reach significantly Life has focused on building relationships with customers for life through through their unique distribution reach with allowed us to reach. high quality of advice and service to the customers. MNYL continues Your Company has actively focused on growing business through other to build its organization to support its aggressive expansion agenda. channels. It has signed 9 new Bancassurance relationships in this financial Your Company has successfully built a strong team of over 4,500 people year. Our relationship with Yes Bank continued to gain strength and is led by an experienced and dynamic management cadre. The extended proving to be a win-win relationship for both organization with emphasis MNYL cadre includes a network of over 25,000 highly trained and well- on quality of service and delivery. respected agent advisors.

MAX INDIA ANNUAL REPORT 2006-07 119 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 DIRECTORS’ REPORT

Training is seen by your Company as a key differentiator in the market 1. In the preparation of the Annual Accounts for the year ended place. MNYL imparted over 32,471 man-days of training to its employees March 31, 2007, the applicable accounting standards have been in the period. The training covered areas such as Insurance Concepts, followed along with proper explanation, relating to any material Product Knowledge, Systems and Processes, Communication, Leadership, departures. Service Delivery and other Management Development inputs. 2. Your Directors have selected such accounting policies and applied CORPORATE SOCIAL REPONSIBILITY them consistently and made judgments and estimates that are Your Company has been donating since inception, part of the proceeds reasonable and prudent so as to give a true and fair view of the of every policy sold to the SOS Children’s Villages of India. This year, state of affairs as on March 31, 2007 and of the Profit and Loss your Company is donating Rs 10,00,000.00 to SOS Children’s Villages Account for the aforesaid period. of India. 3. Proper and sufficient care has been taken by your directors for the SHARE CAPITAL maintenance of adequate accounting records in accordance with During the year, the paid up share capital of the Company has increased provisions of the Companies Act, 1956 for safeguarding the assets to Rs. 732 Crore. Your Company continues to be one of the highest of the Company and for preventing and detecting fraud and other capitalized private life insurance companies in India. irregularities.

SOLVENCY 4. The Annual Accounts of the Company for the period under review Your Company has met the solvency margin requirements as per IRDA have been prepared on a going concern basis. norms. ADDITIONAL INFORMATION DIRECTORS Information in accordance with the provisions of Section 217(1)(e) of In accordance with the provisions of the Companies Act, 1956 and the the Companies Act, 1956 read with the Companies (Disclosure of Articles of Association of the Company, Mr. N. C. Singhal and Mr. Rajesh Particulars in the Report of Board of Directors) Rules, 1988, are as Khanna retire by rotation, and being eligible have offered themselves follows: for reappointment. A. Conservation of Energy : NA B. Technology Absorption : NA AUDIT COMMITTEE C. Foreign Exchange Earnings and Outgo : The Audit Committee of the Company comprises of four non-executive (Rs. in crore) directors. Four meetings of the Committee were held during the year. Year ended 31.03.2007 Mr. B Anantharaman is the Chairman of the audit committee. Mr. Joe Gilmour, Mr. N. C. Singhal and Mr. Frederick Sievert are the other committee members. Earnings (including equity infusion) 45.62 Outgo 14.88 AUDITORS Activities relating to Exports, initiatives taken to increase NA The Joint Auditors M/s. Thakur Vaidyanath Aiyar & Co., Chartered exports, develop New Export markets, Export Plan etc. Accountants and M/s. Ray & Ray, Chartered Accountants retire at the conclusion of the ensuing Annual General Meeting and have expressed ACKNOWLEDGMENTS their willingness to be re-appointed at the Annual General Meeting. The directors wish to place on record their deep appreciation for the The retiring Joint Auditors are proposed to be appointed as joint auditors hard work, dedicated efforts, teamwork and professionalism shown by of the Company at the ensuing Annual General Meeting to hold office the employees and the Agents Advisors, which has enabled the Company until the conclusion of next Annual General Meeting. The Company has to successfully establish itself amongst the leading private life insurance received certificates from the Joint Auditors that their appointment as companies in India. Your directors also express gratitude to the Insurance auditors, if made, will be in accordance with the limits specified under Regulatory and Development Authority of India, the Reserve Bank of Section 224 (1B) of the Companies Act, 1956. India, Central and State Governments and the joint venture partners, Max India Limited and New York Life International, LLC for their continued PARTICULARS OF DEPOSITS cooperation, support and assistance. The Company has not accepted any deposits under Section 58A of the Companies Act, 1956. For and on behalf of the Board of Directors PARTICULARS OF EMPLOYEES The Statement giving particulars, under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, New Delhi ANALJIT SINGH 1975, for the year ended March 31, 2007, is annexed to the Report and MAY 14, 2007 Chairman marked as Annexure I.

DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors hereby state that:

120 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 ANNEXURE I

PARTICULARS OF EMPLOYEES INFORMATION AS PER SECTION 217(2A) READ WITH COMPANIES (PARTICULARS OF EMPLOYEES) RULES 1975 AND FORMING PART OF THE DIRECTORS REPORT DATED 14th MAY, 2007.

Sl. Name Age Designation Remuneration Qualifications Date Of Total Last Designation No. (Yrs.) (Rs.) Commencement Experience Employment of Employment (Years) Held

A. Employed throughout the year and were in receipt of remuneration not less than Rs.2,00,000/- per month 1 A. N. Mohandas 41 Managing Partner 2,952,206 BA (Eco) 8-Jan-01 12 Softel Machines Ltd. Regional Mngr. 2 Abizar Shaikh 41 Vice President - Strategic Initiatives 3,955,093 MMS 3-Dec-00 13 Kotak Mahindra Finance Asst Vice President 3 Ajay Chaturvedi 40 Asst. Vice President - Actuarial Services 4,053,122 BA 1-Dec-00 16 L.I.C Of India AAO 4 Ajay Seth 44 Director - Legal & Compliance 7,448,014 BA,LLB,AICWA,ACS 14-Apr-03 19 Madura Coats Ltd VP Legal Co Secy 5 Aman Pal Singh 39 Regional Manager 3,428,823 MBA 3-Apr-01 16 Fascel Ltd. Asst Vice President 6 Amit Kumar 45 Group Chief Information Officer 12,173,548 B.Tech, MSC 3-Jun-02 22 Associates I Financial Serv Regional Chief Information 7 Amreesh Kher 30 Regional Relationship Manager - Bancassurance 3,129,765 BE, PGDBM 4-Apr-05 7 AVIVA Life Insurance Ltd. Sales Manager 8 Anil Mehta 46 Director - Group Business 10,461,862 MSc 1-Oct-00 21 ANZ Grindlays Bank Head - Risk Mgmt, Middle East & South Asia 9 Anil Misra 40 Regional Manager 5,138,406 Post Graduate Diploma 16-Apr-02 20 Sita World Travels Bus Development Mngr. in Business Management 10 Anurag Bhartiya 37 Vice President - Training 2,807,062 Dip.In Hotel Mgmt, 6-Dec-01 13 Mastek Ltd. Manager- HRD & Development M-HRA-NMIMS 11 Arvinder Bhalla 43 Zone Head - Agency (South) 5,586,497 MA(Eng) 5-Aug-02 15 Ray Ban Sun Optics National Sales Manager 12 Ashish Desai 35 Sr. Vice President - Product 12,439,406 BA, Fellow of the 12-Jul-04 14 GE Frankona Re Risk Manager Management Institute of Actuaries 13 Capt. Ashish Bahadur 35 Vice-President - Facility 2,596,466 B.Com 1-Dec-05 13 IBM Daksh Deputy General Manager Services and Infrastructure Admin 14 Debashis Sarkar 46 Director - Marketing 7,192,272 B-Tech,PGDM 11-Jan-02 22 Reckitt Benckiser Mktg. Controller 15 Gary Bennett 52 CEO & Managing Director 24,018,362 Diploma in Business 15-Jul-05 25 New York Life Insurance President & Chief Executive Management Worldwide 16 Harsha Murthy 34 Asst. Vice President - Strategic Planning & MIS 2,643,349 BE, PGDM 20-Oct-05 8 The World Bank Head Analytics & Quality Assurance 17 John Poole 37 Appointed Actuary 14,414,420 Maths.Deg-UK, FIAA, FIA ASA, 31-Jan-05 27 Was AMP Asia Finance Director FASI, FAICD 18 Kenneth Sannoo 45 Sr. Vice President - Agency (North) 7,807,055 BA 29-Mar-01 22 Singer I Ltd. G M Sales 19 Manish Parmesh Saklani 39 Managing Partner - Multi Location 2,783,444 Masters In Mktg Mgmt 27-May-02 12 BPL Mobile Senior Manager 20 Navneet Tandon 37 Managing Partner - Multi Location 2,641,119 BSc 13-May-03 13 Bharat Shell Ltd Area Sales manager 21 Parag Raja 31 Managing Partner - Multi Location 3,665,385 M.Com 11-Jan-01 11 ICICI Bank Ltd. Regional Product Mngr. 22 Parag Shah 34 Managing Partner 3,332,459 BE, PGDMM 15-Jan-01 7 Infotech Era Territory Manager 23 Prerak Parmar 39 Managing Partner - Multi Location 4,318,100 Diploma in Sales & Management 8-Jan-01 15 Henkel Spic India Ltd., Area Sales Manager 24 Puneet Khanna 39 Managing Partner - Multi Location 3,640,077 MBA 22-Mar-02 15 Std. Chartered Bank Branch Mngr. 25 Raj Nair 42 Regional Manager - Agency (Gujarat) 6,705,488 Post Graduate in Sales & 1-Dec-01 20 Satyam Infoway Ltd. regional Mngr. Management 26 Rajan Kalia 37 Vice President - Human Resources 5,274,779 Master in Personnel Management 7-Dec-00 15 Coca Cola India Manager- HRD & Industrial Relations 27 Rajender Sud 40 Sr. Vice President - Agency (West) 8,488,260 BA 1-Jan-01 16 ION Exchange I Ltd. G M Sales 28 Rajesh Rajput 39 Asst. Vice President - Actuarial Services 3,267,206 M.Sc 1-Dec-00 16 GE Capital Associate Actuary 29 Rajesh Ramakrishnan 33 Managing Partner 3,091,776 B.Com 2-May-01 7 India Com Directories Ltd. Br. Mngr. 30 Rajesh Sud 37 Executive Director - Distribution 20,788,886 B.Com(H), MBA -FMS 16-Oct-00 15 ANZ Grindlays Bank Head-Asset Finance 31 Rajit Mehta 45 Executive Director - HR 13,463,188 MBA 16-Oct-00 23 Bank of America Director - Personnel 32 Raman Garg 38 Vice President & Financial Controller 4,408,263 FCA, ACS, Grad-ICWAI 5-Feb-01 14 Coca Cola India National Manager 33 Rampal Singh 42 Vice President - Rural Business 4,935,272 B.Sc, MBA 15-Jul-02 17 Hindustan Lever Ltd Head - Aqua Business 34 Sachin Garg 40 Vice President - Agency Operations 4,094,139 Post Graduate Diploma in 1-Feb-01 18 Maruti Udyog Ltd. Sr. Mngr. Management 35 Sanchit P Maini 37 Vice President - Actuarial Services 3,695,204 B.Sc-H, M.Sc 1-Sep-05 6 GE Capital Associate Actuary 36 Sandeep Tyagi 41 Head - Amsure 3,519,452 Post Graduate Diploma in 4-Jan-02 16 Electrolux I Ltd. Sr. Mngr. Business Management 37 Sandeep Wanchoo 41 Managing Partner - Multi Location 3,895,465 MBA 16-Sep-02 18 Tata Finance Ltd GM-Asset Finance Div 38 Sanjay Bakshi 41 Regional Manager 4,358,752 B.Com 21-Jul-03 17 Priya Exhibitors G M Sales 39 Sanjay Kumar Bhatia 43 Managing Partner - Multi Location 3,229,993 CA-ICAI 17-Jul-01 12 Vikas Motors V.P (Finance) 40 Sanjay Misra 37 Partner - In Charge 3,121,174 M.Sc 21-Jan-02 10 Ecoboard Inds Ltd BDM(W) 41 Sanjeev Mago 40 Sr. Vice-President - Customer Operations 6,718,256 FCA 1-Jul-02 17 Bharti Televentures Ltd VP-Quality 42 Shailesh Mehta 39 Managing Partner - Strategic initiatives 3,208,208 B.Sc(Finance)Univ of 1-Apr-03 15 AXA Advirors Financial Consultant Massuchussets 43 Shiv Maheshwari 36 Managing Partner 4,371,898 B.Com(H) 8-Sep-03 13 BPL Mobile Cellular Ltd Zonal Sales Manager 44 Sibaranjan Patnaik 43 Zonal Vice President - Agency (East) 3,121,256 LLB, IIIE, PGDBM 9-Feb-04 19 HDFC Standard Life Insurance Regional Manager - East 45 Sumit Rai 37 Vice President - National Training 4,678,939 MBA 23-Oct-00 14 ABN Amro Bank Manager Sales Manager (Agency) 46 Sunil Kakar 50 Director / Chief Financial Officer 8,398,068 B.Tech (Chem.), MBA (Finance) 1-Mar-01 24 Bank of America CFO 47 Sunil Sharma 52 Executive Director & Chief Operating Officer 16,861,026 Masters in Personnel Mgmt, 1-Oct-00 29 ANZ Grindlays Bank Head of Sales, Service and MBA (Sales & Mktg) Change Mgmt - Middle East & South Asia 48 Sushant Kalra 38 Vice-President - Field Operations 3,470,766 MFC 2-Apr-01 15 Bank of America Asst Vice President 49 Sushanto Mukherjee 39 Sr. Vice President - Additional Distribution 8,003,403 MBA 1-Mar-04 18 Tata AIG Zone Head - South Zone 50 V Viswanand 37 Sr. Vice President - Bancassurance & DST 6,600,771 MMS-BITS Pillani 26-Nov-00 16 SC Grindlays Bank MMS-BITS,Pilani(91) 51 Vikas Gujral 33 Vice President - Customer Service and 3,521,822 B.Com-DU. MFC-Australia 12-Jul-04 9 Bharti Infotel Ltd Head-Quality Policy Owners Service 52 Vikram Shivpuri 39 Regional Manager 2,511,749 MBA 1-May-02 10 Amtrex Hitachi App Ltd. Branch Mngr. 53 Vimal Ishwarbhai Patel 37 Partner 2,939,258 B.Com 22-Nov-02 10 Fascel Ltd. Assistant Manager 54 Vipul Jain 38 Managing Partner - Multi Location 2,756,220 BE-IIT Roorkee 20-May-02 11 Xerox India Sr Mktg. Mngr. B. Employed for Part of the Year and were in receipt of remuneration of not less than Rs.2,00,000/- per month 55 Abhinav Rahul 37 Vice President - Corporate Communication 883,266 MBA, B.Com 4-Dec-06 19 Jubilant Organosys Ltd. Head Corporate Comm 56 Anu Prakash 41 Vice President - Legal 206,822 MBA, LLB, B.Com 5-Mar-07 15 Ge India Indu Legal Conusel 57 Hitesh K Arora 42 Vice President - Information Technology 2,342,874 MCA, BA 27-Sep-06 17 Polaris Software Lab Ltd Sr Vice President 58 N Karthikeyan 36 Head - Customer Relationship Manager 1,258,189 M.Sc, BE 8-Nov-06 12 Independent Consultant Consultant 59 Nazir Damji 56 Vice President and Chief Underwriter 5,835,376 B.Sc 12-Jun-06 30 Sun Life Assurance Vice President Company of Canada 60 Prashant Tripathy 36 Sr. Vice President - Business Development 1,306,948 B Tech, PGDBM 1-Feb-07 12 Tata Steel Sr Manager & Strategic Planning 61 Vineet Sharma 47 Senior Vice President - Quality & 900,387 BE, B.Sc 9-Jan-07 8 QAI India Principal Consultant & Business Excellence Practice Head Note: 1. Nature of employment is on contractual basis. 2. Remuneration includes Basic Salary, Allowances & Perquisites, Company contribution to Provident Fund & Superannuation. 3. All Perquisites have been computed in accordance with Income Tax Act, 1961. 4. None of the Employees holds by himself or alongwith his spouse and dependent children, 2% or more Equity Shares of the Company. For and on behalf of the Board of Directors New Delhi ANALJIT SINGH MAY 14, 2007 Chairman

MAX INDIA ANNUAL REPORT 2006-07 121 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 AUDITORS’ REPORT

TO THE MEMBERS OF MAX NEW YORK LIFE INSURANCE (h) In our opinion, and to the best of our information and according COMPANY LIMITED to the explanations given to us, the accounting policies selected 1. We have audited the attached Balance Sheet of Max New York Life by the Company are appropriate and are in compliance with Insurance Company Limited (‘Company’) as at March 31, 2007, the applicable accounting standards referred to under sub-section related Revenue Account, the Profit and Loss Account and the (3C) of Section 211 of the Companies Act, 1956 to the extent Receipts and Payments Account of the Company for the year ended applicable and with accounting principles as prescribed in the on that date (hereinafter referred to as “financial statements”), Insurance Regulatory and Development Authority (Preparation annexed thereto which we have signed under reference to this of Financial Statements and Auditors’ Report of Insurance report. These financial statements are the responsibility of the Companies) Regulations, 2002 and orders/directions issued by management of the Company. Our responsibility is to express an Insurance Regulatory and Development Authority in this behalf. opinion on these financial statements based on our audit. (i) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Revenue 2. We conducted our audit in accordance with auditing standards Account, Profit and Loss Account and the Receipts and Payments generally accepted in India. Those standards require that we plan Account together with the notes thereon and attached thereto and perform the audit to obtain reasonable assurance as to whether are prepared in accordance with the provisions of the Insurance the financial statements are free of material misstatement. An audit Regulatory and Development Authority (Preparation of Financial includes examining, on a test basis, evidence supporting the amounts Statements and Auditor’s Report of Insurance Companies) and disclosures in the financial statements. An audit also includes Regulations 2002, Insurance Act, 1938, the Insurance Regulatory assessing the accounting principles used and significant estimates and Development Act, 1999 and the Companies Act, 1956, to made by management, as well as evaluating the overall financial the extent applicable and in the manner so required and give statements presentation. We believe that our audit provides a a true and fair view in conformity with accounting principles reasonable basis for our opinion. generally accepted in India: (i) of the state of affairs of the Company in so far as it relates 3. We report that: to the Balance Sheet as at March 31, 2007; (a) We have obtained all the information and explanations, which, (ii) of the results of activities in so far as it relates to the to the best of our knowledge and belief were necessary for the Revenue Account for the year ended March 31, 2007; purposes of our audit and have found them to be satisfactory; (iii) of the loss in so far as it relates to the Profit and Loss (b) As the Company’s accounting system is centralized, no returns Account for the year ended March 31, 2007; and for the purposes of our audit are prepared at the branches of (iv) of the receipts and payments in so far as it relates to the the Company; Receipts and Payments Account for the year ended March (c) The Balance Sheet, Revenue Account, Profit and Loss Account 31, 2007. and the Receipts and Payments Account referred to in this report are in agreement with the books of account; 4. Further, we certify to the best of our knowledge and belief that: (d) The actuarial valuation of liabilities for life policies in force is (i) On the basis of our examination of books and records of the the responsibility of the Company’s Appointed Actuary. The Company and according to the information and explanations actuarial valuation of these liabilities as at March 31, 2007 has given to us, we have reviewed the management report and been certified by the Appointed Actuary, and in his opinion, have found no apparent mistake or material inconsistencies the assumptions for such valuation are in accordance with the with the financial statements; guidelines and norms issued by the Insurance Regulatory and (ii) On the basis of our examination of books and records of the Development Authority (IRDA) and the Actuarial Society of Company and according to the information and explanations India in concurrence with the Authority. We have relied upon given to us, and based upon management representations and the appointed actuary’s certificate in this regard for forming compliance certificates noted by the audit committee, nothing our opinion on the financial statements of the Company. has come to our attention which causes us to believe that the (e) On the basis of written representations received from the Company has not complied with the terms and conditions of Directors and taken on record by the Board of Directors of the registration stipulated by the Insurance Regulatory and Company, no Director is disqualified, as at March 31, 2007, Development Authority. from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; (f) In our opinion, and to the best of our information and according to the explanations given to us, proper books of account as required by law have been maintained by the Company so far ASHISH MAJUMDAR K.N. GUPTA as appears from our examination of those books; Partner Partner (g) In our opinion, and to the best of our information and according Membership No. F 57041 Membership No. 9169 to the explanations given to us, the investments have been valued in accordance with the provisions of the Insurance Act, For and on behalf of For and on behalf of 1938 and the Insurance Regulatory and Development Authority Ray & Ray Thakur, Vaidyanath Aiyar & Co (Preparation of Financial Statements and Auditors’ Report of Chartered Accountants Chartered Accountants Insurance Companies) Regulations, 2002 (‘the Regulations’) and orders / directions issued by Insurance Regulatory and New Delhi New Delhi Development Authority in this behalf; MAY 14, 2007 MAY 14, 2007

122 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 AUDITORS’ CERTIFICATE

In accordance with the information and explanations given to us and to the best of our knowledge and belief and based on our examination of the books of account and other records maintained by Max New York Life Insurance Company Limited (‘Company’) for the year ended March 31, 2007, we certify that: 1. We have verified the Company’s investments on the basis of certificates/ confirmations received from the Custodians appointed by the Company and there are no securities relating to the Company’s loans. As at March 31, 2007, the Company had no cash balances, reversions and life interests; 2. The Company does not act as a trustee of any trust; and 3. No part of the assets of the policyholders’ funds has been directly or indirectly applied in contravention to the provisions of the Insurance Act, 1938, relating to the application and investments of the policyholders funds. This certificate is issued to comply with Schedule C of Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations 2002, (‘the Regulations’), read with Regulation 3 of such Regulations and may not be suitable for any other purpose.

ASHISH MAJUMDAR K.N. GUPTA Partner Partner Membership No. F 57041 Membership No. 9169

For and on behalf of For and on behalf of Ray & Ray Thakur, Vaidyanath Aiyar & Co Chartered Accountants Chartered Accountants

New Delhi New Delhi MAY 14, 2007 MAY 14, 2007

MAX INDIA ANNUAL REPORT 2006-07 123 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 FORM A-BS BALANCE SHEET AS AT MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees)

Particulars Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS Share Capital 5 7,324,326 5,574,326 7,324,326 5,574,326 Reserves and Surplus 6 80,000 57,000 Credit/(Debit) fair Value Change Account 34,670 760

Sub-Total 7,438,996 5,632,086

BORROWINGS 7 - -

POLICYHOLDERS’ FUNDS Credit/ (Debit) fair Value Change Account - -

POLICY LIABILITIES (Refer to Note II (q) on Schedule 16) - Participating Individual Life Policies 8,308,457 5,194,777 - Participating Pension Policies 201,077 141,122 - Non-Participating Individual Life Policies 384,811 277,107 - Non-Participating Group Policies 56,108 40,077 - Non-Participating Individual Linked Policies 174,506 9,684 - Non-Participating Linked Pension Policies 3 - - Non-Participating Group Linked Policies - -

INSURANCE RESERVES - -

PROVISION FOR LINKED LIABILITIES - Non-Participating Individual Linked Policies - Linked Liabilities 5,971,298 1,516,306 - Fair Value Change 310,115 6,281,413 229,502 1,745,808 - Non-Participating Linked Pension Policies - Linked Liabilities 235,469 33,159 - Fair Value Change 4,117 239,586 664 33,823 - Non-Participating Linked Group Policies - Linked Liabilities 25,000 - Fair Value Change (40) 24,960 -

Sub-Total 15,670,921 7,442,398

FUNDS FOR FUTURE APPROPRIATIONS - Policyholders - Participating Pension Policies 62,566 49,888 - Shareholders 6,952 5,543

TOTAL 23,179,435 13,129,915

APPLICATION OF FUNDS

INVESTMENTS Shareholders’ Investments 8 2,709,725 1,408,307 Policyholders’ Investments 8A 9,193,560 5,739,928

ASSETS HELD TO COVER LINKED LIABILITIES 8B 6,545,959 1,779,631

124 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 FORM A-BS BALANCE SHEET AS AT MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees)

Particulars Schedule As at As at March 31, 2007 March 31, 2006 LOANS 9 - -

FIXED ASSETS 10 901,145 683,882

CURRENT ASSETS Cash and Bank Balances 11 396,853 221,215 Advances and Other Assets 12 1,516,351 822,567

Sub-Total (A) 1,913,204 1,043,782

CURRENT LIABILITIES 13 2,643,134 1,467,567

PROVISIONS 14 18,875 18,483

Sub-Total (B) 2,662,009 1,486,050

NET CURRENT ASSETS (C) = (A) – (B) (748,805) (442,268)

MISCELLANEOUS EXPENDITURE 15 49,779 37,066 (to the extent not written off or adjusted)

DEBIT BALANCE IN PROFIT AND LOSS ACCOUNT (SHAREHOLDERS’ ACCOUNT) 4,528,072 3,923,369 DEFICIT IN THE REVENUE ACCOUNT (POLICYHOLDERS' ACCOUNT) - -

Total 23,179,435 13,129,915

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 16

The Schedules referred to above form an integral part of For and on behalf of the Board of Directors the Balance Sheet.

As per our report of even date attached ANALJIT SINGH Chairman JOE GILMOUR Director ASHISH MAJUMDAR K.N Gupta B. ANANTHARAMAN Director Partner Partner Membership no. F-57041 Membership no. 9169 GARY BENNETT Chief Executive Officer For and on behalf of For and on behalf of SUNIL SHARMA Executive Director & Chief Operating Officer Ray and Ray Thakur, Vaidyanath Aiyar & Co. JOHN POOLE Chief Actuary (Appointed Actuary) Chartered Accountants Chartered Accountants SUNIL KAKAR Chief Financial Officer AJAY SETH Director- Legal & Compliance and Company Secretary

New Delhi New Delhi New Delhi MAY 14, 2007 MAY 14, 2007 MAY 14, 2007

MAX INDIA ANNUAL REPORT 2006-07 125 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 FORM A-PL PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 SHAREHOLDERS’ ACCOUNT (Non-technical Account) (All Amounts in Thousands of Indian Rupees)

Particulars Schedule Year Ended Year Ended March 31, 2007 March 31, 2006 TRANSFER FROM THE POLICYHOLDERS' ACCOUNT - Participating Individual Life Policies (Technical Account) - - - Participating Pension Policies (Technical Account) 1,176 575 - Non-participating Individual Life Policies (Technical Account) - - - Non-participating Group Policies - - - Non-participating Individual Linked Policies - - - Non-participating Linked Pension Policies - -

INCOME FROM INVESTMENTS (a) Interest, Dividends & Rent - Gross 113,110 64,003 [Gross of tax deducted at source Nil (2006: Nil)] (b) Profit on sale/redemption of investments 27,019 9,048 (c) (Loss) on sale/ redemption of investments (2,180) (49) (d) Amortisation of discount/(premium) 3,215 4,526

OTHER INCOME - Miscellaneous income 40,725 26

Total ( A ) 183,065 78,129

EXPENSES OTHER THAN THOSE DIRECTLY RELATED TO THE INSURANCE BUSINESS Filing fees, rates and taxes 21,044 7,462 Salaries and allowances 17,036 10,434 Others - Donations 850 2,385 - Depreciation 93 111 - Miscellaneous Expenses 6,890 6,718 Bad debts written off - -

Contribution to the Policyholders Account (Technical Account) (Refer to Note II (o) on Schedule 16) - Participating Individual Life Policies 16,232 33,563 - Participating Pension Policies - - - Non-participating Individual Life Policies 236,926 174,084 - Non-participating Group Policies 64,075 20,219 - Non-participating Individual Linked Policies 340,085 403,125 - Non-participating Linked Pension Policies 38,757 20,644 - Non-participating Linked Group Policies 45,780 -

PROVISIONS (OTHER THAN TAXATION) (a) For diminution in the value of investments( Net) - - (b) Provision for doubtful debts - - (c) Others - -

Total ( B ) 787,768 678,745 Profit/(Loss) before Tax (C)=( A )-( B ) (604,703) (600,616) Provision for Taxation - - Profit/ (Loss) after Tax (604,703) (600,616) Appropriations (a) Balance at the beginning of the year (3,923,369) (3,322,753) (b) Interim dividends paid during the year - - (c) Proposed final dividend - - (d) Dividend distribution tax - - (e) Transfer to reserves/ other accounts - -

PROFIT/(LOSS) CARRIED FORWARD TO THE BALANCE SHEET (4,528,072) (3,923,369)

126 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 FORM A-PL PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 SHAREHOLDERS’ ACCOUNT (Non-technical Account) (All Amounts in Thousands of Indian Rupees)

Particulars Schedule Year Ended Year Ended March 31, 2007 March 31, 2006 Earning per Share (Basic and Diluted) (0.99) (1.19) (Refer to Note II (u) on Schedule 16)

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 16

The Schedules referred to above form an integral part of For and on behalf of the Board of Directors the Profit and Loss Account.

As per our report of even date attached ANALJIT SINGH Chairman JOE GILMOUR Director ASHISH MAJUMDAR K.N Gupta B. ANANTHARAMAN Director Partner Partner Membership no. F-57041 Membership no. 9169 GARY BENNETT Chief Executive Officer SUNIL SHARMA Executive Director & Chief Operating Officer For and on behalf of For and on behalf of Ray and Ray Thakur, Vaidyanath Aiyar & Co. JOHN POOLE Chief Actuary (Appointed Actuary) Chartered Accountants Chartered Accountants SUNIL KAKAR Chief Financial Officer AJAY SETH Director- Legal & Compliance and Company Secretary

New Delhi New Delhi New Delhi MAY 14, 2007 MAY 14, 2007 MAY 14, 2007

MAX INDIA ANNUAL REPORT 2006-07 127 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 FORM A-RA REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 POLICY HOLDERS’ ACCOUNT (Technical Account) (All Amounts in Thousands of Indian Rupees)

YEAR ENDED MARCH 31, 2007 Participating Policies Non-Participating Linked Policies Total (Refer Annexure to the (Non-Linked) Policies (Non-Linked) Revenue Account) Particulars Schedule Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Premiums earned - net Premiums 1 7,168,639 84,356 146,348 47,472 7,284,430 246,392 25,165 15,002,802 Less : Reinsurance Ceded 89,911 - 16,606 16,619 25,485 - - 148,621 Add : Reinsurance Accepted ------7,078,728 84,356 129,742 30,853 7,258,945 246,392 25,165 14,854,181 Income from Investments (a) Interest, Dividends & Rent - Gross 532,166 12,680 24,278 3,155 125,320 4,901 255 702,755 (b) Profit on sale/ redemption of investments 49 - - - 192,874 4,487 4 197,414 (c) (Loss) on sale/ redemption of investments (49) - - (4) (43,570) (2,338) (22) (45,983) (d) Transfer/ Gain on revaluation/change in fair value * - - - - 80,785 3,457 (40) 84,202 (e) Amortisation of discount/(premium) (7,087) (98) (542) 322 (155) 1 - (7,559) Other Income Contribution from the Shareholders' Account 16,232 - 236,926 64,075 340,085 38,757 45,780 741,855 Miscellaneous Income 5,908 32 517 70 3,184 137 70 9,918 Total (A) 7,625,947 96,970 390,921 98,471 7,957,468 295,794 71,212 16,536,783 Commission 2 1,042,214 1,152 16,444 577 1,209,404 14,440 1,003 2,285,234 Operating Expenses related to Insurance Business 3 2,774,065 13,706 246,853 44,744 1,938,039 74,759 44,880 5,137,046 Provision for doubtful debts 3,214 18 298 58 2,071 91 58 5,808 Bad debts written off 21 - 1 - 12 - - 34 Provision for Tax - Fringe Benefit Tax 17,237 95 1,595 311 11,106 488 311 31,143 Provision (other than taxation) (a) For diminution in the value of investments( Net) ------(b) Others ------Total (B) 3,836,751 14,971 265,191 45,690 3,160,632 89,778 46,252 7,459,265 Benefits Paid (Net) 4 675,516 6,781 18,026 36,751 96,409 251 - 833,734 Interim Bonuses Paid ------Change in valuation of liability against life policies in force: (a) Gross ** 3,122,280 59,955 107,704 17,430 4,700,427 205,765 24,960 8,238,521 (b) (Amount ceded in Reinsurance ) (8,600) - - (1,400) - - - (10,000) (c) Amount accepted in Reinsurance ------Total ( C ) 3,789,196 66,736 125,730 52,781 4,796,836 206,016 24,960 9,062,255 SURPLUS/ (DEFICIT) ( D )= ( A) - ( B ) - ( C ) - 15,263 - - - - - 15,263 Deficit at the beginning of the year ------SURPLUS AVAILABLE FOR APPROPRIATION - 15,263 - - - - - 15,263 APPROPRIATIONS Transfer to Shareholders’ Account - 1,176 - - - - - 1,176 Transfer to Other Reserves ------Funds available for Future Appropriations - Policyholders - 12,678 - - - - - 12,678 Funds available for Future Appropriations - Shareholders - 1,409 - - - - - 1,409 Insurance reserve carried to the Balance Sheet ------Details of Surplus (a) Interim Bonus Paid ------(b) Allocation of Bonus to Policyholders 680,023 10,582 - - - - - 690,605 [Refer to Note II (p) on Schedule 16] (c) Surplus Shown in the Revenue Account - 15,263 - - - - - 15,263 (d) Total Surplus : [(a)+(b)+(c)] 680,023 25,845 - - - - - 705,868

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 16 * Represents the deemed realised gain as per norms specified by the Authority ** Represents Mathematical Reserve considering allocation of Bonus As required by Section 40 B(4) of the Insurance Act, 1938 we certify that all expenses of management in respect of life insurance business in India by the Insurer have been fully debited to Policyholder Revenue Accounts as expenses.

The Schedules referred to above form an integral part of For and on behalf of the Board of Directors the Revenue Account.

As per our report of even date attached ANALJIT SINGH Chairman JOE GILMOUR Director ASHISH MAJUMDAR K.N Gupta B. ANANTHARAMAN Director Partner Partner Membership no. F-57041 Membership no. 9169 GARY BENNETT Chief Executive Officer For and on behalf of For and on behalf of SUNIL SHARMA Executive Director & Chief Operating Officer Ray and Ray Thakur, Vaidyanath Aiyar & Co. JOHN POOLE Chief Actuary (Appointed Actuary) Chartered Accountants Chartered Accountants SUNIL KAKAR Chief Financial Officer AJAY SETH Director- Legal & Compliance and Company Secretary

New Delhi New Delhi New Delhi MAY 14, 2007 MAY 14, 2007 MAY 14, 2007

128 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 FORM A-RA REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 POLICY HOLDERS’ ACCOUNT (Technical Account) (All Amounts in Thousands of Indian Rupees)

YEAR ENDED MARCH 31, 2006 Participating Policies Non-Participating Linked Policies Total (Refer Annexure to the (Non-Linked) Policies (Non-Linked) Revenue Account) Particulars Schedule Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Premiums earned - net Premiums 1 5,367,399 87,250 104,916 44,702 2,235,439 41,549 - 7,881,255 Less : Reinsurance Ceded 57,669 - 9,428 11,648 5,341 - - 84,086 Add : Reinsurance Accepted ------5,309,730 87,250 95,488 33,054 2,230,098 41,549 - 7,797,169 Income from Investments (a) Interest, Dividends & Rent - Gross 329,291 12,195 18,805 6,018 18,887 41 - 385,237 (b) Profit on sale/ redemption of investments 49 - - - 32,993 9 - 33,051 (c) (Loss) on sale/ redemption of investments (49) - - (1,561) (3,093) (1) - (4,704) (d) Transfer/ Gain on revaluation/change in fair value * - - - - 225,370 660 - 226,030 (e) Amortisation of discount/(premium) (14,315) (166) (568) (268) 155 4 - (15,158) Other Income Contribution from the Shareholders' Account 33,563 - 174,084 20,219 403,125 20,644 - 651,635 Miscellaneous Income 2,311 15 164 21 9,772 55 - 12,338 Total (A) 5,660,580 99,294 287,973 57,483 2,917,307 62,961 - 9,085,598 Commission 2 906,196 2,060 13,792 156 419,913 2,629 - 1,344,746 Operating Expenses related to Insurance Business 3 2,205,749 13,377 149,341 22,638 975,764 26,281 - 3,393,150 Provision for doubtful debts 611 4 42 9 269 8 - 943 Bad debts written off 347 2 24 5 153 5 - 536 Provision for Tax - Fringe Benefit Tax 16,557 109 1,152 256 7,286 215 - 25,575 Provision (other than taxation) (a) For diminution in the value of investments( Net) ------(b) Others ------Total (B) 3,129,460 15,552 164,351 23,064 1,403,385 29,138 - 4,764,950 Benefits Paid (Net) 4 337,167 2,873 16,578 56,347 12,423 - - 425,388 Interim Bonuses Paid ------Change in valuation of liability against life policies in force: (a) Gross ** 2,208,045 24,863 112,152 (19,886) 1,501,499 33,823 - 3,860,496 (b) (Amount ceded in Reinsurance ) (14,092) - (5,108) (2,042) - - - (21,242) (c) Amount accepted in Reinsurance ------Total ( C ) 2,531,120 27,736 123,622 34,419 1,513,922 33,823 - 4,264,642 SURPLUS/ (DEFICIT) ( D )= ( A) - ( B ) - ( C ) - 56,006 - - - - - 56,006 Deficit at the beginning of the year ------SURPLUS AVAILABLE FOR APPROPRIATION - 56,006 - - - - - 56,006 APPROPRIATIONS Transfer to Shareholders’ Account - 575 - - - - - 575 Transfer to Other Reserves ------Funds available for Future Appropriations - Policyholders - 49,888 - - - - - 49,888 Funds available for Future Appropriations - Shareholders - 5,543 - - - - - 5,543 Insurance reserve carried to the Balance Sheet ------Details of Surplus (a) Interim Bonus Paid ------(b) Allocation of Bonus to Policyholders 417,371 5,179 - - - - - 422,550 [Refer to Note II (p) on Schedule 16] (c) Surplus Shown in the Revenue Account - 56,006 - - - - - 56,006 (d) Total Surplus : [(a)+(b)+(c)] 417,371 61,185 - - - - - 478,556

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 16 * Represents the deemed realised gain as per norms specified by the Authority ** Represents Mathematical Reserve considering allocation of Bonus As required by Section 40 B(4) of the Insurance Act, 1938 we certify that all expenses of management in respect of life insurance business in India by the Insurer have been fully debited to Policyholder Revenue Accounts as expenses.

The Schedules referred to above form an integral part of For and on behalf of the Board of Directors the Revenue Account.

As per our report of even date attached ANALJIT SINGH Chairman JOE GILMOUR Director ASHISH MAJUMDAR K.N Gupta B. ANANTHARAMAN Director Partner Partner Membership no. F-57041 Membership no. 9169 GARY BENNETT Chief Executive Officer For and on behalf of For and on behalf of SUNIL SHARMA Executive Director & Chief Operating Officer Ray and Ray Thakur, Vaidyanath Aiyar & Co. JOHN POOLE Chief Actuary (Appointed Actuary) Chartered Accountants Chartered Accountants SUNIL KAKAR Chief Financial Officer AJAY SETH Director- Legal & Compliance and Company Secretary

New Delhi New Delhi New Delhi MAY 14, 2007 MAY 14, 2007 MAY 14, 2007

MAX INDIA ANNUAL REPORT 2006-07 129 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

RECEIPTS AND PAYMENT ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees)

Particulars Year Ended Year Ended March 31, 2007 March 31, 2006 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 15,019,871 7,706,152 Amount received in Advance from customers 366,770 167,353 Commission paid to agents (2,170,363) (1,288,586) Claims Paid to policyholders (852,937) (414,491) Claims Recovered from Reinsurers 41,892 23,587 Reinsurance Premium Paid (111,340) (64,288) Payments/advances to suppliers/employees (4,895,118) (3,233,758) Deposit recovered / given from / to RBI - - Cash deployed in operations 7,398,775 2,895,969 Wealth tax paid (482) (476) Net cash deployed in operating activities 7,398,293 2,895,493 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (421,202) (308,402) Proceed from sale of fixed assets 19,330 7,474 Purchase of Investments (32,380,600) (7,311,549) Proceeds from sale/maturity of investments 23,108,798 3,442,687 Interest received 701,019 421,880 Tax deducted at source - - Net cash from investing activities (8,972,655) (3,747,910) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of share capital 1,750,000 913,515 Interest paid - - Net cash generated from financing activities 1,750,000 913,515 Net increase/ (decrease) in cash and cash equivalents 175,638 61,097 Cash and cash equivalents at beginning of year 221,215 160,118 Cash and cash equivalents at end of year 396,853 221,215 Notes : 1. The above Receipts and Payments Account has been prepared under the "Direct Method" as set out in the Accounting Standard-3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India , as prescribed by Insurance Regulatory & Development Authority (Preparation of Financial Statements and Auditors Report of Insurance Companies ) Regulations, 2002. 2. Figures in paranthesis represent cash outflows. 3. Cash and cash equivalents at the end of the year consist of cash, cheques in hand, stamps in hand, fixed deposits and balance with banks. As at As at March 31, 2007 March 31, 2006 Cash in hand - - Stamps in hand - 486 Cheques in hand - - Balance with banks - Current Account (including Remittances in Transit) 396,853 220,729 - Fixed Deposit - - Total 396,853 221,215

As per our report of even date attached For and on behalf of the Board of Directors

ANALJIT SINGH Chairman JOE GILMOUR Director ASHISH MAJUMDAR K.N Gupta B. ANANTHARAMAN Director Partner Partner Membership no. F-57041 Membership no. 9169 GARY BENNETT Chief Executive Officer For and on behalf of For and on behalf of SUNIL SHARMA Executive Director & Chief Operating Officer Ray and Ray Thakur, Vaidyanath Aiyar & Co. JOHN POOLE Chief Actuary (Appointed Actuary) Chartered Accountants Chartered Accountants SUNIL KAKAR Chief Financial Officer AJAY SETH Director- Legal & Compliance and Company Secretary

New Delhi New Delhi New Delhi MAY 14, 2007 MAY 14, 2007 MAY 14, 2007

130 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-1 PREMIUM (Refer to Note I (a) on Schedule 16)

YEAR ENDED MARCH 31, 2007 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group First year premiums 2,337,998 750 65,435 33,965 4,841,675 200,132 25,165 7,505,120 Renewal premiums 4,380,792 79,203 77,112 13,507 1,313,899 17,218 - 5,881,731 Single premiums 449,849 4,403 3,801 - 1,128,856 29,042 - 1,615,951 Total premium 7,168,639 84,356 146,348 47,472 7,284,430 246,392 25,165 15,002,802 Business % 47.78% 0.56% 0.98% 0.32% 48.55% 1.64% 0.17% 100% Total premium in India 7,168,639 84,356 146,348 47,472 7,284,430 246,392 25,165 15,002,802 Total Premium outside India ------

YEAR ENDED MARCH 31, 2006 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group

First year premiums 2,203,820 10,611 51,969 18,929 2,088,173 41,549 - 4,415,051 Renewal premiums 2,872,313 71,677 50,602 25,773 147,266 - - 3,167,631 Single premiums 291,266 4,962 2,345 - - - - 298,573 Total premium 5,367,399 87,250 104,916 44,702 2,235,439 41,549 - 7,881,255 Business % 68.10% 1.11% 1.33% 0.57% 28.36% 0.53% 0.00% 100% Total premium in India 5,367,399 87,250 104,916 44,702 2,235,439 41,549 - 7,881,255 Total Premium outside India ------

SCHEDULE-2 COMMISSION (Refer to Note I (b) on Schedule 16) YEAR ENDED MARCH 31, 2007 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Commission paid Direct first year premiums 846,679 39 15,171 569 1,107,643 13,561 1,003 1,984,665 Direct renewal premiums 194,094 1,101 1,210 8 86,258 299 - 282,970 Direct single premiums 1,441 12 63 - 15,503 580 - 17,599 Total (A) 1,042,214 1,152 16,444 577 1,209,404 14,440 1,003 2,285,234 Add : Commission on Re-insurance Accepted ------Less : Commission on Re-insurance Ceded ------Net Commission 1,042,214 1,152 16,444 577 1,209,404 14,440 1,003 2,285,234

MAX INDIA ANNUAL REPORT 2006-07 131 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-2 (Contd.)

YEAR ENDED MARCH 31, 2006 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Commission paid Direct first year premiums 748,314 719 11,975 156 410,549 2,629 - 1,174,342 Direct renewal premiums 155,947 1,138 1,783 - 9,364 - - 168,232 Direct single premiums 1,935 203 34 - - - - 2,172 Total (A) 906,196 2,060 13,792 156 419,913 2,629 - 1,344,746 Add : Commission on Re-insurance Accepted ------Less : Commission on Re-insurance Ceded ------Net Commission 906,196 2,060 13,792 156 419,913 2,629 - 1,344,746

Break-up of Expenses (Gross) incurred to procure business is as per details below:

YEAR ENDED MARCH 31, 2007 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Agents 558,848 1,102 13,339 450 935,468 12,741 967 1,522,915 Brokers 3,547 5 302 10 12,363 59 0 16,286 Corporate Agency 448,694 34 2,211 20 173,634 1,282 35 625,910 Referral Fees 3,130 3 137 0 8,231 90 0 11,591 Others ------Bancassurance 27,988 8 492 12 79,705 268 1 108,474 Direct Selling 7 - (37) 85 3 - - 58 Total (B) 1,042,214 1,152 16,444 577 1,209,404 14,440 1,003 2,285,234

YEAR ENDED MARCH 31, 2006 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Agents 453,199 1,992 12,420 136 395,178 2,552 - 865,477 Brokers 3,995 6 151 4 7,431 4 - 11,591 Corporate Agency 442,192 49 976 3 6,989 47 - 450,256 Referral Fees 830 4 22 - 1,561 8 - 2,425 Others Bancassurance 5,980 9 223 - 8,754 18 - 14,984 Direct Selling - - - 13 - - - 13 Total (B) 906,196 2,060 13,792 156 419,913 2,629 - 1,344,746

132 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-3 OPERATING EXPENSES RELATED TO INSURANCE BUSINESS (Refer to Note I (i) on Schedule 16)

YEAR ENDED MARCH 31, 2007 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Life Pension Individual Life Group Linked Individual Linked Pension Linked Group Employees remuneration and welfare benefits [Refer to Notes II(i) and (j) on Schedule16 ] 1,126,207 5,291 91,374 17,359 839,707 29,796 17,444 2,127,178 Travel, conveyance and vehicle running expenses 150,713 833 13,945 2,723 97,112 4,266 2,723 272,315 Training expenses (including Agent advisors) 141,309 784 13,074 2,555 91,049 4,003 2,555 255,329 Rent, rates & taxes 138,414 767 12,806 2,500 89,187 3,922 2,500 250,096 Repairs & Maintenance 49,967 280 4,691 920 31,573 1,425 920 89,776 Printing and stationery 55,035 305 5,090 995 35,463 1,560 995 99,443 Communication expenses 123,990 684 11,470 2,239 79,892 3,513 2,239 224,027 Legal, professional and consultancy charges 51,274 284 4,743 926 33,892 1,452 926 93,497 Medical fees 20,746 115 1,919 375 13,368 588 375 37,486 Auditors' fees, expenses etc : (a) as auditor 885 5 82 16 571 25 16 1,600 (b) as advisor or in any other capacity, in respect of : (i) Taxation matters ------(ii) Insurance matters ------(iii) Management services; and ------(c) in any other capacity (including out of pocket expenses) 237 1 22 5 152 6 5 428 Advertisement and publicity 146,446 650 11,374 2,142 113,700 3,790 2,157 280,259 Interest and bank charges 10,052 55 930 182 45,807 1,632 211 58,869 Service Tax Expenditure 89,627 39 14,621 1 24,761 18 1 129,068 Information technology maintenance expenses 83,512 462 7,726 1,507 53,810 2,367 1,507 150,891 Recruitment (including Agent advisors) 39,952 132 2,502 443 36,380 936 450 80,795 Electricity, water and utilities 39,606 219 3,664 717 25,519 1,122 717 71,564 Insurance 8,200 44 758 147 5,283 232 147 14,811 Policy issuance and servicing costs 341,651 1,892 31,606 6,173 220,140 9,680 6,173 617,315 Policy Stamps 21,289 118 1,970 385 13,717 603 385 38,467 (Profit)/Loss on fluctuation in foreign exchange (1,912) (11) (177) (34) (1,233) (55) (34) (3,456) Other miscellaneous expenses 11,621 63 1,075 208 7,489 330 208 20,994 Depreciation 125,244 694 11,588 2,260 80,700 3,548 2,260 226,294 Total 2,774,065 13,706 246,853 44,744 1,938,039 74,759 44,880 5,137,046

YEAR ENDED MARCH 31, 2006 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Life Pension Individual Life Group Linked Individual Linked Pension Linked Group Employees remuneration and welfare benefits [Refer to Notes II(i) and (j) on Schedule 16] 841,634 4,821 51,596 2,994 384,518 9,697 - 1,295,260 Travel, conveyance and vehicle running expenses 130,473 861 9,079 1,977 57,421 1,693 - 201,504 Training expenses (including Agent advisors) 97,025 641 6,753 1,400 42,701 1,260 - 149,780 Rent, rates & taxes 109,647 723 7,631 1,774 48,254 1,423 - 169,452 Repairs & Maintenance 41,621 266 2,820 619 18,469 528 - 64,323 Printing and stationery 44,395 293 3,090 691 19,540 577 - 68,586 Communication expenses 114,481 758 7,968 1,839 50,381 1,490 - 176,917 Legal, professional and consultancy charges 58,251 385 4,055 1,013 26,529 757 - 90,990 Medical fees 17,192 113 1,196 266 7,566 223 - 26,556 Auditors' fees, expenses etc : (a) as auditor 1,036 7 72 16 456 13 - 1,600 (b) as advisor or in any other capacity, in respect of : (i) Taxation matters ------(ii) Insurance matters ------(iii) Management services; and ------(c) in any other capacity (including out of pocket expenses) 273 2 19 4 120 3 - 421 Advertisement and publicity (including promotional expenses) 157,732 896 9,594 2,041 72,216 1,806 - 244,285 Interest and bank charges 6,469 42 448 100 12,227 109 - 19,395 Service Tax Expenditure 63,550 169 9,081 - 4,831 - - 77,631 Information technology maintenance expenses 64,297 426 4,474 993 28,297 835 - 99,322 Recruitment (including Agent advisors) 28,964 149 1,627 273 13,536 308 - 44,857 Electricity, water and utilities 30,902 202 2,152 477 13,600 401 - 47,734 Insurance 6,040 40 420 93 2,658 78 - 9,329 Policy issuance and servicing costs 244,475 1,613 17,014 3,775 107,589 3,173 - 377,639 Policy Stamps 15,888 105 1,106 245 6,992 206 - 24,542 (Profit)/Loss on fluctuation in foreign exchange 1,856 12 129 28 817 24 - 2,866 Other miscellaneous expenses 13,528 89 941 227 5,954 176 - 20,915 Depreciation 116,020 764 8,076 1,793 51,092 1,501 - 179,246 Total 2,205,749 13,377 149,341 22,638 975,764 26,281 - 3,393,150

MAX INDIA ANNUAL REPORT 2006-07 133 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-4 BENEFITS PAID [NET] IN INDIA (Refer to Note I (c ) on Schedule 16)

YEAR ENDED MARCH 31, 2007 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Insurance Claims * (a) By death 152,285 24 14,638 39,439 71,541 221 - 278,148 (b) By Maturity 348 6 - 4,378 - - - 4,732 (c) Annuities/ Pension payment, ------(d)Other benefits -Surrenders 117,570 2,948 3,927 - 32,536 30 - 157,011 -Bonus to Policyholders (Refer to Note II (p) on Schedule 16) 426,460 3,803 - 4,204 - - - 434,467 -Others 3,529 - 800 - - - - 4,329 Total paid 700,192 6,781 19,365 48,021 104,077 251 - 878,687 (Amount ceded in re-insurance) : (a) By death (24,676) - (1,339) (11,270) (7,668) - - (44,953) (b) By Maturity ------(c) Annuities/ Pension payment, ------(d)Other benefits ------Total ceded (24,676) - (1,339) (11,270) (7,668) - - (44,953) Amount accepted in re-insurance : (a) By death ------(b) By Maturity ------(c) Annuities/ Pension payment, ------(d)Other benefits ------Total accepted ------Net Paid 675,516 6,781 18,026 36,751 96,409 251 - 833,734 * Including claim investigation expenses amounting to Rs. 2,528

YEAR ENDED MARCH 31, 2006 Particulars Participating Policies Non-Participating Linked Policies Total (Non-Linked) Policies (Non-Linked) (refer Annexures to the Revenue Account)

Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group Insurance Claims * (a) By death 109,438 - 18,689 36,041 7,391 - - 171,559 (b) By Maturity 67 3 - 32,568 - - - 32,638 (c) Annuities/ Pension payment, ------(d)Other benefits -Surrenders 30,552 1,956 567 - 6,205 - - 39,280 -Bonus to Policyholders (Refer to Note II (p) on Schedule 16) 215,317 914 - - - - - 216,231 -Others 2,400 - - - 200 - - 2,600 Total paid 357,774 2,873 19,256 68,609 13,796 - - 462,308 (Amount ceded in re-insurance) : (a) By death (20,607) - (2,678) (12,262) (1,373) - - (36,920) (b) By Maturity ------(c) Annuities/ Pension payment, ------(d)Other benefits ------Total ceded (20,607) - (2,678) (12,262) (1,373) - - (36,920) Amount accepted in re-insurance : (a) By death ------(b) By Maturity ------(c) Annuities/ Pension payment, ------(d)Other benefits ------Total accepted ------Net Paid 337,167 2,873 16,578 56,347 12,423 - - 425,388 * Including claim investigation expenses amounting to Rs. 1,033

134 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-5

Particulars As at As at March 31, 2007 March 31, 2006

SHARE CAPITAL Authorised 1,000,000,000 Equity Shares of Rs 10 each (Previous Year: 1,000,000,000 Equity Shares) 10,000,000 10,000,000 Issued and Subscribed 732,432,600 Equity Shares of Rs 10 each (Previous Year: 557,432,600 Equity Shares) 7,324,326 5,574,326 Paid up 732,432,600 Equity Shares of Rs 10 each (Previous Year: 557,432,600 Equity Shares), fully paid up 7,324,326 5,574,326 Less : Calls unpaid - - Add : Shares forfeited (Amount originally paid up) - - Less : Par value of equity shares bought back - - Less : Preliminary Expenses (to the extent not written off or adjusted) - - Total 7,324,326 5,574,326

Of the above, 536,500,014 equity shares of Rs 10 each fully paid up (2006: 407,000,014 equity shares of Rs 10 each fully paid up) are held by Max India Limited and its nominees.

SCHEDULE-5A PATTERN OF SHAREHOLDING (as certified by Management) Particulars AS AT MARCH 31, 2007 AS AT MARCH 31, 2006 Shareholder Shares of Rs. 10 Total Shares of Rs. 10 Total each fully paid up each fully paid up Promoters - Indian 536,500,014 536,500,014 407,000,014 407,000,014 - Foreign 190,432,586 190,432,586 144,932,586 144,932,586 Others 5,500,000 5,500,000 5,500,000 5,500,000 (Refer to Note II (j) on Schedule 16) Total 732,432,600 732,432,600 557,432,600 557,432,600 Promoters - Indian 73.25% 73.01% - Foreign 26.00% 26.00% Others 0.75% 0.99% Total 100% 100%

SCHEDULE-6 RESERVE AND SURPLUS Particulars As at As at March 31, 2007 March 31, 2006 Capital Reserve - - Capital Redemption Reserve - - Share Premium - - Revaluation Reserve - - General Reserve - - Less: Debit balance in Profit and Loss Account, if any - - Less: Amount utilised for Buy-back - - Catastrophe Reserve - - Other Reserves - - Employee Share Based Payment Plan Outstanding 80,000 57,000 [Refer to Note II (j) on Schedule 16] Balance of profit/ (loss) in Profit and Loss Account - - Total 80,000 57,000

MAX INDIA ANNUAL REPORT 2006-07 135 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS (All Amounts in Thousands of Indian Rupees) SCHEDULE-7 BORROWINGS Particulars As at As at March 31, 2007 March 31, 2006 Debentures/ Bonds - - Banks - - Financial Institutions - - Others - - Total - -

SCHEDULE-8 INVESTMENTS SHAREHOLDERS (IN INDIA) (Refer to Note I (d) and II (h) on Schedule 16) Particulars As at As at March 31, 2007 March 31, 2006 LONG TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills 874,477 556,447 [Market Value Rs. 806,631 (Previous Year Rs. 520,805)] Other Approved Securities - - Other investments (a) Shares (aa) Equity [Historical Cost Rs. 196,141 (Previous Year Nil)] 214,774 - (bb) Preference - - (b) Mutual Funds - - (c) Derivative Instruments - - (d) Debentures/ Bonds [Market Value Rs. 82,593 (Previous Year Rs. 67,441)] 84,500 67,698 (e) Other Securities - - -Deposits with Bank [Market Value Rs. 50,000 (Previous Year Nil)] 50,000 - (f) Subsidiaries - - Investment Properties-Real Estate - - Investments in Infrastructure and Social Sector [Market Value Rs. 565,282 (Previous Year Rs. 417,860)] 636,987 451,886 Other than Approved Investments (a) Debentures/ Bonds [Market Value Rs. 116,423 (Previous Year Rs. 125,167)] 131,751 130,998 (b) Equity Shares [Historical Cost Rs. 40,908 (Previous Year Nil)] 55,532 - SHORT TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills [Market Value Rs. 97,289 (Previous Year Nil)] 97,307 - Other Approved Securities - - Other Investments - - (a) Shares (aa) Equity - - (bb) Preference - - (b) Mutual Funds - - (c) Derivative Instruments - - (d) Debentures/ Bonds [Market Value Rs. 3,011 (Previous Year Rs. 7,147)] 3,010 7,263 (e) Others Securities Commercial Paper [Market Value Nil (Previous Year Rs. 1,844)] - 1,842 Deposits with Bank [Market Value Rs. 363,537 (Previous Year Rs. 65,149)] 363,537 65,149 (f) Subsidiaries - - Investment Properties-Real Estate - - Investments in Infrastructure and Social Sector [Market value Rs. 5,420 (Previous Year Nil)] 5,530 - Other than Approved Investments (a) Mutual Funds [Historical Cost Rs. 190,906 (Previous Year Rs. 126,263)] 192,320 127,024 Total 2,709,725 1,408,307 Aggregate Market Value of Investments - Shareholders 2,552,813 1,332,437

136 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-8A INVESTMENTS POLICYHOLDERS (IN INDIA) (Refer to Note I (d ) and II (h) on Schedule 16)

YEAR ENDED MARCH 31, 2007 Particulars Participating Policies Non-Participating Policies Total Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group LONG TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills * 5,889,043 197,600 184,572 37,426 42,782 - - 6,351,423 (Market Value Rs. 5,950,406) Other Approved Securities (a) Shares (aa) Equity ------(bb) Preference ------(b) Mutual Funds ------(c) Derivative Instruments ------(d) Debentures/ Bonds (Market Value Rs. 649,243) 507,693 14,989 39,903 21,868 70,000 11,842 - 666,295 (e) Other Securities ------(f) Subsidiaries ------(g) Investment Properties-Real Estate ------(h) Policy Loan (Market Value Rs. 10,283) 10,283 ------10,283 Investments in Infrastructure and Social Sector (Market Value Rs. 1,613,849) 1,548,226 7,712 131,229 2,100 67,393 - - 1,756,660 Other than Approved Investments (Market Value Rs. 223,759) ** 200,487 - 38,037 - 1,963 - - 240,487 SHORT TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills ------Other Approved Securities (a) Shares (aa) Equity ------(bb) Preference ------(b) Mutual Funds ------(c) Derivative Instruments ------(d) Debentures/ Bonds (Market Value Rs. 29,313) 29,758 ------29,758 (e) Other Securities Commercial Paper / Certificate of Deposits [Market Value Rs. 138,614] 138,654 ------138,654 Deposits with Bank ------(f) Subsidiaries ------(g) Investment Properties-Real Estate ------Investments in Infrastructure and Social Sector ------Other than Approved Investments ------Total 8,324,144 220,301 393,741 61,394 182,138 11,842 - 9,193,560 Aggregate Market Value of Investments - Policyholders 7,798,824 205,396 365,555 56,419 177,968 11,306 - 8,615,468 * Includes Rs. 106,893 of securities under section 7 of Insurance Act, 1938 (Refer to Note II (h) on Schedule 16) ** Includes only Debt Securities SCHEDULE-8A INVESTMENTS POLICYHOLDERS (IN INDIA) (Refer to Note I (d ) and II (h) on Schedule 16) YEAR ENDED MARCH 31, 2006 Particulars Participating Policies Non-Participating Policies Total Individual Pension Individual Group Linked Linked Linked Life Life Individual Pension Group

LONG TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills * 4,375,898 147,891 123,261 37,616 4,103 - - 4,688,769 (Market Value Rs. 4,555,754) Other Approved Securities (a) Shares (aa) Equity ------(bb) Preference ------(b) Mutual Funds ------(c) Derivative Instruments ------(d) Debentures/ Bonds (Market Value Rs. 137,448) 120,302 5,257 9,973 534 - - - 136,066 (e) Other Securities ------(f) Subsidiaries ------(g) Investment Properties-Real Estate ------(h) Policy Loan (Market Value Rs. 1,563) 1,563 ------1,563 Investments in Infrastructure and Social Sector (Market Value Rs. 821,062) 731,991 5,380 121,451 2,516 3,617 864,955 Other than Approved Investments (Market Value Rs. 38,758) ** - - 38,037 - 1,963 - - 40,000 SHORT TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills ------Other Approved Securities (a) Shares (aa) Equity ------(bb) Preference ------(b) Mutual Funds ------(c) Derivative Instruments ------(d) Debentures/ Bonds(Market Value Rs. 8,480) - - - 8,575 - - - 8,575 (e) Other Securities ------(f) Subsidiaries ------(g) Investment Properties-Real Estate ------Investments in Infrastructure and Social Sector ------Other than Approved Investments ------Total 5,229,754 158,528 292,722 49,241 9,683 - - 5,739,928 Aggregate Market Value of Investments - Policyholders 5,067,233 156,963 282,795 46,700 9,374 - - 5,563,065 * Includes Rs. 107,025 of securities under section 7 of Insurance Act, 1938 (Refer to Note II (h) on Schedule 16) ** Includes only Debt Securities

MAX INDIA ANNUAL REPORT 2006-07 137 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-8B ASSENTS HELD TO COVER LINKED LIABILITIES (Refer to Note I (d) and II (h) on Schedule 16)

As at March 31, 2007 As at March 31, 2006 Particulars Linked Linked Linked Total Linked Linked Linked Total Individual Pension Group Individual Pension Group LONG TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills 259,316 2,887 324 262,527 114,904 3,094 - 117,998 (Historical Cost of Rs. 269,784, Previous Year Rs. 121,303) Other Approved Securities ------Other investments (a) Shares (aa) Equity (Historical Cost of Rs. 2,282,917; Previous Year Rs. 561,569) 2,430,291 119,130 8,041 2,557,462 757,565 11,362 - 768,927 (bb) Preference ------(b) Mutual Funds ------(c) Derivative Instruments ------(d) Debentures/ Bonds (Historical Cost of Rs. 434,364, Previous Year Rs. 293,488) 415,060 8,778 2,884 426,722 290,194 978 - 291,172 (e) Other Securities ------(f) Subsidiaries ------(g) Investment Properties-Real Estate ------Investments in Infrastructure and Social Sector (Historical Cost of Rs. 451,214; Previous Year Rs. 45,441) * 413,240 28,127 2,177 443,544 42,996 1,432 - 44,428 Other than Approved Investments (a) Shares (aa) Equity (Historical Cost of Rs. 776,583; Previous Year Rs. 86,733) 855,056 67 5 855,128 112,412 2,093 - 114,505 (bb) Preference ------(b) Debentures/ Bonds (Historical Cost of Rs. 272,701; Previous Year Rs. 38,571) 263,327 2,899 - 266,226 37,411 1,893 - 39,304 (c) Mutual Funds ------

SHORT TERM INVESTMENTS Government securities and Government guaranteed bonds including Treasury Bills 174,187 13,556 5,786 193,529 82,437 3,296 - 85,733 (Historical Cost of Rs. 199,573, Previous Year Rs. 85,557) Other Approved Securities ------Other investments (a) Shares (aa) Equity ------(bb) Preference ------(b) Mutual Funds ------(c) Derivative Instruments ------(d) Debentures/ Bonds (Historical Cost of Rs. 170,567, Previous Year Rs. 72,005) 154,641 9,810 1,954 166,405 68,820 1,968 - 70,788 (e) Other Securities (Historical Cost of Rs. 499,859 Previous Year Rs. 44,217) 480,166 19,330 2,316 501,812 42,405 1,844 - 44,249 (f) Subsidiaries ------(g) Investment Properties-Real Estate ------Investments in Infrastructure and Social Sector (Historical Cost of Rs. 66,662; ------Previous Year Nil) * 61,469 3,958 266 65,693 - - - - Other than Approved Investments (a) Shares (aa) Equity ------(bb) Preference ------(b) Debentures/ Bonds (Historical Cost of Rs. 17,000; Previous Year Nil) 16,370 - - 16,370 - - - - (c) Mutual Funds (Historical Cost of Nil; Previous Year Rs. 132,724) - - - - 133,068 1,604 - 134,672

NET CURRENT ASSETS 758,289 31,044 1,208 790,541 63,595 4,260 - 67,855 Total 6,281,412 239,586 24,961 6,545,959 1,745,807 33,824 - 1,779,631 * Includes only Debt Securities

138 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-9 LOANS

Particulars As at As at March 31, 2007 March 31, 2006 SECURITY-WISE CLASSIFICATION Secured (a) On mortgage of property (aa) In India - - (bb) Outside India - - (b) On Shares, Bonds, Govt. Securities, etc. - - (c) Loans against policies - - (d) Others - - Unsecured - - Total - -

BORROWER-WISE CLASSIFICATION (a) Central and State Governments - - (b) Banks and Financial Institutions - - (c) Subsidiaries - - (d) Companies - - (e) Loans against policies - - (f) Others - - Total - -

PERFORMANCE-WISE CLASSIFICATION (a) Loans classified as standard (aa) In India - - (bb) Outside India - - (b) Non-standard loans less provisions (aa) In India - - (bb) Outside India - - Total - -

MATURITY- WISE CLASSIFICATION (a) Short Term - - (b) Long Term - - Total - -

MAX INDIA ANNUAL REPORT 2006-07 139 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-10 FIXED ASSETS (Refer to Note I (e) on Schedule 16)

Gross Block Depriciation Net Block Particulars April 1, Additions Sale/ March 31, April 1, For The On Sales / March 31, March 31, March 31, 2006 Disposal 2007 2006 Year Disposal 2007 2007 2006 Goodwill ------Intangibles - Software 250,143 58,030 - 308,173 116,894 44,442 - 161,336 146,837 133,249 Land-Freehold ------Leasehold improvements 278,639 166,966 - 445,605 103,866 56,494 - 160,360 285,245 174,773 Buildings ------Furniture and fixtures 109,306 41,345 2,082 148,569 36,620 16,766 569 52,817 95,752 72,686 Information Technology equipment (Including communication networks and servers ) 312,432 126,294 6,999 431,727 186,439 69,374 6,509 249,304 182,423 125,993 Vehicles 75,624 18,355 26,453 67,526 33,635 12,554 15,754 30,435 37,091 41,989 Office equipment 121,236 52,464 3,197 170,503 61,918 26,757 1,794 86,881 83,622 59,318 Others ------Total 1,147,380 463,454 38,731 1,572,103 539,372 226,387 24,626 741,133 830,970 608,008 Capital Work in Progress (including Capital advances) 70,175 75,874 Grand Total 1,147,380 463,454 38,731 1,572,103 539,372 226,387 24,626 741,133 901,145 683,882 Previous year 917,678 242,995 13,293 1,147,380 367,088 179,357 7,073 539,372 608,008 -

SCHEDULE-11 CASH AND BANK BALANCES Particulars As at As at March 31, 2007 March 31, 2006 Cash [Including Insurance Stamp Nil (Previous Year : Rs. 486)] - 486 Balances with banks in India* (a) Deposit Accounts (aa) Short-term fixed deposit (i.e maturing in 12 months) - - (bb) Others - - (b) Current accounts 396,853 220,729 (c) Others - -

Money at Call and Short Notice (a) With Banks - - (b) With other Institutions - - Others - - Total 396,853 221,215 *Balances with non-scheduled bank included in (b) above - -

SCHEDULE-12 ADVANCES AND OTHER ASSETS Particulars As at As at March 31, 2007 March 31, 2006 ADVANCES Reserve deposit with ceding companies - - Application money for investments 520 - Prepayments 215,458 20,663 Advances to Directors / Officers - - Advance tax paid and taxes deducted at source (Net of provision for taxation) 461 133 Others Advances to suppliers 83,966 56,263 Advances to employees for travel, etc 28,957 2,060

Total (A) 329,362 79,119

140 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE-12 (Contd.) Particulars As at As at March 31, 2007 March 31, 2006 OTHER ASSETS Income accrued on investments 239,424 134,136 Outstanding Premiums 330,399 311,968 Agents' Balances - 1,575 Foreign Agencies Balances - - Due from other entities carrying on insurance business (including reinsurers) 35,347 32,286 Due from subsidiaries / holding company - - Deposits with Reserve Bank of India (Pursuant to Section 7 of Insurance Act, 1938) - - Others : - Service Tax Unutilised Credit 399,827 135,903 - Security and other deposits 181,992 127,580 Total (B) 1,186,989 743,448 Total (C) = (A) + (B) 1,516,351 822,567

SCHEDULE-13 CURRENT LIABILITIES Particulars As at As at March 31, 2007 March 31, 2006 Agents’ balances 243,941 129,070 Balance due to other insurance companies 84,343 47,062 Deposits held on reinsurance companies - - Premium received in advance 39,342 27,164 Unallocated premium 442,864 179,773 Sundry creditors 1,288,712 742,768 Due to holding company 1,089 32 Claims Outstanding ( includes pending investigation ) ** 145,664 119,914 Annuities Due - - Due to Officers/ Directors - - Others : - Proposal / Policyholder deposits 223,679 132,178 - Withholding Tax Deducted at Source 162,963 83,208 - Service Tax Liability - 78 - Other Statutory liabilities 10,537 6,320 Total 2,643,134 1,467,567 ** Includes Claims acrrued but not reported Rs. 25,336 (2006 : Rs. 19,663)

MAX INDIA ANNUAL REPORT 2006-07 141 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANCIAL STATEMENTS

SCHEDULE-14 PROVISIONS (Refer to Note II (w) on Schedule 16) Particulars As at As at March 31, 2007 March 31, 2006 For Taxation (less Payments and Taxes Deducted at Source) - - For Proposed Dividends - - For Dividend Distribution Tax - - Others - Provision for Gratuity 11,473 14,803 - Provision for Fringe Benefit Tax 949 463 - Provision for Wealth Tax 356 405 - Provision for Doubtful Debts 6,097 2,812 Total 18,875 18,483

SCHEDULE-15 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) (Refer to Note II (j) on Schedule 16) Particulars As at As at March 31, 2007 March 31, 2006 Discount Allowed in issue of shares/ debentures - - Others - - - Deferred Employee Compensation 49,779 37,066 Total 49,779 37,066

142 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 ANNEXURE TO REVENUE ACCOUNT - Break up of Unit Linked Buisness (UL) REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees) Policyholders’ Accounts (Technical Account) (Refer to Note II (y) on Schedule 16)

Linked Life Linked Pension Linked Group Particulars Schedule Non-Unit Unit Total Non-Unit Unit Total Non-Unit Unit Total Total Unit Linked (1) (2) (3)=(1) + (2) (4) (5) (6)=(4) + (5) (7) (8) (9)= (7) + (8) (10)=(3)+(6)+(9)

Premiums earned – net (a) Premium 1,291,677 5,992,753 7,284,430 42,276 204,116 246,392 2 25,163 25,165 7,555,987 (b) Reinsurance ceded (25,485) - (25,485) ------(25,485) Income from Investments (a) Interest, Dividend & Rent - Gross 3,848 121,472 125,320 418 4,483 4,901 - 255 255 130,476 (b) Profit on sale/redemption of investments - 192,874 192,874 - 4,487 4,487 - 4 4 197,365 (c) Loss on sale/redemption of investments - (43,570) (43,570) - (2,338) (2,338) - (22) (22) (45,930) (d) Unrealised gain/(loss) 171 80,614 80,785 4 3,453 3,457 - (40) (40) 84,202 (e) Amortisation of discount/(premium) (155) - (155) - 1 1 - - - (154) Other income : (a) Linked Income UL1 1,546,436 (1,546,436) - 6,203 (6,203) - 58 (58) - - (b ) Contribution from the Shareholders' Account 340,085 - 340,085 38,757 - 38,757 45,780 - 45,780 424,622 (c ) Others 3,184 - 3,184 137 - 137 70 - 70 3,391 TOTAL (A) 3,159,761 4,797,707 7,957,468 87,795 207,999 295,794 45,910 25,302 71,212 8,324,474 Commission Paid 1,209,404 - 1,209,404 14,440 - 14,440 1,003 - 1,003 1,224,847 Operating Expenses related to Insurance Business 1,938,039 - 1,938,039 74,759 - 74,759 44,880 - 44,880 2,057,678 Provision for Tax - Fringe Benefit Tax 11,106 - 11,106 488 - 488 311 - 311 11,905 Provision for doubtful debts 2,071 - 2,071 91 - 91 58 - 58 2,220 Bad debts written off 12 - 12 ------12 TOTAL (B) 3,160,632 - 3,160,632 89,778 - 89,778 46,252 - 46,252 3,296,662 Benefits Paid (Net) UL2 61,125 35,284 96,409 10 241 251 - - - 96,660 Interim Bonus Paid - - - - Change in Valuation Liability 164,822 4,535,605 4,700,427 2 205,763 205,765 - 24,960 24,960 4,931,152 TOTAL (C) 225,947 4,570,889 4,796,836 12 206,004 206,016 - 24,960 24,960 5,027,812 SURPLUS/ (DEFICIT) (D)=(A)-(B)-(C) (226,818) 226,818 - (1,995) 1,995 - (342) 342 - - APPROPRIATIONS Transfer to Shareholders' a/c ------Funds available for future appropriations ------Total (E) ------

Schedules to Annexure to Revenue Account (UL) forming part of Financial Statements. SCHEDULE-UL1 (Refer to Note II (y) on Schedule 16) Linked Income (recovered from linked funds)* YEAR ENDED MARCH 31, 2007 Particulars Life Linked Unit Pension Linked Unit Linked Group Unit Total (1) (2) (3) (4)= (1)+(2)+(3) Fund Administration charges - - - - Fund Management charge - - - - Policy Administration charge 1,331,213 6,183 58 1,337,454 Surrender charge 915 12 - 927 Switching charge 1 8 - 9 Mortality charge 214,307 - - 214,307 Rider Premium charge - - - - Partial withdrawal charge - - - - Miscellaneous charge - - - - TOTAL (UL-1) 1,546,436 6,203 58 1,552,697 * (net of service tax, if any)

MAX INDIA ANNUAL REPORT 2006-07 143 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO REVENUE ACCOUNT (UL) AND FORMING PART OF FINANCIAL STATEMENTS (All Amounts in Thousands of Indian Rupees) SCHEDULE–UL2 BENEFITS PAID [NET] (Refer to Note II (y) on Schedule 16)

YEAR ENDED MARCH 31, 2007 S.No. Particulars Linked Life Linked Pension Linked Group Non Unit Unit Linked Life Non Unit Unit Linked Pension Non Unit Unit Linked Group Total Unit Linked (1) (2) (3)=(1)+(2) (4) (5) (6)=(4)+(5) (7) (8) (9)=(7)+(8) (10)=(3)+(6)+(9) 1 Insurance Claims (a) Claims by Death 68,793 2,748 71,541 10 211 221 - - - 71,762 (b) Claims by Maturity ------(c) Annuities / Pension payment ------(d) Other benefits - Surrender - 32,536 32,536 - 30 30 - - - 32,566 - Survival ------Sub Total (A) 68,793 35,284 104,077 10 241 251 - - - 104,328

2 Amount Ceded in reinsurance (a) Claims by Death 7,668 - 7,668 ------7,668 (b) Claims by Maturity ------(c) Annuities / Pension payment ------(d) Other benefits - Surrender ------Survival ------Sub Total (B) 7,668 - 7,668 ------7,668

TOTAL (A) - (B) 61,125 35,284 96,409 10 241 251 - - - 96,660 Benefits paid to claimants : In India 68,793 35,284 104,077 10 241 251 - - - 104,328 Outside India ------TOTAL (UL2) 68,793 35,284 104,077 10 241 251 - - - 104,328

Form A-BS(UL) Fund Balance Sheet as at March 31, 2007 (Refer to Note II (Y) on Schedule 16)

Funds Particulars Schedule Balanced Conservative Secured Growth Guaranteed Guaranteed Pension Pension Pension Pension Group Group Group Total Fund Fund Balanced Conservative Secured Growth Balanced Conservative Growth Dynamic Income Sources of Funds Policyholders' Funds : Policyholder contribution F-1 472,589 97,649 77,342 5,046,056 3,533 459 12,176 696 2,106 215,176 18,987 573 5,231 5,952,573 Revenue Account 52,698 10,119 3,578 517,378 11 2 341 22 42 9,027 127 14 27 593,386 Total 525,287 107,768 80,920 5,563,434 3,544 461 12,517 718 2,148 224,203 19,114 587 5,258 6,545,959 Application of Funds Investments F-2 476,547 95,981 74,221 4,872,627 3,314 433 11,355 636 1,872 194,679 18,188 518 5,047 5,755,418 Current Assets F-3 54,480 11,854 6,762 808,001 235 29 1,172 82 278 37,349 938 70 214 921,464 Less : Current Liabilities and Provisions F-4 5,741 69 61 117,198 4 - 10 1 2 7,824 10 - 3 130,923 Net current assets 48,739 11,785 6,701 690,803 231 29 1,162 81 276 29,525 928 70 211 790,541 Total 525,286 107,766 80,922 5,563,430 3,545 462 12,517 717 2,148 224,204 19,116 588 5,258 6,545,959 Net Asset Value (NAV) per Unit: 14.81 12.70 11.19 18.54 10.25 10.13 10.87 10.79 10.58 11.49 10.51 10.24 10.05 (a) Net Asset as per Balance Sheet (Total Assets 525,286 107,767 80,922 5,563,430 3,546 461 12,516 718 2,148 224,204 19,115 587 5,259 6,545,959 less Current Liabilities and Provisions) (Rs. in '000) (b) Number of Units outstanding 35,472,611 8,484,775 7,229,987 300,062,176 345,840 45,538 1,151,292 66,496 203,014 19,518,363 1,818,453 57,302 523,139 (c) NAV per Unit (a)/(b) (Rs.) 14.81 12.70 11.19 18.54 10.25 10.12 10.87 10.80 10.58 11.49 10.51 10.24 10.05 Significant accounting policies and notes to the accounts 16 The Schedules referred to above form an integral part of the Fund Balance Sheet. Form A-RA(UL) Fund Revenue Account for the year ended March 31, 2007 (Refer to Note II (Y) on Schedule 16) Funds Particulars Schedule Balanced Conservative Secured Growth Guaranteed Guaranteed Pension Pension Pension Pension Group Group Group Total Fund Fund Balanced Conservative Secured Growth Balanced Conservative Growth Dynamic Income Income from investments Interest income 16,357 5,904 4,879 71,083 47 6 373 27 79 3,189 204 32 10 102,190 Dividend income 1,542 147 - 21,506 1 - 30 1 - 784 6 - 3 24,020 Profit on sale of investment 15,336 2,168 252 172,932 - - 69 3 3 3,751 1 - - 194,515 Loss on sale of investment (2,084) (281) (28) (37,054) (1) - (117) - - (1,966) (11) - - (41,542) Profit on inter fund transfer/ sale of investment 704 481 5 996 - - 42 8 1 610 - - 3 2,850 loss on inter fund transfer/ sale of investment (135) (158) (157) (3,672) - - (15) (2) (1) (237) (9) (2) - (4,388) Miscellaneous Income 1 1 ------2 Unrealised Gain/loss* (1,785) (2,515) (1,608) 86,549 (26) (3) (14) (13) (33) 3,513 (40) (14) 14 84,025 Total (A) 29,936 5,747 3,343 312,340 21 3 368 24 49 9,644 151 16 30 361,672 Fund management expenses 3,543 683 513 34,485 10 1 69 3 7 1,263 24 2 3 40,606 Fund administration expenses ------Other charges F5 ------Total (B) 3,543 683 513 34,485 10 1 69 3 7 1,263 24 2 3 40,606 Net Income for the year (A-B) 26,393 5,064 2,830 277,855 11 2 299 21 42 8,381 127 14 27 321,066 Add : Fund revenue account at the beginning of the year 26,305 5,055 748 239,523 - - 42 1 - 646 - - - 272,320 Fund revenue account at the end of the year March 31, 2007 52,698 10,119 3,578 517,378 11 2 341 22 42 9,027 127 14 27 593,386 * Net change in mark to market value of investments Significant accounting policies and notes to the accounts 16 The Schedules referred to above form an integral part of the Fund Revenue Account.

144 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO FUND REVENUE ACCOUNT AND FORMING PART OF FINANCIAL STATEMENTS

(All Amounts in Thousands of Indian Rupees) SCHEDULE: F-1 POLICYHOLDERS' CONTRIBUTION for the year ended March 31, 2007 (Refer to Note II (y) on Schedule 16)

Funds Particulars Balanced Conservative Secured Growth Guaranteed Guaranteed Pension Pension Pension Pension Group Group Group Total Fund Fund Balanced Conservative Secured Growth Balanced Conservative Growth Dynamic Income Opening balance 193,301 57,111 24,912 1,198,855 - - 2,796 120 259 29,958 - - - 1,507,312 Add: Additions during the year* 286,188 49,145 60,181 3,861,485 3,548 471 9,447 864 1,891 185,422 19,308 587 5,235 4,483,772 Less: Deductions during the year* 6,900 8,607 7,751 14,284 15 12 67 288 44 204 321 14 4 38,511 Closing balance 472,589 97,649 77,342 5,046,056 3,533 459 12,176 696 2,106 215,176 18,987 573 5,231 5,952,573 * Additions represents units creation and deductions represent unit cancellations

SCHEDULE: F-2 INVESTMENTS (Refer to Note II (y) on Schedule 16) 2006-2007 Funds Particulars Balanced Conservative Secured Growth Guaranteed Guaranteed Pension Pension Pension Pension Group Group Group Total Fund Fund Balanced Conservative Secured Growth Balanced Conservative Growth Dynamic Income Approved Investments Government Bonds 121,660 57,785 44,535 207,025 2,151 348 3,139 423 1,479 11,401 4,771 333 1,006 456,056 Corporate Bonds 81,734 8,016 14,070 465,661 195 24 117 59 78 18,335 3,888 - 950 593,127 Infrastructure Bonds 35,167 4,309 3,949 431,079 205 - 2,859 61 133 29,031 2,258 184 - 509,235 Equity 127,332 9,791 - 2,372,313 444 59 4,032 93 - 115,073 5,403 - 2,638 2,637,178 Money Market 31,737 4,137 5,779 438,332 182 - 1,208 - 182 17,939 1,862 - 454 501,812 Mutual Funds ------Total 397,630 84,038 68,333 3,914,410 3,177 431 11,355 636 1,872 191,779 18,182 517 5,048 4,697,408 Other Investments Corporate Bonds 48,353 9,684 5,888 215,672 99 - - - - 2,899 - - - 282,595 Infrastructure Bonds ------Equity 30,564 2,260 - 742,546 38 1 - - - - 5 - - 775,414 Money Market ------Mutual Funds ------Total 78,917 11,944 5,888 958,218 137 1 - - - 2,899 5 - - 1,058,009 GRAND TOTAL 476,547 95,982 74,221 4,872,628 3,314 432 11,355 636 1,872 194,678 18,187 517 5,048 5,755,417 % of Approved Investments to Total 83 88 92 80 96 100 100 100 100 99 100 100 100 82 % of Other Investments to Total 17 12 8 20 4 0 - - - 1 0 - - 18

SCHEDULE: F-3 CURRENT ASSETS (Refer to Note II (y) on Schedule 16) 2006-2007 Funds Particulars Balanced Conservative Secured Growth Guaranteed Guaranteed Pension Pension Pension Pension Group Group Group Total Fund Fund Balanced Conservative Secured Growth Balanced Conservative Growth Dynamic Income Accrued Interest 11,010 2,994 2,646 37,185 92 14 272 20 67 2,772 365 17 67 57,521 Cash & Bank Balance 42,304 8,833 4,115 746,318 143 15 898 63 211 33,937 570 53 146 837,606 Dividend Receivable 88 6 - 1,498 0 0 2 0 - 61 3 - 1 1,659 Receivable for Sale of Investments 779 - - 17,200 - - - - - 579 - - - 18,558 Unit Collection A/c ------Other Current Assets (for Investments) 298 22 - 5,800 ------6,120 Total 54,479 11,855 6,761 808,001 235 29 1,172 83 278 37,349 938 70 214 921,464

SCHEDULE: F-4 CURRENT LIABILITIES (Refer to Note II (y) on Schedule 16) 2006-2007 Funds Particulars Balanced Conservative Secured Growth Guaranteed Guaranteed Pension Pension Pension Pension Group Group Group Total Fund Fund Balanced Conservative Secured Growth Balanced Conservative Growth Dynamic Income Payable for Purchase of Investments 5,300 - - 112,129 - - - - - 7,630 - - - 125,059 Other Current Liabilities 441 69 61 5,069 4 0 10 1 2 194 10 0 3 5,864 Unit Payable a/c ------Total 5,741 69 61 117,198 4 0 10 1 2 7,824 10 0 3 130,923

SCHEDULE: F-5 OTHER EXPENSES (Refer to Note II (y) on Schedule 16) 2006-2007 Funds Particulars Balanced Conservative Secured Growth Guaranteed Guaranteed Pension Pension Pension Pension Group Group Group Total Fund Fund Balanced Conservative Secured Growth Balanced Conservative Growth Dynamic Income Policy Administration charge ------Surrender charge ------Switching charge ------Mortality charge ------Rider Premium charge ------Partial withdrawal charge ------Miscellaneous charge ------Total ------

MAX INDIA ANNUAL REPORT 2006-07 145 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

SCHEDULE-16 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS BACKGROUND: Max New York Life Insurance Company Limited (‘the Insurer’) was incorporated on July 11, 2000 as a public limited company under the Companies Act,1956 to undertake and carry on the business of life insurance and annuity. The Insurer has obtained a license from the Insurance Regulatory and Development Authority (’IRDA’) dated November 15, 2000 for carrying on life insurance business. The Insurer offers a wide range of life insurance products to the customers. These include whole life, endowment policies, renewable, convertible term policies, pension, group policies, unit linked policies - individual and group and easy term policies, with the option of purchasing additional riders with the basic policy.

I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared under the historical cost convention on the accrual basis of accounting, in accordance with the accounting principles and framework prescribed by the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002, the accounting standards issued by The Institute of Chartered Accountants of India (ICAI) and the requirements of the Insurance Act 1938, Insurance Regulatory and Development Authority Act, 1999, and various circulars issued thereunder and the Companies Act, 1956, to the extent applicable and the practices prevailing within the insurance industry in India. The significant accounting policies are as follows :

(a) Revenue Recognition Premium is recognized as income when due. Uncollected premium on lapsed policies is not recognised as income until reinstated. For linked business, premium income is recognised when the associated units are allotted. In case of linked business, top-up premiums (i.e. premium paid in excess of annual target premium as per policy contract) are recognised as single premium. Fees on linked policies including fund charges, etc are recovered from the linked fund and recognised in accordance with the terms and conditions of the policies. Premium ceded is accounted at the time of recognition of the premium income in accordance with the treaty or in-principle arrangement with the reinsurers. Interest on investments is recognised when accrued and taken to the Revenue and Profit and Loss Account, as appropriate. Dividend income is recognised when the right to receive is established. Interest income on loans is recognised on accrual basis.

(b) Acquisition Costs Acquisition costs, including commission, are expensed in the year in which they are incurred.

(c) Benefits Paid (including Claims) Benefits paid consists of the policy benefit amount and claim settlement costs, if any. Maturity claims are accounted when due for payment. Surrender, death and other claims are recognised for when intimated. An additional provision is made for benefits incurred but not reported. Repudiated claims disputed before judicial authorities are provided for based on management prudence considering the facts and evidences available in respect of such claims. Reinsurance recoverables , where applicable, are accounted in the same period. Withdrawals under linked policies are accounted in respective schemes along with cancelation of associated units.

(d) Investments Investments are made in accordance with the Insurance Act, 1938 and the Insurance Regulatory & Development Authority (Investment) Regulations, 2000.Investments are recorded at cost on date of purchase, which includes brokerage and statutory levies, if any and excludes interest paid, if any, on purchase. Diminution in the value of investment, other than temporary decline, is charged to revenue and profit and loss account as applicable.

(i) Classification Investments intended to be held for a period less than twelve months or maturing within twelve months from the balance sheet date are classified as short term. All other investments are classified as long-term investments.

(ii) Valuation - shareholders' investments and non-linked policyholders' investments Debt securities, which include government securities, are considered as 'held to maturity' and measured at historical cost. The premium/discount, if any, on purchase of debt securities is recognised and amortised in the revenue account and profit and loss account, as the case may be, over the remaining period to maturity on the basis of their intrinsic yield. Listed equity shares, as at balance sheet date, are valued at fair value, being the last quoted closing price on the National Stock Exchange (NSE) and in case the same is not available, then on the Bombay Stock Exchange (BSE) Ltd. Unlisted Equity shares are valued at historical cost subject to provision for diminution. Investments in Mutual fund units are valued at fair value at previous day's net asset value. Unrealised gains/losses due to changes in fair value of listed equity shares and mutual fund units are credited/debited to the 'Fair Value Change Account'. Realised gains/loss on debt securities is the difference between the sale consideration and the amortised cost, which is computed on weighted average basis, as on the date of sale. Sale consideration for the purpose of realised gain/loss is net of brokerage and taxes, if any and excludes interest accrued till transaction settlement date. In case of listed equity shares /mutual fund units, the profit/loss on actual sale of investment includes the accumulated changes in the fair value, previously recognised under "Fair Value Change Account".

146 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(iii) Valuation - linked investments In case of Linked business - Government securities are valued at the rate obtained from CRISIL (Credit Rating Information Services of India Ltd.). Debt securities other than Government Securities are valued on the basis of Bond Valuer (CRISIL). Listed equity shares are valued at fair value, being the last quoted closing price on NSE and in case the same is not available, then on the BSE. Mutual fund units are taken at the previous day's net asset values. Unrealised gains and losses are recognised in the respective scheme's revenue account. Realised gain/loss on securities is the difference between the sale consideration and the book value, which is computed on weighted average basis, as on the date of sale. Sale consideration for the purpose of realised gain/loss is net of brokerage and taxes, if any and excludes interest accrued till transaction settlement date.

(iv) Transfer of Investments Investments are transferred to policyholders from shareholders at lower of book value (amortised cost) or market value. Inter-fund transfer/Sale from shareholder funds relating to linked business are effected at market price on date of transfer

(e) Fixed Assets, depreciation and impairment Fixed Assets are stated at cost less accumulated depreciation. All costs related to acquisition and installation of fixed assets, including freight, taxes and other incidental expenses, are capitalised on the day they are put to productive use. Any additions to the original fixed assets are depreciated over the remaining useful life of the original asset. All significant improvements to software are capitalised with the insignificant improvements being charged as software maintenance expenses. Assets individually costing upto Rs 5,000 (rupees five thousand) and not purchased in bulk are fully depreciated in the year of acquisition. Fixed assets at third party locations and not under direct physical control of the Insurer are fully depreciated in the year of purchase. Depreciation on assets is charged on straight-line method, on a pro-rata basis at the following rates over their economic useful lives as estimated by the Management: Assets Estimated Useful life Leasehold Improvements Renewable period of respective leases subject to a maximum of 10 years Office Equipment 5 years Furniture and Fixtures 10 years Information Technology equipment, communication networks, servers and software (including software licenses but excluding Policy Administration System and Satellite systems) 4 years Policy Administration & Satellite systems (hardware and software) 6 years Vehicles 5 years Management periodically assesses, using external and internal sources, whether there is an indication that an asset may be impaired. Impairment occurs where the carrying value exceeds the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the asset's net sales price or present value as determined above.

(f) Liability for Life Policies in Force The estimated liability for life policies in force is determined by the Insurer's appointed actuary, pursuant to his annual investigation of life insurance business, using methods and assumptions that conform with regulations issued by the IRDA and Guidance notes issued by the Actuarial Society of India (ASI). The liability is so calculated that together with future premium payments and investment income, the Insurer meets all future claims (including bonus entitlements to policyholders, if applicable,) and expenses.

(g) Retirement Benefits Provident Fund , is administered through a trust. Insurer's contributions towards this fund, a defined contribution plan, is at the rate as specified under the trust deed and charged to the revenue account and profit and loss account, as applicable. Gratuity , is administered through a trust. The trust has taken a group policy from the Insurer to cover the liability towards gratuity. Insurer's liability towards gratuity, a defined benefit plan, is accounted on the basis of independent actuarial valuation carried out every year and is charged to the revenue account and profit and loss account, as applicable.

(h) Foreign Exchange Transactions Transactions in foreign currency are recorded at the rates of exchange prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at year end rates. The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions, are recognised in the revenue account and profit and loss account.

MAX INDIA ANNUAL REPORT 2006-07 147 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(i) Operating Expenses Operating expenses relating to insurance business are assigned to individual life participating policies, pension participating policies, individual life non-participating policies, group policies and unit-linked comprising individual linked, pension business and group segments ('the business segments') as follows :Expenses directly identifiable to the business segments are allocated on an actual basis. Other expenses, which are not directly identifiable, are apportioned to the business segment by adopting one or more of the following basis, which is considered as most appropriate :(a) total number of policies in-force, (b) annualised first year premium , ( c) weighted combination of sum assured, first year premium , renewal premium income and total number of policies in force, (d) sum assured and (e) first year commission.

(j) Contribution to Policyholders’ Account (Technical Account) Contribution to Policyholders’ Account (Technical Account) is made as decided by the Board of Directors and approved by the Shareholders.

(k) Taxation Provision for current income tax, wealth tax and fringe benefit tax , if any, is made on accrual basis after considering relevant credit allowances, exemptions and valuation rules as determined under the Income tax Act, 1961. The difference that results between the taxable profit and the profit as per financial statements are identified and thereafter deferred tax assets or deferred tax liabilities are recorded as timing differences that originate in one accounting period and reverse in another, based on the tax effect of aggregate amount. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted regulations. Deferred tax assets are recognised only to the extent there is a reasonable certainty of realisation in future. However, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are revalued at each balance sheet date and written up / down to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised. Service tax paid on taxable services received is recognised as service tax unutilised credit for future set off against service tax on risk premium. Based on estimated set off of future unutilised credit against future risk premium, relevant provision is created, if required.

(l) Operating Leases Lease of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease rentals are recognised in the revenue account and profit and loss account, as the case may be, on a straight line basis over the period of the lease.

(m) Employee Share Based Payment Plans The value of options is equal to the aggregate of the fair value of the options granted. Fair value is the option discount represented by excess of market price (in absence of a trading market price, it is the value of the equity shares - at which the share capital was last injected by the Promoters ) or net asset value of the Insurer, whichever is higher over the exercise price. The fair value of the options (including any incremental value) as at balance sheet date is amortised on a straight line basis over the remainder of the vesting period. As and when the options are exercised, the same are accounted for as paid up capital to the extent of the face value. Options that lapse are reversed by a credit to employee compensation expense equal to the amortised portion of the value of the lapsed options and a credit to deferred employee compensation expense equal to the unamortised option.

(n) Loans Loans are stated at historical cost, subject to provision for impairment, if any.

(o) Use of estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Example of the estimates include future obligation under employee benefits plans, useful life of fixed assets and valuation in respect of live policies. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as on the date of the financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

(p) Provisions and Contingencies The Company creates a provision for litigation, assessment, fines, penalties, claims (other than insurance claims), etc when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. However, contingent assets are not recongnised on prudent basis.

148 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(q) Earnings Per Share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

II NOTES TO ACCOUNTS (a) Contingencies Particulars As At As At March 31, 2007 March 31, 2006 Partly paid-up investment 1,121 1,681 Underwriting commitments outstanding (in respect of shares and securities) - - Claims, other than against policies, not acknowledged as debts by the Insurer 547 - Guarantees given by or on behalf of the Insurer - - Statutory demands/ liabilities in dispute, not provided for - - Reinsurance obligations to the extent not provided for in accounts - - Others * 6,476 21,161 * Represents potential liability in respect of repudiated Policyholders claims

(b) Actuarial Assumptions The Insurer's Appointed Actuary has determined valuation assumptions that conform with Regulations issued by the IRDA and professional guidance notes issued by the Actuarial Society of India (ASI). Details of assumptions are given below: Interest: This has been based on the yield on the fund, and expected yields on future investments determined by projecting assets and liabilities together. A long-term estimate of 7.75% (2006 : 7.35%) for participating business and 7.02% (2006 : 7.02%) for non-participating business and riders have been used. The long-term rate has then been reduced by margins for adverse deviations of 1.25% (2006 : 1.5%) for non participating business, 0.75% (2006 : 0.75%) for participating business. Gross unit growth rates of 6.5% to 8.35% pa (2006 : 6.5% to 8.35% pa) depending on the funds type have been used which were further reduced by a margin of adverse deviation of 1.5% (2006 : 1.5%) pa. Mortality: This has been based on an analysis of experience and assumptions used in the previous annual valuation. For some products, the basis used varies from 65% (2006 : 75%) of Indian Assured Lives table (IALT) 1994-96 ultimate in year one increasing to 80% (2006 : 90%) in year five and thereafter. For others, 80% to 180 % (2006 : 80% to 150%) of IALT 1994-96 ultimate has been used throughout. The mortality assumption has been increased by a margin for adverse deviation of 10% (2006 : 10%) for all products. Morbidity: The ASI has recommended the CIBT93 study of UK for morbidity incident rates due to lack of any published Indian experience. Proportions of 95% to 300% (2006 : 95% to 300%) of these tables have been used which were further increased by a margin for adverse deviation of 15% (2006 : 15%). Expenses: The per policy maintenance expenses used are based on projected expenses for the year when Insurer acquires a stable level of business. These are further increased by margins for adverse deviation of 5% (2006 : 5%) for participating policies and 10% (2006 : 10%) for non-participating policies. Inflation: An assumption of 6% pa (2006 : 6% pa) for expense inflation has been used. Commission: Allowed for at actual rates paid and is up to 7.5% (2006 : 7.5%) for the 2nd and 3rd years and up to 5% (2006 : 5%) for subsequent years. Lapses: Lapses have been allowed for in the range of 1% to 15% (2006 : 1% to 15%) during the 2nd year, 1% to 10% (2006 : 1% to 10%) during the 3rd year and 1% to 3% (2006 : 1% to 3%) thereafter. For unit linked business a 10% (2006 : 10%) lapse rate was used after the 2nd year. These were further reduced by margins for adverse deviation of 20% (2006 : 20%) for participating policies and 50% (2006 : 50%) for non-participating policies. Future bonuses: Provision is made for future bonuses based on estimated expected bonus payouts consistent with the valuation assumptions and policyholders’ reasonable expectations.

(c) Restructured Assets The total of loan assets, standard assets, sub-standard assets and doubtful assets which are subject to restructuring is Rs. Nil (2006 : Nil).

(d) Encumbrances The assets of the Insurer in India are free from all encumbrances. The Insurer do not have any assets outside India.

(e) Commitments Estimated amount of contracts remaining to be executed on capital account (net of advances) is Rs. 54,069 (2006 : Rs. 55,984). Commitments made and outstanding for loans is Nil (2006 : Nil)

MAX INDIA ANNUAL REPORT 2006-07 149 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(f) Value of unsettled contracts relating to investments Value of contracts in relation to investments, for: (a) Purchases where deliveries are pending- Rs 133,362 (2006 : Rs. 14,367) (b) Sales where payments are overdue- Nil (2006 : Rs Nil)

(g) Taxation The Insurer carries the business of Life Insurance, therefore the provisions of section 44 and the first schedule of Income tax Act 1961, are applicable for computation of profit and gains of business. No provision for tax has been made in the Financial Statements, since the Insurer does not have any taxable income for the current financial year. Life Insurance is a long gestation business. As per Accounting Standard 22 on "Accounting for taxes on income issued by ICAI, virtual certainty supported by conclusive evidence is necessary to create deferred tax asset on unabsorbed loss. Hence, no deferred tax asset on unabsorbed carried forward losses has been created.

(h) Investments The investments are effected from the respective funds of the policyholders and shareholders and income thereon has been accounted accordingly. All the investments are performing in nature. The Insurer does not have any investment property. Investments under Section 7 of the Insurance Act 1938 are as follows: Statutory Deposit Details As At As At March 31, 2007 March 31, 2006 10.18% Government of India Security 2026 (Face value Rs. 100,000)* 106,893 107,025 Total 106,893 107,025 * This is in the constituent subsidiary general ledger account maintained with HSBC Bank, Mumbai, India under intimation to IRDA.

(i) Directors' Remuneration Directors' remuneration paid in the accounts is as below: Particulars 2006-07 2005-06 Salary & Allowances 29,460 21,541 Contribution to Provident Fund 418 388 Value of Perquisites 11,002 7,811 Others - 10,000 Total 40,880 39,740 Notes : (i) The above figures do not include provision for gratuity payable to the Directors as the same is actuarially determined for the Insurer as a whole. (ii) All Perquisites have been computed in accordance with Income Tax Act, 1961. (iii) Others include value of shares issued and vested under Employee Stock Option Plan.

(j) Employee Share Based Payment Plans (a) Employee Share Payment Based Plan 2003 (ESBP 2003): The plan was approved by the Board of Directors in October, 2003 and by the shareholders in November, 2003. The plan covers selected employees of the Insurer and it provides for issue of 8,000,000 shares of Rs 10 each at an exercise price of Re 1 per 1,000 fully paid shares. To administer and implement the plan, the Insurer has setup an ESBP Trust. Under the plan, Nil shares were outstanding at the beginning of the year. The Insurer has accrued for an ESBP cost amounting to Rs. Nil (2006: Rs. 2,513). No further options have been granted under this plan. (b) Employee Share Based Payment Plan 2004 (ESBP 2004): The plan was approved by the Board of Directors in September 2005.The plan covers selected employees of the Insurer and it provides for issue of 5,900,000 shares of Rs 10 each at an exercise price of Re 1 per 1000 fully paid shares. The options were granted with effect from July 1, 2004 and are to vest on July 1, 2009, if the employee is in service with the Insurer as on the vesting date. The Insurer is under the process of finalising the scheme and is also setting up a Trust to administer and implement the options granted. As per management estimate, the appropriate basis for the value of each share is the face value of paid up equity share of the Insurer, as injected last by the Promoters, given the net asset value is lower Under the plan, 5,700,000 shares were outstanding at the beginning of the year out of which 200,000 got lapsed due to attrition during the year. The Insurer has accrued for an ESBP cost amounting to Rs 10,287 ( 2006 : Rs. 13,087 ). (c) Employee Share Based Payment Plan 2006 (ESBP 2006): The plan was announced in July 2006 and approved by the Board of Directors in March 2007. The plan covers selected employees of the Insurer and it provides for issue of 2,500,000 shares of Rs 10 each at an exercise price of Rs 10 per fully paid shares. The options were granted with effect from July 1, 2006 and 75% are to vest on July 1,

150 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

2009 and balance 25% on July 1, 2010 if the employee is in service with the Insurer as on the vesting date. The Insurer is under the process of finalising the scheme and is also setting up a Trust to administer and implement the options granted. As per management estimate, the appropriate basis for the value of each share is the face value of paid up equity share of the Insurer, as injected last by the Promoters, given the net asset value is lower. Accordingly, the Insurer has accrued for an ESBP cost amounting to Nil (2006 : Nil).

A summary of status of Insurer's Employee Stock Based Plans is as given below:

Particulars As At March 31, 2007 As At March 31, 2006 (Nos.) in '000 (Nos.) in '000 Outstanding at the beginning of the year 5,700 6,900 Add: granted during the year 2,500 - Less: Forfeited/lapsed during the year 200 200 Exercised during the year - 1,000 Outstanding at the end of the year 8,000 5,700

(k) Percentage of Business sector-wise Percentage of policies written business sector - wise is as below: 2006-07 Particulars Policy Nos. No of Lives First year covered Premium Income Total Business 552,670 627,463 9,203,425

Rural Sector 104,026 786,644 As % of Total Business 18.82% 8.55% Social Sector 48,842 162,627 As % of Total Business 7.78% 1.77%

2005-06 Particulars Policy Nos. No of Lives First year covered Premium Income Total Business 423,780 464,081 4,432,756 Rural Sector 151,730 760,399 As % of Total Business 35.80% 17.15% Social Sector 25,839 18,130 As % of Total Business 5.57% 0.41%

(l) Percentage of risk-retained and risk-reinsured The extent of risk retained and reinsured is given below : Particulars Premium Sum Assured 2006-07 2005-06 2006-07 2005-06 Individual Business : Risk retained 99.12% 99.07% 77.61% 78.60% Risk reinsured 0.88% 0.93% 22.39% 21.40% Group Business : Risk retained 77.12% 73.94% 60.24% 52.24% Risk reinsured 22.88% 26.06% 39.76% 47.76%

(m) Operating lease commitments The Insurer has leased office spaces under various agreements with various expiration dates extending upto 10 years. Lease payments made under operating lease agreements have been fully recognised in the books of accounts. Some of the agreements have lock-in periods and same has been considered as the non-cancelable period of the lease(s). None of the leases are having more than three years of non-cancelable period. The future minimum lease payments under non-cancelable operating leases with remaining lease terms at March 31, 2007 are as follows :

MAX INDIA ANNUAL REPORT 2006-07 151 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

Particulars 2007 2006 Lease rentals for non-cancelable leases paid during the year 45,673 51,883 Lease obligations for non-cancelable lease Not later than one year 25,999 43,746 Later than one year and not later than five years 15,970 10,648 Later than five years - - Total 41,969 54,394

(n) Claims outstanding Claims from Policyholders which are settled and unpaid for more than 6 months as on Balance Sheet date amount to Nil (2006 : Nil)

(o) Contributions from Shareholders' Fund to Policyholders' Funds The sums contributed from the shareholders' funds to the policyholders funds are required to maintain adequate level of solvency and to provide in case of participating funds sufficient surplus to allow for bonuses to be declared. The Insurer has transferred amount aggregating to Rs.741,855 (2006 : Rs. 651,635 approved in Annual General Meeting held on July 04, 2006), from the Shareholder’s Account (Non-technical Account) to the Policyholder’s Account (Technical Account). The amounts transferred from shareholders' account (non- technical) are irreversible in nature and shall not be recouped to the shareholders at any point of time in future. Approval from Shareholders will be obtained for such contribution at the ensuing Annual General Meeting of the Insurer.

(p) Policyholders' Bonus The Bonus for current year as recommended by Appointed Actuary has been included in Change in valuation against policies in force.

(q) Policy Liabilities The movement of policy liabilities (forming part of Policyholders funds) is as follows : Particulars Participating Participating Non Non Linked Linked Linked Total Individual Pensions Participating Participating Individual Pension Group Life Policies Policies Individual Group Policies Policies Life Policies Policies At start of Year 5,194,777 141,122 277,107 40,077 1,755,492 33,823 - 7,442,398 Add : Change in valuation of liability 2,433,657 49,373 107,704 16,031 4,700,427 205,766 24,960 7,537,918 against life policies in force, Net Add : Policyholder Bonus provided 680,023 10,582 - - - - - 690,605 At end of Year 8,308,457 201,077 384,811 56,108 6,455,919 239,589 24,960 15,670,921

(r) (i) Segmental Reporting 1 Business Segments The Insurer's business is organised on a national basis around eight business segments, namely Individual Life Participating business, Participating Pension business, Individual Life Non-participating business , Group business, Linked Individual, Linked Pension, Linked Group and Investments of Shareholders' Funds. Non-participating businesses include policies with committed cash flows, with no rights to the surplus in the business. Participating business include policies other than those of non-participating businesses. Investment of shareholder funds constitute investible funds relating to shareholders. Accordingly, the Insurer has provided primary segment information for these segments as per the Accounting Standard 17 on 'Segment Reporting', issued by the ICAI, read with the relevant IRDA Regulations.

2. Geographical Segments Since the business operation of the Insurer is in India only, the same is considered as one geographical segment.

3. Segmental Assets and Liabilities Segment assets and liabilities include those, which are employed by a segment in its operating activity. Other common assets and liabilities are allocated to the segment on a pre-determined basis. Assets and liabilities that cannot be allocated to all segments on a reasonable basis have been disclosed as unallocated assets / liabilities.

4. Segmental Revenues and Expenses The accounting principles used in presentation of financial statements are also applied to record revenue and expenditure in individual segments. All segment revenue are directly attributed to individual segments. Other expenses, which are reasonably attributable, are apportioned to the business segment by adopting one of the following basis, which is considered as most appropriate : (a) total number of policies in-force, (b) annualised first year premium, (c) weighted combination of first year premium, renewal premium

152 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

income, sum assured and total number of policies in force, (d) sum assured and (e) first year commission. There are no inter segment revenues. Income and expenses that cannot be allocated to the segments on a reasonable basis are disclosed as unallocated Income/expense.

The segmental report for the year ended March 31, 2007 is given below : Participating Policies Non-Participating Policies Linked Policies Particulars Individual Pension Individual Group Linked Linked Linked Investment Total Life Life Individual Pension Group Shareholders Funds SEGMENTAL SHAREHOLDERS' / POLICYHOLDERS' ACCOUNT Revenue Premium earned - net 7,078,728 84,356 129,742 30,853 7,258,945 246,392 25,165 - 14,854,181 Income from Investments 525,079 12,582 23,736 3,473 355,254 10,508 197 141,164 1,071,993 Other Income 22,140 32 237,443 64,145 343,269 38,894 45,850 40,725 792,498 Unallocated Revenue ------Transfer from Policyholder ------1,176 1,176 Total Revenue (net) 7,625,947 96,970 390,921 98,471 7,957,468 295,794 71,212 183,065 16,719,848 Commission 1,042,214 1,152 16,444 577 1,209,404 14,440 1,003 - 2,285,234 Operating Expenses incl. Provision for doubtful debts 2,777,300 13,724 247,152 44,802 1,940,122 74,850 44,938 10,970 5,153,858 Provision for Tax - Fringe Benefit Tax 17,237 95 1,595 311 11,106 488 311 - 31,143 Benefits Paid (Net) 675,516 6,781 18,026 36,751 96,409 251 - - 833,734 Interim Bonus ------Change in valuation of liability against life policies in force (Net) 3,113,680 59,955 107,704 16,030 4,700,427 205,765 24,960 - 8,228,521 Net Contribution to policyholders fund ------741,855 741,855 Segment Operating Results - 15,263 - - - - - (569,760) (554,497) Transfer to Shareholder - (1,176) ------(1,176) Unallocated other income ------Shareholder expenses ------34,943 (34,943) Net Operating Profit/(Loss) ------(590,616) SEGMENTAL BALANCE SHEET Segment Assets Investments 8,324,144 220,301 393,741 61,394 6,463,551 251,428 24,961 2,709,725 18,449,245 Loan ------Net Fixed Assets 498,588 2,764 46,126 9,270 321,262 14,127 9,008 - 901,145 Advances and Other Assets 768,928 7,418 56,022 19,084 567,601 22,508 9,691 35,685 1,486,936 Total Segment Assets 9,591,660 230,483 495,889 89,748 7,352,414 288,063 43,660 2,745,410 20,837,326 Unallocated Assets Cash and Bank Balances ------396,853 Advances and Other Assets ------29,418 Debit Balance In Profit And Loss Account (Shareholders' Account) ------4,528,072 4,528,072 Deficit In The Revenue Account (Policyholders' Account) ------Total Assets 2,5791,669 Segment Liabilities Policy Liabilities 8,308,457 201,077 384,811 56,108 6,455,919 239,589 24,960 - 15,670,921 Funds For Future Appropriations - 62,566 - - - - - 6,952 69,518 Current Liabilities 1,325,315 7,800 103,041 20,247 967,119 36,836 19,817 - 2,480,175 Fair Value Change Account ------34,670 34,670 Total Segment Liabilities 9,633,772 271,443 487,852 76,355 7,423,038 276,425 44,777 41,622 18,255,284 Segment Reserves ------Reserves and Surplus ------80,000 Equity Capital ------7,324,326 Unallocated Liabilities Current Liabilities ------162,963 Provisions ------18,875 Deferred Expenditure ------(49,779) Total Liabilities 25,791,669 OTHER INFORMATION Capital Expenditure during the year 253,342 1,402 23,437 4,578 163,239 7,178 4,578 - 457,754 Depreciation for the year 125,244 694 11,588 2,260 80,700 3,548 2,260 93 226,387 Non-cash expenditure other than depreciation Liabilities to Policyholders 3,113,680 59,955 107,704 16,030 4,700,427 205,765 24,960 - 8,228,521 Unallocated preliminary expenses -

MAX INDIA ANNUAL REPORT 2006-07 153 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

The segmental report for the year ended March 31, 2006 is given below :

Participating Policies Non-Participating Policies Linked Policies Particulars Individual Pension Individual Group Linked Linked Linked Investment Total Life Life Individual Pension Group Shareholders Funds SEGMENTAL SHAREHOLDERS' / POLICYHOLDERS' ACCOUNT Revenue Premium earned - net 5,309,730 87,250 95,488 33,054 2,230,098 41,549 - - 7,797,169 Income from Investments 314,976 12,029 18,237 4,189 274,312 713 - 77,528 701,984 Other Income 35,874 15 174,248 20,240 412,897 20,699 - - 663,973 Unallocated Revenue ------Transfer from Policyholder ------575 575 Total Revenue (net) 5,660,580 99,294 287,973 57,483 2,917,307 62,961 - 78,103 9,163,701 Commission 906,196 2,060 13,792 156 419,913 2,629 - - 1,344,746 Operating Expenses incl. Provision for doubtful debts 2,206,707 13,383 149,407 22,652 976,186 26,294 - 10,434 3,405,063 Provision for Tax - Fringe Benefit Tax 16,557 109 1,152 256 7,286 215 - - 25,575 Benefits Paid (Net) 337,167 2,873 16,578 56,347 12,423 - - - 425,388 Interim Bonus ------Change in valuation of liability against life policies in force (Net) 2,193,953 24,863 107,044 (21,928) 1,501,499 33,823 - - 3,839,254 Net Contribution to policyholders fund ------651,635 651,635 Segment Operating Results - 56,006 - - - - - (583,966) (527,960) Transfer to Shareholder - (575) ------(575) Unallocated other income ------26 Shareholder Expenses ------16,676 (16,676) Net Operating Results ------(545,185) SEGMENTAL BALANCE SHEET Segment assets Investments 5,228,191 158,528 292,722 49,241 1,755,490 33,824 - 1,343,158 8,861,154 Loan 1,563 ------1,563 Net Fixed Assets 442,555 2,924 30,799 7,097 194,760 5,747 - - 683,882 Advances and Other Assets 533,827 7,315 29,007 10,997 213,864 5,032 - 20,332 820,374 Total Segment Assets 6,206,136 168,767 352,528 67,335 2,164,114 44,603 - 1,363,490 10,366,973 Unallocated Assets Cash and Bank Balances ------286,364 Advances and Other Assets ------2,193 Debit Balance In Profit And Loss Account (Shareholders' Account) ------3,923,369 3,923,369 Deficit In The Revenue Account (Policyholders' Account) ------Total Assets 14,578,899 Segment Liabilities Policy Liabilities 5,194,777 141,122 277,107 40,077 1,755,492 33,823 - - 7,442,398 Funds For Future Appropriations - 49,888 - - - - - 5,543 55,431 Current Liabilities 905,863 6,823 51,987 11,764 397,699 10,223 - - 1,384,359 Fair Value Change Account ------760 760 Total Segment Liabilities 6,100,640 197,833 329,094 51,841 2,153,191 44,046 - 6,303 8,882,948 Segment Reserves ------Reserves and Surplus ------57,000 Equity Capital ------5,574,326 Unallocated Liabilities Current Liabilities ------83,208 Provisions ------18,483 Deferred Expenditure ------(37,066) Total Liabilities 14,578,899 OTHER INFORMATION Capital Expenditure during the year 198,712 1,310 13,830 3,070 87,450 2,580 - - 306,952 Depreciation for the year 116,020 764 8,076 1,793 51,092 1,501 - 111 179,357 Non-cash expenditure other than depreciation Liabilities to Policyholders 2,193,953 24,863 107,044 (21,928) 1,501,499 33,823 - - 3,839,254

154 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(s) The ratios as prescribed by IRDA are given below :

For the year ended March 31, 2007 Participating Policies Non-Participating Policies Linked Policies Ratios for the year ended March 31, 2007 Individual Pension Individual Group Linked Linked Linked Total Life Life Individual Pension Group (a) New Business Premium Income Growth 111.7% 33.1% 127.5% 179.4% 285.9% 551.6% 0.0% 193.5% Current Year New Business Premium as a % of Previous Year New Business Premium) (b) Net Retention Ratio 98.7% 100.0% 88.7% 65.0% 99.7% 100.0% 100.0% 99.0% (Net premium as a % of gross premium) (c) Ratio of Expenses of Management 53.5% 17.7% 181.2% 96.2% 43.4% 36.4% 183.8% 49.7% (Expenses of Management as a % of Gross Premium) (d) Commission Ratio 14.5% 1.4% 11.2% 1.2% 16.6% 5.9% 4.0% 15.2% (Gross Commission as a % of Gross Premium) (e) Ratio of Policy holders' liabilities to shareholders' funds 313.5% (Policyholders' Liability as a % of Shareholders' Fund) (f) Growth rate of Shareholders' Fund 70.4% (Increase/ (Decrease) in Shareholders' Fund over previous year as a % of Shareholders' Funds of Previous year) (g) Ratio of Policyholders' Surplus to Policy holders' liability 0.2% (Policyholders' Surplus as a % of Policyholders' Liability) (Refer to Note II on Schedule 16) (h) Change in net worth ( over previous year) 70.4% (Increase/ (Decrease) in Net Worth over previous year as a % of Net Worth of Previous year) (i) Profit after tax / Total Income -330.3% (Refer to Note II on Schedule 16) (j) (Total Real Estate+Loans)/ Cash & Invested assets NA (k) Total Investments/(Capital + Total Surplus) 408.9% (l) Total Affiliated Investments/(Capital + Total Surplus) NA

Notes for Calculation of above Ratios 1) Expenses of Management include operating expenses and commission. 2) Shareholders funds = Share Capital (net of Preliminary Expenses to the extent not written off /adjusted) + Reserve and Surplus/ Deficit in Profit and Loss Account. 3) Total Surplus = Policyholders' Reserves + Debit balance in Profit and Loss Account (Non-Technical) as appearing in Balance Sheet + Deficit in the Revenue Account (Technical) as appearing in Balance Sheet. 4) Net Worth = Shareholders Funds + Insurance Reserves+Deficit in the Revenue Account (Technical) as appearing in Balance Sheet. 5) Profit After Tax and total income are as disclosed in the Profit and Loss Account (Non - Technical).

For the Year ended March 31, 2006 Ratios for the year ended March 31, 2006 Participating Policies Non-Participating Policies Linked Policies Individual Pension Individual Group Linked Linked Linked Total Life Life Individual Pension Group (a) New Business Premium Income Growth 134.3% 33.4% 175.1% 29.6% 595.5% 0.0% 0.0% 201.8% (Current Year New Business Premium as a % of Previous Year New Business Premium) (b) Net Retention Ratio 98.9% 100.0% 91.0% 73.9% 99.8% 100.0% 0.0% 98.9% (Net premium as a % of gross premium) (c) Ratio of Expenses of Management 58.3% 17.8% 156.7% 51.6% 62.8% 70.1% 0.0% 60.5% (Expenses of Management as a % of Gross Premium) (d) Commission Ratio 16.9% 2.4% 13.1% 0.3% 18.8% 6.3% 0.0% 17.1% (Gross Commission as a % of Gross Premium) (e) Ratio of Policy holders' liabilities to shareholders' funds 331.4% (Policyholders' Liability as a % of Shareholders' Fund) (f) Growth rate of Shareholders' Fund 21.4% (Increase/ (Decrease) in Shareholders' Fund over previous year as a % of Shareholders' Funds of Previous year) (g) Ratio of Policyholders' Surplus to Policy holders' liability 1.0% (Policyholders' Surplus as a % of Policyholders' Liability) (Refer to Note II (o) on Schedule 16) (h) Change in net worth ( over previous year) 21.4% (Increase/ (Decrease) in Net Worth over previous year as a % of Net Worth of Previous year) (i) Profit after tax / Total Income -774.4% (Refer to Note II (o) on Schedule 16) (j) (Total Real Estate+Loans)/ Cash & Invested assets NA (k) Total Investments/(Capital + Total Surplus) 414.4% (l) Total Affiliated Investments/(Capital + Total Surplus) NA

MAX INDIA ANNUAL REPORT 2006-07 155 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(t) Related parties Disclosures The details of significant related party transactions as per Accounting Standard 18 issued by ICAI is given below : Summary of Related Parties Transactions for Holding Fellow Shareholders Key Enterprises over Total the year ended March 31, 2007 Company Subsidiaries with Management which key (a) (b) Significant Personnel management Influence (d) personnel have (c) significant influence (e) Equity Share Capital 1,295,000 - 455,000 - - 1,750,000 Purchase of Fixed Assets ------Purchase of Goods/Services - 1,023 - - 2,740 3,763 Premium received ------Rendering Services ------Receiving of Services * - 1,719 - 40,880 - 42,599 Reimbursement of Expenses 1,223 9,221 9,155 - 353 19,952 Management Contracts Including for deputation of employees ------Balance receivable/(payable) as at March 31, 2007 (1,089) (701) (36,384) - (779) * Includes consultancy charges paid to Shareholders with significant influence. Notes: 1) All the above transactions have been conducted at arm's length basis. 2) In accordance with the requirements of Accouting Standards (AS) - 18, "Related Party Dsiclosures", the names of the related party where control exists/able to exercise significant influene along with the aggregate transaction and year end balances with them as identified and certified by the management are given below:

Description of relationship Name of Party (a) Holding Company Max India Ltd. (b) Fellow Subsidiaries Pharmax Corporation Ltd. Max Healthcare Institute Ltd. Max Medical Services Ltd. Alps Hospital Pvt. Ltd. (w.e.f. April 6, 2006) Neeman Medical International BV, Netherlands Neeman Medical International NV, Netherlands Neeman Medical International Inc., USA Neeman Medical International, Latin America Neeman Medical International (Asia) Ltd. Max Ateev Ltd. Max UK Ltd, UK Max Healthstaff International Ltd (w.e.f. June 30, 2005) Max Estates Ltd. - Till May 31, 2006 Malsi Estates Ltd. - Till May 31, 2006 Max Telecom Ventures Limited - Till Nov 30, 2005 Max Asia Pac Limited - Till Nov 30, 2005 (c) Shareholder with significant influence New York Life International Llc (d) Key Management Personnel Analjit Singh (Chairman) / Gary Bennett (CEO & Managing Director) / Sunil Sharma (Executive Director & COO) (e) Enterprises over which Key Management Personnel New Delhi House Services Ltd. have significant influence

156 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees)

Summary of Related Parties Transactions for Holding Fellow Shareholders Key Enterprises over Total the year ended March 31, 2006 Company Subsidiaries with Management which key (a) (b) Significant Personnel management Influence (d) personnel have (c) significant influence (e) Equity Share Capital 666,000 - 237,515 - - 903,515 Purchase of Fixed Assets * - - 606 - - 606 Purchase of Goods/Services ------Premium received ------Rendering Services ------Receiving of Services ** - 1,473 6,803 39,740 - 48,016 Reimbursement of Expenses 938 1,704 6,641 - - 9,283 Management Contracts Including for deputation of employees ------Balance receivable/(payable) as at March 31, 2006 (32) (50) (30,554) - -

* The transactions represents purchase of Software from Shareholders with Significant Influence. ** Includes consultancy charges paid to Shareholders with Significant Influence Note: 1) There are no transactions with enterprises in which directors are interested. 2) All the above transactions have been conducted at arm's length basis. 3) In accordance with the requirements of Accouting Standards (AS) - 18, "Related Party Dsiclosures", the names of the related party where control exists/able to exercise significant influene along with the aggregate transactions and year end balances with them as identified and certified by the management are given below:

Description of relationship Name of Party (a) Holding Company Max India Ltd. (b) Fellow Subsidiaries Pharmax Corporation Ltd. Max Healthcare Institute Ltd. Max Medical Services Ltd. Alps Hospital Pvt. Ltd. (w.e.f. April 6, 2006) Neeman Medical International BV, Netherlands Neeman Medical International NV, Netherlands Neeman Medical International Inc., USA Neeman Medical International, Latin America Neeman Medical International (Asia) Ltd. Max Ateev Ltd. Max UK Ltd., UK Max Healthstaff International Ltd. (w.e.f. June 30, 2005) Max Estates Ltd. - Till May 31, 2006 Malsi Estates Ltd. - Till May 31, 2006 Max Telecom Ventures Limited - Till Nov 30, 2005 Max Asia Pac Limited - Till Nov 30, 2005 (c) Shareholder with significant influence New York Life International Llc (d) Key Management Personnel Analjit Singh(Chairman)/ Gary Bennett (CEO & Managing Director) / Sunil Sharma(Executive Director &COO) (e) Enterprises over which Key Management Personnel Nil have significant influence

Other relevant information : i) Fixed assets are purchased from holding Company, fellow subsidiary and Shareholders with significant influence at book value and normal commercial terms respectively. ii) Payment for services received from the holding Company are at actual cost incurred by them; those received from fellow subsidiary and shareholder with significant influence are at agreed terms. iii) Payments for management contract, including for deputation of employees is at actual cost incurred by them. iv) Payments for services received from Key Management Personnel represent remuneration as computed under the Income Tax Act, 1961 and do not include provision for gratuity payable to them as the same is actuarially determined for the Insurer as a whole.

MAX INDIA ANNUAL REPORT 2006-07 157 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(u) Summary of Financial Statements forming part of Notes to Accounts (Rs in lakhs) is given below: Particulars 2006-2007 2005-2006 2004-2005 2003-2004 2002-2003 2001-2002 POLICYHOLDERS' A/C 1 Gross Premium Income 150,028 78,813 41,343 21,525 9,659 3,895 2 Net Premium Income (Net of Re-insurance ceded) 148,542 77,972 40,872 21,206 9,506 3,860 3 Income from Investments (Net) 9,308 6,245 2,087 878 406 77 4 Other Income (Miscellaneous Income) 99 123 15 14 12 1 5 Contribution from the Shareholders' a/c 7,419 6,516 10,267 24,500 - - 6 Total Income ( 2+3+4+5) 165,368 90,856 53,241 46,598 9,924 3,938 7 Commission 22,852 13,447 6,509 4,028 1,849 1,186 8 Brokerage ------9 Operating Expenses related to Insurance Business 51,429 33,946 24,662 16,273 11,194 8,489 10 Provision for Tax - Fringe Benefit Tax 311 256 - - - - 11 Total Expenses (7+8+9+10) 74,592 47,649 31,171 20,301 13,043 9,675 12 Payments to Policyholders 8,337 4,254 1,242 1,938 249 67 13 Increase in Actuarial Liability 82,285 38,393 20,827 8,646 4,521 2,021 14 Surplus/Deficit from Operations 154 560 - 15,713 (7,890) (7,823) SHAREHOLDERS' A/C 15 Total Income under Shareholders' Account 1,819 776 472 1,384 1,113 1,307 16 Profit/(loss) before Tax (6,047) (6,006) (9,966) (23,276) 482 1,139 17 Provision for Tax ------18 Profit/ loss after tax (6,047) (6,006) (9,966) (23,276) 482 1,139 19 Profit/ loss carried to Balance Sheet (45,280) (39,233) (33,227) (23,261) 15 (467) MISCELLANEOUS 20 Policyholders' account: Total Funds 156,709 74,424 36,031 16,012 (9,155) (5,786) Total Investments (Including UL) 157,396 75,180 36,923 16,012 6,558 2,053 Yield on Investments (%) (Controlled Funds) 7.86% 7.92% 8.40% 8.09% 9.89% 7.84% Yield on Investments (%) (Unit Linked Funds) 9.20% 31.29% 5.23% - - - Shareholders' account: Total Funds 29,109 17,087 14,078 11,350 25,489 24,496 Total Investments 27,097 13,432 11,379 8,520 8,646 14,125 Yield on Investments (%) 7.22% 6.45% 5.29% 9.49% 9.95% 12.41% 21 Yield on Total Investments 9.03% 10.81% 7.52% 8.71% 9.93% 12.02% 22 Paid up Equity capital 73,243 55,743 46,608 34,608 25,474 24,963 23 Weighted Average Number of Shares 611,693 504,642 385,529 294,617 250,000 192,083 24 Net Worth 28,611 16,717 13,556 11,350 9,776 16,674 25 Total Assets 27,097 17,944 11,622 9,961 5,655 4,559 26 Earning per share - Basic & Diluted (Face Value : Rs 10 each) in Rs. (0.99) (1.19) (2.59) (7.90) 0.19 0.59 27 Book Value per Share: Rs 10 Paid up 3.97 3.07 3.02 3.28 3.83 6.67 Book Value per Share: Re 1 Paid up - - - - 0.38 -

(v) Disclosures For ULIP Business (Refer to Note II (y) on Schedule 16) 1 Performance of the Fund (Absolute Growth %) Fund Name Year of Year of Since Inception 2006-2007 2005-2006 2004-2005 inception Balanced 2004-05 8.73% 26.36% 7.78% 48.08% Conservative 2004-05 6.87% 13.35% 4.85% 27.01% Growth 2004-05 11.24% 45.68% 14.41% 85.41% Secured 2004-05 5.28% 3.88% 2.34% 11.93% Pension Balanced 2005-06 5.99% 2.57% 8.72% Pension Conservative 2005-06 7.15% 0.70% 7.90% Pension Growth 2005-06 9.88% 4.54% 14.87% Pension Secured 2005-06 5.37% 0.41% 5.80% Group Gratuity Balanced 2006-07 5.12% 5.12% Group Gratuity Conservative 2006-07 2.39% 2.39% Group Gratuity Growth 2006-07 0.52% 0.52% Guaranteed Fund- Dynamic 2006-07 2.51% 2.51% Guaranteed Fund-Income 2006-07 1.26% 1.26%

158 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

2 Investment Management Activities outsourced : None Fee paid for various activities charged to Policyholders' Account : Nil Basis of payment of fees : Nil 3 Related party transactions Fund wise details Brokerage, custodial fee or any other payments and receipts made to/from related parties (as defined in AS 18 issued by ICAI) : Nil Company-wise details of investments held in the Promoter Group along with its percentage to funds under management. This information is required to be given fund-wise and also for total funds under ULIPs. : Nil 4 Provision for doubtful debts on assets of the respective Fund : Nil 5 Unclaimed redemptions of units (represent unclaimed amount for claims) : Rs. 5,370 6 Net Asset Value (NAV) : Highest, Lowest and Closing at the end of the current year

Fund Name Highest NAV Lowest NAV Closing NAV Balanced 15.267 12.597 14.808 Conservative 12.758 11.644 12.701 Growth 19.814 14.490 18.541 Secured 11.193 10.643 11.193 Pension Balanced 11.324 9.465 10.872 Pension Conservative 10.799 9.999 10.790 Pension Growth 12.312 9.345 11.487 Pension Secured 10.580 10.044 10.580 Group Gratuity Balanced 10.623 10.000 10.512 Group Gratuity Conservative 10.239 9.999 10.239 Group Gratuity Growth 10.086 9.945 10.052 Guaranteed Fund - Dynamic 10.335 10.000 10.251 Guaranteed Fund - Income 10.126 9.997 10.126

7 Expenses Charges to Fund % Annualized expense ratio to average daily assets of the Fund Fund Name Ratio Balanced 1.10% Conservative 0.90% Growth 1.25% Secured 0.90% Pension Balanced 1.10% Pension Conservative 0.90% Pension Growth 1.25% Pension Secured 0.90% Group Gratuity Balanced 0.85% Group Gratuity Conservative 0.75% Group Gratuity Growth 0.95% Guaranteed Fund- Dynamic 1.70% Guaranteed Fund-Income 1.50%

MAX INDIA ANNUAL REPORT 2006-07 159 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

8 Ratio of gross income (including unrealized gains) to average daily net assets

Fund Name Ratio Balanced 9.29% Conservative 7.58% Growth 11.32% Secured 5.87% Pension Balanced 5.83% Pension Conservative 7.19% Pension Growth 9.54% Pension Secured 6.19% Group Gratuity Balanced 3.04% Group Gratuity Conservative 2.72% Group Gratuity Growth 0.59% Guaranteed Fund- Dynamic 1.41% Guaranteed Fund-Income 1.73%

9 Fund-wise disclosure of appreciation and/or (depreciation) in value of investments segregated class-wise Fund Name Bonds Equity Government Money Total Securities Market Balanced (4,462) 26,389 (4,033) 159 18,053 Conservative (467) 2,182 (2,442) 25 (702) Growth (21,171) 318,863 (4,460) 1,650 294,882 Secured (221) - (1,897) 29 (2,089) Pension Balanced (93) 192 (82) 6 23 Pension Conservative (3) (1) (8) - (12) Pension Growth (1,058) 5,403 (279) 73 4,139 Pension Secured (7) - (27) 1 (33) Group Gratuity Balanced (56) 52 (43) 8 (39) Group Gratuity Conservative (7) - (7) - (14) Group Gratuity Growth 1 15 (3) 1 14 Guaranteed Fund- Dynamic (6) (4) (17) - (27) Guaranteed Fund-Income - - (2) - (2)

(w) Additional information in respect of Provisions in Schedule 14 pursuant to Accounting Standard-29 issued by ICAI

Nature of Obligation As at Additions made Paid/written back/ As at March 31, 2006 during the year used during the year March 31, 2007 Provision for Gratuity 14,803 4,800 8,130 11,473 Provision for Fringe Benefit Tax 463 38,546 38,060 949 Provision for Wealth tax 405 433 482 356 Provision for Doubtful Debts 2,812 3,316 31 6,097 Total 18,483 47,095 46,703 18,875

160 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 20% 13% % To Total % To Investment Total 44,180 28,565 In Industry Investment ------950 988 964 933 4,771 2,022 1,939 3,938 1,967 2,848 2,275 6,582 2,045 1,064 6,159 2,349 6,793 1,346 5,837 4,085 1,996 Pension Growth Fund Pension 10,894 Investments

11% 13% % To Total % To Investment 1,606 1,324 Total In Industry Investment ------61 98 59 47 45 25 66 573 454 182 132 444 253 308 183 Pension Balanced Fund Pension Investments 7% 3% % To Total % To Investment 266 124 Total In Industry Investment ------11 11 51 16 17 35 32 35 182 Guaranteed Fund-Dynamic Investments 2% 4% Total ment % To Invest- 7 20 Total In Industry Investment ------1 5 1 1 3 5 11 Guaranteed Fund-Income Investments 0% 23% % To Total % To Investment - 18,008 Total In Industry Investment ------Secured Fund 910 950 964 999 1,816 3,053 3,877 1,486 3,953 Investments 2% 16% % To Total % To Investment 2,455 Total 18,514 In Industry Investment ------76 271 102 109 108 614 954 969 983 138 908 429 144 373 933 408 135 538 272 Conservative Fund 3,938 2,275 1,387 1,908 2,997 Investments 20% 12% % To Total % To Investment Total 657,324 1,125,986 In Industry Investment - - Growth Fund 582 7,007 3,816 1,939 5,595 1,339 18,211 45,510 43,021 48,616 10,000 50,461 10,990 13,316 45,218 69,421 31,624 29,293 39,205 17,098 48,657 48,845 37,409 42,283 39,550 45,457 45,395 16,068 75,177 85,783 45,489 45,379 39,532 60,785 15,423 26,643 15,908 45,346 26,398 111,215 125,712 121,020 127,574 Investments 5% 22% % To Total % To Investment 28,027 Total 113,834 In Industry Investment ------60 Balanced Fund 8,110 2,076 2,518 3,816 4,941 1,831 1,314 4,004 2,953 3,933 5,939 2,486 3,837 1,928 4,996 1,996 1,080 1,392 4,082 7,666 1,372 6,237 3,622 1,843 11,191 10,010 10,662 13,617 12,349 Investments ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007 31, FOR THE YEAR ENDED MARCH STATEMENTS OF FINANCIAL PART ANNEXED TO AND FORMING Script Name

ABN AMRO BANK 0PCT CD 12SEPT2007 BAJAJ AUTO FINANCE LTD 0PCT CP 5/03/2008 FINANCE LTD BAJAJ AUTO BANK OF BARODA LTD BANK OF INDIA 9.2% 8MAY2007 CENTURION BANK OF PUNJAB LTD CITICORP FINANCE 8.6% NCD 2JUN2009 CITIFINANCIAL CONSUMER FIN 7.05% 5NOV08 CITIFINANCIAL CONSUMER FIN 8.9% 5AUG2009 CITIFINANCIAL CONSUMER FIN 9% 6JUL2009 DSP MERRILL LYNCH CAP LTD 8.8% 27JUN2008 CAP LTD DSP MERRILL LYNCH DSP MERRILL LYNCH CAPITAL 8.8% 8NOV2009 CAPITAL DSP MERRILL LYNCH DSP MERRILL LYNCH CAPITAL 9.45% 4OCT2009 CAPITAL DSP MERRILL LYNCH EXPORT IMPORT BANK OF INDIA 8.7% 29DEC09 HOUSING DEVELOPMENT FINANCE CORP BANK HSBC BANK 0PCT CD 13MAR2008 ICICI BANK 0% CD 06MAR2008 ICICI BANK 0% CD 07MAR2008 ICICI BANK 0% CD 29FEB2008 ICICI BANK LTD INDUSTRIAL DEV BK INDIA 9.4% 25NOV2007 INDUSTRIAL DEV BK INDIA 9.5% 12SEP2007 IDBI BANK 0PCT CD 05MARCH2008 IL&FS CO LTD 0% CP 14MAR2008 IL&FS CO LTD IL&FS LTD 10.75% 29MAR2009 10.75% IL&FS LTD INDIAN BANK INDUSTRIAL DEV BK OF INDIA 6.75% 18AUG08 INFRASTRE LEASING & FINAN 9.2% 23APR2008 KOTAK MAHINDRA BANK LTD KOTAK MAHINDRA & FIN 8.6% 24APR2009 NABARD 7.7% 31MAY2009 SERIES 8C NABARD 7.7% 31MAY2009 PUNJAB NATIONAL BANK PUNJAB NATIONAL RELIANCE CAPITAL LTD RELIANCE CAPITAL STATE BANK OF INDIA STATE STATE BANK OF INDIA STEP CPN 12SEP2021 STATE UCO BANK 0% CD 27MAR2008 UNION BANK 0% CD 20MAR2008 ABB LTD AREVA T&D INDIA LTD BHARAT EARTH MOVERS LTD BHARAT BHARAT ELECTRONICS LTD BHARAT BHARAT HEAVY ELECTRICALS LTD HEAVY BHARAT CUMMINS INDIA LTD LARSEN AND TOUBRO LTD LARSEN AND TOUBRO SIEMENS INDIA LTD VOLTAS LIMITED VOLTAS

Engineering Banking and Financial Institutions Financial and Banking Statement of Industry Wise Disclosure Investments Industry 1. 2. S. No. (All Amounts in Thousands of Indian Rupees, unless otherwise stated) (All Amounts in Thousands of Indian Rupees, SCHEDULE 10

MAX INDIA ANNUAL REPORT 2006-07 161 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 13% % To Total % To Investment Total 28,880 In Industry Investment ------77 761 273 505 755 4,851 3,614 2,500 5,000 2,374 1,185 2,846 1,326 2,972 2,167 3,566 1,463 1,522 4,868 1,933 2,992 1,722 2,242 Pension Growth Fund Pension 21,180 18,612 Investments 8% % To Total % To Investment 1,035 Total In Industry Investment ------3 6 0 81 61 43 87 117 117 538 500 186 789 668 390 134 130 1,292 1,959 Pension Balanced Fund Pension Investments 8% % To Total % To Investment 287 Total In Industry Investment ------5 110 100 187 468 195 1,573 Guaranteed Fund-Dynamic Investments Total ment % To 12% Invest- 57 Total In Industry Investment ------1 - 10 47 98 24 249 Guaranteed Fund-Income Investments 5% % To Total % To Investment 5,069 Total In Industry Investment ------Secured Fund 391 569 980 1,015 1,000 3,500 6,478 1,973 1,560 1,059 1,947 13,811 18,638 Investments 19% % To Total % To Investment Total 22,570 In Industry Investment ------0 5 77 88 53 98 34 98 507 109 143 238 259 283 958 980 149 196 129 Conservative Fund 691 691 7,410 1,041 2,461 2,921 1,000 4,500 6,496 9,945 11,399 17,070 18,525 Investments 11% % To Total % To Investment Total 632,311 In Industry Investment - - Growth Fund 4,251 1,314 4,508 8,844 2,197 9,893 3,922 5,755 9,135 11,074 21,561 41,500 49,731 20,109 19,251 10,438 13,891 44,618 50,374 45,140 90,920 40,000 28,245 39,249 33,276 44,949 58,429 24,428 27,405 15,225 15,673 74,968 40,583 46,349 35,469 43,725 50,199 49,595 28,598 30,344 35,483 13,278 24,336 60,376 336,132 130,894 Investments 9% % To Total % To Investment 49,628 Total In Industry Investment Balanced Fund ------84 691 798 274 2,117 1,591 7,661 3,351 2,251 4,000 7,500 1,882 3,972 2,567 1,365 1,046 1,762 1,876 2,120 6,927 2,030 5,798 1,509 1,822 1,174 1,856 1,340 1,983 11,683 10,000 10,775 4,503 28,128 12,008 59,043 18,786 20,475 18,949 Investments ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007 31, FOR THE YEAR ENDED MARCH STATEMENTS OF FINANCIAL PART ANNEXED TO AND FORMING Script Name

HSBC BANK LTD,NEW DELHI 365D 10% 03MAY07 DELHI 365D 10% HSBC BANK LTD,NEW HSBC BANK LTD,NEW DELHI 365D 8.5% 02APR07 HSBC BANK LTD,NEW HSBC BANK LTD,NEW DELHI 365D 9% 11APR07 HSBC BANK LTD,NEW ICICI BANK LIMITED, NEW DELHI 999D 10.35% 22FEB12 ICICI BANK LIMITED, NEW DELHI 999D 10.35% YES BANK LTD, MUMBAI 366D 8.9% 30DEC09 YES BANK LTD, HSBC 7 DAYS FD HSBC 7 DAYS YES BANK LTD, MUMBAI 367D 10% 16FEB08 MUMBAI 367D 10% YES BANK LTD, BAJAJ AUTO LTD BAJAJ AUTO MARUTI UDYOG LTD MARUTI UDYOG EXIDE INDUSTRIES LTD MOTOR INDUSTRIES CO LTD MOTOR INDIA CEMENTS LTD MADRAS CEMENTS LTD HINDUSTAN CONSTRUCTION CO LTD HINDUSTAN JAIPRAKASH ASSOCIATES LTD JAIPRAKASH ASSOCIATES GRASIM INDUSTRIES LTD TATA SONS LTD 8.85% 30OCT2016 SONS LTD TATA OIL & NATURAL GAS CORP LTD OIL & NATURAL HINDUSTAN LEVER LTD HINDUSTAN ITC LTD ITC MARICO LTD NESTLE INDIA LTD INDIA (GOVT OF) 11.4% 31AUG2008 INDIA (GOVT OF) 11.4% INDIA, GOVERNMENT OF 11.5% 11JUN2010 INDIA, GOVERNMENT OF 11.5% INDIA, GOVERNMENT OF 11.5% 15MAY2009 INDIA, GOVERNMENT OF 11.5% INDIA, GOVERNMENT OF 11.9% 28MAY2007 INDIA, GOVERNMENT OF 11.9% INDIA, GOVERNMENT OF 12.00% 2MAY2008 INDIA, GOVERNMENT OF 13.05% 22APR2007 INDIA, GOVERNMENT OF 6.65% 5APR2009 INDIA, GOVERNMENT OF 7.5% 12MAY2010 INDIA, GOVERNMENT OF 9.4% 11SEP2012 INDIA, GOVERNMENT OF 9.5% 20FEB2008 HDFC LTD 8.45% 30MAY2008 HDFC LTD HDFC LTD 8.5% 8DEC2008 HDFC LTD HDFC LTD 8.55% 1DEC2009 HDFC LTD HOUSING DEV FIN CORP 5.85% 1MAR2009 HOUSING DEVELOPMENT FINANCE 0% 12MAR2010 HOUSING DEVELOPMENT FINANCE 0% 5MAR2008 HOUSING DEVELOPMENT FINANCE CORP LTD INDIAN HOTELS C0MPANY LTD 9.50% 28FEB2012 LTD C0MPANY INDIAN HOTELS ASC ENTERPRISES LTD GLOBAL BROADCAST NEWS LTD NETWORK 18 FINCAP PVT LTD TELEVISION EIGHTEEN INDIA LTD WIRE AND WIRELESS INDIA LTD ZEE ENTERTAINMENT ENTERPRISES LTD ZEE ENTERTAINMENT ZEE NEWS LTD HINDALCO INDUSTRIES LTD 6.6% 20NOV2007 HINDALCO INDUSTRIES LTD

Fixed Deposits Fixed Others Industry 3. 4. S. No. (All Amounts in Thousands of Indian Rupees, unless otherwise stated) (All Amounts in Thousands of Indian Rupees, SCHEDULE

162 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 55% 100% % To Total % To Investment Total 121,936 223,341 In Industry Investment ------64 218 162 378 336 Pension Growth Fund Pension 3,011 2,931 1,331 1,801 3,990 1,463 2,244 1,274 1,948 3,459 2,863 9,149 5,644 5,629 11,415 Investments 223,361 68% 100% % To Total % To Investment 8,425 Total 12,391 In Industry Investment ------3 11 59 25 36 33 97 34 13 99 336 153 900 297 266 Pension Balanced Fund Pension 12,391 Investments 81% Total ment % To Invest- 100% Total 2,924 3,601 In Industry Investment ------9 61 89 15 52 29 14 99 205 3,601 Guaranteed Fund-Dynamic Investments 83% Total % To 100% Investment 403 Total 487 In Industry Investment ------8 8 2 1 1 11 487 Guaranteed Fund-Income Invest- ments 71% Total ment % To Invest- 100% Total 56,213 79,290 In Industry Investment ------Secured Fund 2,931 1,023 1,004 3,403 79,290 Investments 63% Total ment % To Invest- 100% 75,014 Total 118,553 In Industry Investment ------8 31 66 25 26 27 80 12 713 207 251 213 518 403 262 227 306 409 147 537 587 246 337 Conservative Fund 3,011 1,072 118,553 Investments 56% Total ment % To Invest- 100% Total 3,089,315 In Industry Investment 5,504,936 - Growth Fund 49 1,110 3,207 8,415 1,678 1,730 1,954 1,238 4,095 1,159 31,112 10,707 11,526 38,717 28,091 21,947 15,814 46,917 91,797 12,575 40,684 88,597 28,775 46,886 84,530 13,330 39,992 46,003 35,275 68,198 30,266 47,803 75,805 89,440 33,478 43,188 213,574 244,321 196,677 125,332 Investments 5,504,936 64% Total ment % To Invest- 100% Total 334,683 526,172 In Industry Investment Balanced Fund ------112 231 174 577 568 447 133 477 837 1,507 1,816 6,512 2,202 2,026 9,032 4,569 1,657 2,120 3,203 1,856 1,354 3,579 5,644 3,636 2,604 2,946 3,756 11,607 11,741 10,171 10,748 10,772 526,172 Investments ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007 31, FOR THE YEAR ENDED MARCH STATEMENTS OF FINANCIAL PART ANNEXED TO AND FORMING Script Name HINDALCO INDUSTRIES PARTLY PAID HINDALCO INDUSTRIES PARTLY STEEL AUTHORITY OF INDIA 10.25% 3JUN2007 STEEL AUTHORITY OF INDIA 10.25% TATA STEEL LTD TATA GUJARAT STATE PETRONET LTD STATE GUJARAT RELIANCE INDUSTRIES LTD RELIANCE INDUSTRIES LTD 12.7% 15DEC2007 RELIANCE INDUSTRIES LTD RELIANCE INDUSTRIES LTD 6.2% 20NOV2007 RELIANCE INDUSTRIES LTD RELIANCE PETROLEUM LTD INFRA DEV FINA COMP 0% 27JUN2008 INFRA DEV FINANCE CO LTD 8.6% 24NOV2011 INFRA DEV FINANCE CO LTD INFRASTRUCTURE DEV FIN CO LTD ASIAN PAINTS (INDIA) LTD ASIAN PAINTS KANSAI NEROLAC PAINTS LTD KANSAI NEROLAC PAINTS BHARAT PETROLEUM CORP LTD BHARAT HINDUSTAN PETROLEUM CORP LTD HINDUSTAN CIPLA LTD DR. REDDYS LABORATORIES LTD LABORATORIES DR. REDDYS GLAXOSMITHKLINE PHARMACEUTICALS LTD IPCA LABORATORIES LIMITED IPCA LABORATORIES SUN PHARMACEUTICAL INDUSTRIES LTD KALPATARU POWER TRANSMISSION LTD KALPATARU NATIONAL HYDROELECT POWER 7.7% 31MAR2010 NATIONAL NTPC LTD POWER FINANCE CORP 7% 24DEC2011-SER 22 POWER FINANCE CORP 7% 24DEC2011-SER POWER FINANCE CORP 8.49% 9OCT2011 POWER GRID CORP OF INDIA 8.73% 11OCT2010 RELIANCE ENERGY LTD RURAL ELECTRIFICATION CORP 13% 17FEB2008 RURAL ELECTRIFICATION TATA POWER CO LTD TATA PANTALOON RETAIL INDIA LTD RETAIL PANTALOON HCL TECHNOLOGIES LTD INFOSYS TECHNOLOGIES LTD SATYAM COMPUTER SERVICES LTD SATYAM TATA CONSULTANCY SERVICES LTD CONSULTANCY TATA TECH MAHINDRA LTD WIPRO LTD BHARTI AIRTEL LTD IDEA CELLULAR LTD RELIANCE COMMUNICATION LTD RELIANCE COMMUNICATION TATA TELE SERVICES LTD 20APR2009 TELE SERVICES LTD TATA ADITYA BIRLA NUVO LTD ADITYA Total Industry S. No. (All Amounts in Thousands of Indian Rupees, unless otherwise stated) (All Amounts in Thousands of Indian Rupees, SCHEDULE

MAX INDIA ANNUAL REPORT 2006-07 163 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 11% 21% % To Total % To Investment 720,514 Total 1,328,639 Total In Industry Investment 582 2,873 2,486 9,540 1,399 11,011 31,111 71,361 45,510 47,708 41,357 48,616 10,000 50,461 49,414 45,218 47,221 18,228 19,386 33,247 48,657 48,845 49,222 49,166 45,599 45,457 45,395 45,390 90,920 99,289 45,489 45,379 66,909 19,279 19,982 17,090 15,823 18,652 45,346 35,479 29,249 142,901 133,625 124,989 134,290 Investments 0% 0% % To Total % To Investment - - Total In Industry Investment ------Group Gratuity Conservative Fund Investments 35% 16% Total In Industry Investment 830 1,794 % To Total % To Investment ------950 262 454 128 532 178 120 Investments Group Gratuity Growth Fund 10% 23% % To Total % To Investment 4,249 1,829 Total In Industry Investment ------4 61 13 954 950 984 222 908 227 934 565 256 Investments Group Gratuity Balanced Fund 9% 0% % To Total % To Investment - 182 Total In Industry Investment ------91 91 Pension Secured Fund Pension Investments 2% 2% % To Total % To Investment 13 16 Total In Industry Investment ------13 16 Pension Conservative Fund Pension Investments ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007 31, FOR THE YEAR ENDED MARCH STATEMENTS OF FINANCIAL PART ANNEXED TO AND FORMING Script Name

ABN AMRO BANK 0PCT CD 12SEPT2007 BAJAJ AUTO FINANCE LTD 0PCT CP 5/03/2008 FINANCE LTD BAJAJ AUTO BANK OF BARODA LTD BANK OF INDIA 9.2% 8MAY2007 CENTURION BANK OF PUNJAB LTD CITICORP FINANCE 8.6% NCD 2JUN2009 CITIFINANCIAL CONSUMER FIN 7.05% 5NOV08 CITIFINANCIAL CONSUMER FIN 8.9% 5AUG2009 CITIFINANCIAL CONSUMER FIN 9% 6JUL2009 DSP MERRILL LYNCH CAP LTD 8.8% 27JUN2008 CAP LTD DSP MERRILL LYNCH DSP MERRILL LYNCH CAPITAL 8.8% 8NOV2009 CAPITAL DSP MERRILL LYNCH DSP MERRILL LYNCH CAPITAL 9.45% 4OCT2009 CAPITAL DSP MERRILL LYNCH EXPORT IMPORT BANK OF INDIA 8.7% 29DEC09 HOUSING DEVELOPMENT FINANCE CORP BANK HSBC BANK 0PCT CD 13MAR2008 ICICI BANK 0% CD 06MAR2008 ICICI BANK 0% CD 07MAR2008 ICICI BANK 0% CD 29FEB2008 ICICI BANK LTD INDUSTRIAL DEV BK INDIA 9.4% 25NOV2007 INDUSTRIAL DEV BK INDIA 9.5% 12SEP2007 IDBI BANK 0PCT CD 05MARCH2008 IL&FS CO LTD 0% CP 14MAR2008 IL&FS CO LTD IL&FS LTD 10.75% 29MAR2009 10.75% IL&FS LTD INDIAN BANK INDUSTRIAL DEV BK OF INDIA 6.75% 18AUG08 INFRASTRE LEASING & FINAN 9.2% 23APR2008 KOTAK MAHINDRA BANK LTD KOTAK MAHINDRA & FIN 8.6% 24APR2009 NABARD 7.7% 31MAY2009 SERIES 8C NABARD 7.7% 31MAY2009 PUNJAB NATIONAL BANK PUNJAB NATIONAL RELIANCE CAPITAL LTD RELIANCE CAPITAL STATE BANK OF INDIA STATE STATE BANK OF INDIA STEP CPN 12SEP2021 STATE UCO BANK 0% CD 27MAR2008 UNION BANK 0% CD 20MAR2008 ABB LTD AREVA T&D INDIA LTD BHARAT EARTH MOVERS LTD BHARAT BHARAT ELECTRONICS LTD BHARAT BHARAT HEAVY ELECTRICALS LTD HEAVY BHARAT CUMMINS INDIA LTD LARSEN AND TOUBRO LTD LARSEN AND TOUBRO SIEMENS INDIA LTD VOLTAS LIMITED VOLTAS

Banking and Financial Institutions Financial and Banking Engineering Industry 1. 2. S. No. Statement of Industry Wise Disclosure Investments SCHEDULE (All Amounts in Thousands of Indian Rupees, unless otherwise stated) (All Amounts in Thousands of Indian Rupees,

164 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 11% % To Total % To Investment 740,587 Total Total In Industry Investment 4,518 8,221 2,461 8,844 5,460 9,893 12,821 24,216 10,438 10,586 97,361 48,314 29,870 17,415 50,374 45,140 90,920 50,000 50,000 50,000 43,855 35,379 56,973 47,775 60,303 25,505 28,728 67,800 24,186 52,387 12,682 63,689 14,209 48,979 46,349 37,733 45,547 57,068 49,595 15,409 32,397 36,823 49,003 115,631 404,153 165,752 Investments 5% % To Total % To Investment 30 Total In Industry Investment ------30 18 316 Investments Group Gratuity Conservative Fund 2% Total In Industry Investment 87 % To Total % To Investment ------87 53 1,006 Investments Group Gratuity Growth Fund 3% % To Total % To Investment 585 Total In Industry Investment ------5 2 1 0 31 10 85 14 25 500 126 293 190 974 4,464 Investments Group Gratuity Balanced Fund 10% % To Total % To Investment 216 Total In Industry Investment ------90 15 68 126 168 1,227 Pension Secured Fund Pension Investments 5% % To Total % To Investment 31 Total In Industry Investment ------6 25 64 66 98 196 Pension Conservative Fund Pension Investments ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007 31, FOR THE YEAR ENDED MARCH STATEMENTS OF FINANCIAL PART ANNEXED TO AND FORMING Script Name

HSBC BANK LTD,NEW DELHI 365D 10% 03MAY07 DELHI 365D 10% HSBC BANK LTD,NEW HSBC BANK LTD,NEW DELHI 365D 8.5% 02APR07 HSBC BANK LTD,NEW HSBC BANK LTD,NEW DELHI 365D 9% 11APR07 HSBC BANK LTD,NEW ICICI BANK LIMITED, NEW DELHI 999D 10.35% 22FEB12 ICICI BANK LIMITED, NEW DELHI 999D 10.35% YES BANK LTD, MUMBAI 366D 8.9% 30DEC09 YES BANK LTD, HSBC 7 DAYS FD HSBC 7 DAYS YES BANK LTD, MUMBAI 367D 10% 16FEB08 MUMBAI 367D 10% YES BANK LTD, BAJAJ AUTO LTD BAJAJ AUTO MARUTI UDYOG LTD MARUTI UDYOG EXIDE INDUSTRIES LTD MOTOR INDUSTRIES CO LTD MOTOR INDIA CEMENTS LTD MADRAS CEMENTS LTD HINDUSTAN CONSTRUCTION CO LTD HINDUSTAN JAIPRAKASH ASSOCIATES LTD JAIPRAKASH ASSOCIATES GRASIM INDUSTRIES LTD TATA SONS LTD 8.85% 30OCT2016 SONS LTD TATA OIL & NATURAL GAS CORP LTD OIL & NATURAL HINDUSTAN LEVER LTD HINDUSTAN ITC LTD ITC MARICO LTD NESTLE INDIA LTD INDIA (GOVT OF) 11.4% 31AUG2008 INDIA (GOVT OF) 11.4% INDIA, GOVERNMENT OF 11.5% 11JUN2010 INDIA, GOVERNMENT OF 11.5% INDIA, GOVERNMENT OF 11.5% 15MAY2009 INDIA, GOVERNMENT OF 11.5% INDIA, GOVERNMENT OF 11.9% 28MAY2007 INDIA, GOVERNMENT OF 11.9% INDIA, GOVERNMENT OF 12.00% 2MAY2008 INDIA, GOVERNMENT OF 13.05% 22APR2007 INDIA, GOVERNMENT OF 6.65% 5APR2009 INDIA, GOVERNMENT OF 7.5% 12MAY2010 INDIA, GOVERNMENT OF 9.4% 11SEP2012 INDIA, GOVERNMENT OF 9.5% 20FEB2008 HDFC LTD 8.45% 30MAY2008 HDFC LTD HDFC LTD 8.5% 8DEC2008 HDFC LTD HDFC LTD 8.55% 1DEC2009 HDFC LTD HOUSING DEV FIN CORP 5.85% 1MAR2009 HOUSING DEVELOPMENT FINANCE 0% 12MAR2010 HOUSING DEVELOPMENT FINANCE 0% 5MAR2008 HOUSING DEVELOPMENT FINANCE CORP LTD INDIAN HOTELS C0MPNY LTD 9.50% 28FEB2012 C0MPNY LTD INDIAN HOTELS ASC ENTERPRISES LTD GLOBAL BROADCAST NEWS LTD NETWORK 18 FINCAP PVT LTD TELEVISION EIGHTEEN INDIA LTD WIRE AND WIRELESS INDIA LTD ZEE ENTERTAINMENT ENTERPRISES LTD ZEE ENTERTAINMENT

Fixed Deposits Fixed Others Industry 3. 4. S. No. (All Amounts in Thousands of Indian Rupees, unless otherwise stated) (All Amounts in Thousands of Indian Rupees, SCHEDULE

MAX INDIA ANNUAL REPORT 2006-07 165 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 57% 100% % To Total % To Investment Total 3,706,261 Total 6,496,001 In Industry Investment 49 477 6,971 1,480 1,883 2,480 1,238 4,608 1,283 8,897 3,776 44,114 11,526 40,371 79,715 47,170 13,151 19,541 28,091 41,254 48,838 50,855 88,597 28,775 49,339 93,887 13,989 49,506 39,603 75,760 32,367 24,759 22,326 47,803 48,120 20,146 94,656 98,795 43,188 219,713 255,714 138,023 239,252 6,496,001 Investments 95% 100% % To Total % To Investment 518 548 Total In Industry Investment ------184 548 Group Gratuity Conservative Fund Investments 47% 100% Total In Industry Investment 2,422 5,133 % To Total % To Investment ------55 131 141 445 127 464 5,133 Investments Group Gratuity Growth Fund 65% 100% % To Total % To Investment 12,111 18,774 Total In Industry Investment ------3 4 4 76 82 28 707 370 316 977 977 255 405 569 1,203 18,774 Investments Group Gratuity Balanced Fund 81% 100% % To Total % To Investment 1,689 2,087 Total In Industry Investment ------78 133 2,087 Pension Secured Fund Pension Investments 91% 100% % To Total % To Investment 608 668 Total In Industry Investment ------3 9 9 61 59 30 13 668 Pension Conservative Fund Pension Investments ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007 31, FOR THE YEAR ENDED MARCH STATEMENTS OF FINANCIAL PART ANNEXED TO AND FORMING Script Name ZEE NEWS LTD HINDALCO INDUSTRIES LTD 6.6% 20NOV2007 HINDALCO INDUSTRIES LTD HINDALCO INDUSTRIES PARTLY PAID HINDALCO INDUSTRIES PARTLY STEEL AUTHORITY OF INDIA 10.25% 3JUN2007 STEEL AUTHORITY OF INDIA 10.25% TATA STEEL LTD TATA GUJARAT STATE PETRONET LTD STATE GUJARAT RELIANCE INDUSTRIES LTD RELIANCE INDUSTRIES LTD 12.7% 15DEC2007 RELIANCE INDUSTRIES LTD RELIANCE INDUSTRIES LTD 6.2% 20NOV2007 RELIANCE INDUSTRIES LTD RELIANCE PETROLEUM LTD INFRA DEV FINA COMP 0% 27JUN2008 INFRA DEV FINANCE CO LTD 8.6% 24NOV2011 INFRA DEV FINANCE CO LTD INFRASTRUCTURE DEV FIN CO LTD ASIAN PAINTS (INDIA) LTD ASIAN PAINTS KANSAI NEROLAC PAINTS LTD KANSAI NEROLAC PAINTS BHARAT PETROLEUM CORP LTD BHARAT HINDUSTAN PETROLEUM CORP LTD HINDUSTAN CIPLA LTD DR REDDYS LABORATORIES LTD LABORATORIES DR REDDYS GLAXOSMITHKLINE PHARMACEUTICALS LTD IPCA LABORATORIES LIMITED IPCA LABORATORIES SUN PHARMACEUTICAL INDUSTRIES LTD KALPATARU POWER TRANSMISSION LTD KALPATARU NATIONAL HYDROELECT POWER 7.7% 31MAR2010 NATIONAL NTPC LTD POWER FINANCE CORP 7% 24DEC2011-SER 22 POWER FINANCE CORP 7% 24DEC2011-SER POWER FINANCE CORP 8.49% 9OCT2011 POWER GRID CORP OF INDIA 8.73% 11OCT2010 RELIANCE ENERGY LTD RURAL ELECTRIFICATION CORP 13% 17FEB2008 RURAL ELECTRIFICATION TATA POWER CO LTD TATA PANTALOON RETAIL INDIA LTD RETAIL PANTALOON HCL TECHNOLOGIES LTD INFOSYS TECHNOLOGIES LTD SATYAM COMPUTER SERVICES LTD SATYAM TATA CONSULTANCY SERVICES LTD CONSULTANCY TATA TECH MAHINDRA LTD WIPRO LTD BHARTI AIRTEL LTD IDEA CELLULAR LTD RELIANCE COMMUNICATION LTD RELIANCE COMMUNICATION TATA TELE SERVICES LTD 20APR2009 TELE SERVICES LTD TATA ADITYA BIRLA NUVO LTD ADITYA Total Industry S. No. (All Amounts in Thousands of Indian Rupees, unless otherwise stated) (All Amounts in Thousands of Indian Rupees, SCHEDULE

166 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

SCHEDULES ANNEXED TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(x) Additional information on Remuneration Information under section 217(2A) of the Companies Act, 1956 read with Companies (employees) rules, 1975, as amended, are annexed in the Director's Report.

(y) Comparatives Previous year figures have been re-classified wherever necessary and significant, to conform to current year's presentation. As per letter no IRDA/F&A/001/Apr-07 dt 16-4-07 received from IRDA , disclosure for ULIP business have been made only for current year.

(z) Auditors The financial statements for the current year have been jointly audited by M/s Ray and Ray, Chartered Accountants and M/s Thakur, Vaidyanath Aiyar and Co., Chartered Accountants. The financial statements for the previous year were jointly audited by M/s Lovelock & Lewes, Chartered Accountants and M/s BSR & Co., Chartered Accountants.

Signatures to Schedules 1 to 16 For and on behalf of the Board of Directors

ANALJIT SINGH Chairman JOE GILMOUR Director B. ANANTHARAMAN Director

GARY BENNETT Chief Executive Officer SUNIL SHARMA Executive Director & Chief Operating Officer JOHN POOLE Chief Actuary (Appointed Actuary) SUNIL KAKAR Chief Financial Officer New Delhi AJAY SETH Director- Legal & Compliance and MAY 14, 2007 Company Secretary

MAX INDIA ANNUAL REPORT 2006-07 167 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 MANAGEMENT REPORT

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

With respect to the operations of the Company for the financial year 10. Average claim settlement time to-date has been 14 days from the April 1, 2006 to March 31, 2007 and results thereof, the Management day the final document submitted with Company (2006 : 16 days). of the Company confirms, certifies and declares: 11. The value of investments as shown in Balance Sheet have been 1. The Company is doing business on the basis of certificate of arrived as follows registration granted and duly renewed by IRDA. (i) Valuation -shareholders' investments and non-linked 2. The Company has duly paid all dues payable to the statutory policyholders' investments have been ascertained on the basis authorities. of quotes received from market participants. Debt securities, which include government securities, are considered as held 3. There has been no change in the Indian and Foreign shareholding to maturity' and measured at historical cost subject to pattern of the Company and the same are in conformity with the amortisation. Listed equity shares, as at balance sheet date, are statutory or regulatory requirements for the same. valued at fair value, being the last quoted closing price on the 4. The Company has not directly or indirectly invested outside India National Stock Exchange (NSE) and in case the same is not the funds of the holders of policies issued in India. available, then on the Stock Exchange, Mumbai (BSE). Equity 5. The Company is maintaining the required solvency margins as shares, awaiting listing, are valued at historical cost subject to undertaken to the Insurance Regulatory and Development Authority. provision for diminution. Investments in Mutual fund units are 6. The Company certifies that the values of all the assets have been valued at fair value at previous day's net asset value. reviewed on the date of the Balance Sheet and that the assets set (ii) Valuation - linked investments forth in the Balance Sheet are shown in the aggregate at amounts In case of Linked business - Government securities are valued not exceeding their realisable or market value under the several at the rate obtained from CRISIL (Credit Rating Information headings - " Loans", " Investments", "Agents' balances", "Outstanding Services of India Ltd.). Debt securities other than Government Premiums", "Interest, Dividends and Rents outstanding", "Interest, Securities are valued on the basis of Bond Valuer (CRISIL). Listed Dividends and Rents accruing but not due", "Amounts due from equity shares are valued at fair value, being the last quoted other persons or Bodies carrying on insurance business", " Sundry closing price on NSE and in case the same is not available, then Debtors", " Bills Receivable", " Cash" and the several items specified on the BSE. Mutual fund units are taken at the previous day's under "Other Accounts". net asset values. 7. No part of the life insurance fund has been directly or indirectly 12. The Company has invested its controlled funds only in rated securities, applied in contravention of the provisions of the Insurance Act, primarily in Central Government treasury bills and securities and 1938 (4 of 1938) relating to the application and investment of the highly rated bonds/mutual funds. All Investments in Debt securities life insurance funds. are made with the clear intent of being held to maturity. Accordingly, 8. The Company recognises the risks associated with the life insurance the Management is confident of the quality of the investments. business and manages it by adopting prudent policies commensurate 13. The financial statements of Max New York Life Insurance Company with the needs of the life insurance business. The key risks affecting Limited and all information in this annual report are the responsibility the operations of the Company are underwriting risks and investment of the Management and have been reviewed by the Audit Committee risks. The underwriting risk is managed robustly by the Company's and approved by the Board of Directors. underwriting function and by further establishing reinsurance (a) The financial statements have been prepared in accordance treaties with various reinsurance companies. All risks above the with generally accepted accounting standards and principles pre-determined retention limits are automatically reinsured. and policies have been followed with no material departures. The investment risk is managed by creating a portfolio of different (b) The financial statements have been prepared in accordance asset classes and of varied maturities so as to spread the risk across with the accounting policies adopted by the Management and a wide category of investee companies. The Company has constituted stated therein and the same have been followed consistently. an Investment Committee, which acts as the policy making body These financial statements contain some items which reflect for the investment operations. The Investment Committee lays the best estimates and judgement of the Management. down various internal policies and norms governing the functioning When alternative accounting methods exist, Management has of the Investment Department. The Investment Committee chosen those it deems most appropriate in the circumstances periodically discusses the investment strategy, portfolio structures, to ensure the financial statements are presented fairly, in all performance of the portfolio and related issues. The investment material respects. The choice of estimates and judgement have policy is reviewed regularly in order to align the same with the been made are reasonable and prudent so as to give a true and Company's business plans. fair view of the state of affairs of the Company as at the end 9. The Company does not have operations in any other country other of the financial year and the operating loss of the Company than India. for the year.

168 MAX INDIA ANNUAL REPORT 2006-07 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000 MANAGEMENT REPORT

(All Amounts in Thousands of Indian Rupees, unless otherwise stated)

(c) The Management of the Company has taken proper and (e) The Company has set up an internal audit system commensurate sufficient care for the maintenance of adequate accounting with the size and nature of the business and the same is records in accordance with the applicable provisions of the operating effectively. Insurance Act 1938 (4 of 1938) and Companies Act 1956 (1 of 14. The details of transactions with related parties for the year ended 1956), for safeguarding the assets of the Company and for March 31, 2007 are given in Note No.II (r) in Schedule 16 in financial preventing and detecting fraud and other irregularities. statement. (d) The financial statements have been prepared on a going concern basis. For and on behalf of the Board of Directors

ANALJIT SINGH Chairman JOE GILMOUR Director B. ANANTHARAMAN Director

GARY BENNETT Chief Executive Officer SUNIL SHARMA Executive Director & Chief Operating Officer JOHN POOLE Chief Actuary (Appointed Actuary) SUNIL KAKAR Chief Financial Officer AJAY SETH Director- Legal & Compliance and Company Secretary

New Delhi MAY 14, 2007

MAX INDIA ANNUAL REPORT 2006-07 169 MAX NEW YORK LIFE INSURANCE COMPANY LIMITED REGISTRATION NO: 104; DATE OF REGISTRATION WITH IRDA : NOVEMBER 15, 2000

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS :

Registration No. 1 0 6 7 2 3 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placement N I L 1 7 5 0 0 0 0

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand)

Total Liabilities Total Assets 2 3 1 7 9 4 3 5 2 3 1 7 9 4 3 5

SOURCES OF FUND Paid-up Capital Secured Loans 7 3 2 4 3 2 6 N I L Reserves and Surplus Unsecured Loans 8 0 0 0 0 N I L APPLICATION OF FUNDS Net Fixed Assets Investments 9 0 1 1 4 5 1 8 4 4 9 2 4 4 +- Net Current Assets Misc. Expenditure 7 4 8 8 0 5 4 9 7 7 9 Accumulated Losses 4 5 2 8 0 7 2

IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand)

Turnover (Total Income) Total Expenditure 1 5 9 7 6 8 1 7 1 6 5 6 7 4 3 3

+- Profit/Loss before Tax +- Profit/Loss after Tax 5 9 0 6 1 6 5 9 0 6 1 6

V GENERIC NAME OF THE PRINCIPAL PRODUCT OF COMPANY

Product Description L I F E I N S U R A N C E P R O D U C T S

Notes: Since Schedule VI of the Companies Act, 1956 does not apply to a Life Insurance Company and in view of the requirement under Insurance Act , 1938 to split the accounts between policyholders and shareholders funds, it is not possible to give the information required in Part 3 and 4 of the schedule.

170 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED MAX HEALTHCARE INSTITUTE LIMITED

DIRECTORS’ REPORT

Your Directors are pleased to present the Sixth Annual Report, along Organizations (NABH): In 2006-07, the tertiary care hospitals of with Audited Accounts for the year ended March 31, 2007. MHC – Max Heart & Vascular Institute (MHVI) and Max Super Speciality Hospital (MSSH) became the first two hospitals of North PERFORMANCE 2006-07 India to receive prestigious NABH accreditation. NABH is an Your Company continued to gain traction, scale and size in its operations. autonomous body established in 2005 under the Quality Council During the year, the Company registered a revenue of Rs. 151.18 crore, of India for setting benchmarks in Indian healthcare industry. representing a growth of 83% over the last year. Growth in the revenue NABL: National Accreditation Board for Laboratories: In 2006-07, is attributed to higher patient flow, improvement in realization and MHC also acquired National Accreditation Board for Laboratories commissioning of a new facility during the year. Loss for the year was accreditation (ISO 15189:2003) for its Laboratory at MSSH. Rs. 22.27 crore as against a loss of Rs. 20.51 crore of previous year. Income from other hospitals in the network has been booked to the From 663 beds across its network of five hospitals, the Company intends extent of service fee earned. to increase its capacity to over 1,200 beds within next three years. In addition, a 110-bedded multi-speciality healthcare facility commenced Key operational highlights for the year 2006-07 for the Company and operations in July 2007 at Gurgaon, Haryana. This hospital with 4 other hospitals in the network are: Operation Theaters will focus on Nephrology & Urology, General & Max Super Speciality Hospital, a 188-beded Super Speciality facility Minimally Invasive surgeries, Plastic & Reconstructive surgeries, Woman commenced operations at South Delhi in May 2006 and turned & Child (including Infertility), Health Checks and 24-hour Chemist. EBITDA positive during the end of fiscal year. Max Healtahcare enjoys a strong brand recall value in the NCR region. This important CAPITAL INFUSION business differentiator enabled the new tertiary care hospital to During the year under review, equity shares aggregating to Rs. 21.61 scale up rapidly. crore were issued and allotted to Max India Limited for cash at par. With Max Super Specialty Hospital focuses on tertiary care facilities in the aforesaid allotment, the paid up equity share capital of the Company service areas of Neurosciences, Orthopaedics, Paediatrics, Obstretics increased to Rs. 228,00,36,390/- as on March 31, 2007, with Max India’s & Gynaecology. shareholding at 72.85%. - The Institute of Orthopaedics & Joint replacement offers comprehensive and latest treatment for joint replacement using PROJECT FINANCING Computer Navigation, Sports Medicine, Management of Arthritis In July, 2007, International Finance Corporation, U.S.A., subscribed for & Trauma, Spine Surgery and Paediatric Orthopaedics. securities of the Company aggregating to Rs. 300 crore, comprising of - Institute of Neurosciences has a high-end technology including 90,90,909 equity shares of Rs. 10/- each at a premium of Rs. 45/- per Brain Suite and Flat Panel DSA Lab. Brain Suite is the first share aggregating to Rs. 50 crore and 25,00,00,000 optionally, partially integrated high field intra operative MRI in Asia, using which convertible redeemable preference shares of Rs. 10/- each aggregating the Neurosurgeons can operate upon complicated brain tumour to Rs. 250 crore to meet its funding requirements. The said securities patients with utmost precision offering reduced re-operations have been allotted as of the date of this report. and recurrence rates. Out of the earlier sanctioned loans, the Company has availed a fresh - The Institute of Paediatrics has a team of highly experienced Paediatricians, Paediatric Super Specialists, fully equipped Neonatal disbursal of Rs. 72 crore in the current year, taking the aggregate project ICUs with round-the-clock Neonatologists provide Multi-Speciality borrowing to Rs. 240 crore. care to the small premature babies whereas state-of-the-art Paediatric ICUs (PICU) can treat critically ill children suffering DIVIDEND from life threatening conditions. Healthcare, being a long gestation business, and in view of the Company’s - The Institute of Obstetrics & Gynaecology, is an advanced current year cash loss, your Directors are unable to recommend any maternity and reproductive healthcare service offered to patients dividend for the year under review. in the high-risk group. The services range from reproductive care and mother & child healthcare to infertility. INVESTMENT BY MAX MEDICAL SERVICES LIMITED Various hospitals in MHC’s network performed 790 cardiac surgeries, During the year under review, Max Medical Services Limited, a wholly 1490 angioplasties and 3025 angiographies. In addition, 1600 ortho- owned subsidiary of the Company acquired 40,700 equity shares of Rs. surgeries, 495 neuro-surgeries and 5925 other major and minor 10/- each representing entire outstanding equity shares of Alps Hospitals surgeries were done. Private Limited for Rs. 13.47 crore. Average occupancy rate of operational beds at the Company’s network of hospitals was approximately 63.5% in 2006-07 as DIRECTORS compared to 56.3% in 2005-06 with the average operational beds In accordance with the provisions of the Companies Act, 1956 and the increasing from 346 in 2005-06 to 610 in 2006-07. Company’s Articles of Association, Mr. Aman Mehta, Dr. Ashok Seth, Mr. Number of patient episodes increased from 793,667 episodes in Anuroop Singh and Mr. Analjit Singh are due to retire by rotation and the fiscal 2006 to 1,142,091 episodes in the fiscal 2007. In the last are eligible for re-appointment. quarter of fiscal 2007, the Company’s network of hospitals averaged During the year under review, Mr. Nitin Sibal, a director nominated by over 100,000 patient episodes per month. Warburg Pincus group resigned from the Board of Directors of the Revenue of all hospitals grew nearly 79% to Rs. 245 crore in the Company. Further, Dr. Narottam Puri, Mr. Mukesh Shivdasani and Dr. fiscal 2007 from Rs. 137 crore in last fiscal year. Pervez Ahmed resigned from the Board of Directors and continue as ISO: All 5 hospitals of MHC are ISO certified. employees of the Company. The Board places on record, its appreciation National Accreditation Board for Hospitals and Health Care for the valuable contribution made by them as Directors of the Company.

MAX INDIA ANNUAL REPORT 2006-07 173 MAX HEALTHCARE INSTITUTE LIMITED

DIRECTORS’ REPORT

AUDIT COMMITTEE ADDITIONAL INFORMATION The Audit Committee of the Company comprises of Mr. K.K. Mathur, Mr. Information in accordance with the provisions of Section 217 (1)(e) of Aman Mehta and Mr. Rajesh Khanna. All the members of the Committee the Companies Act, 1956 read with the Companies (Disclosure of are non-executive directors. The role and terms of reference of the Audit Particulars in the Report of Board of Directors) Rules, 1988, are annexed Committee covers the areas mentioned under Section 292A of the as Annexure–A. Companies Act, 1956 besides other terms, as may be referred to it by the Board of Directors of the Company. HUMAN CAPITAL The Company continues to attract eminent physicians from the NCR as REMUNERATION COMMITTEE well as from abroad. There are around 1250 leading physicians associated The Remuneration Committee of Directors comprises of Mr. Analjit Singh with the Company on its rolls and also as visiting consultants. (Chairman), Mr. Rajesh Khanna, Mr. Aman Mehta, Mr. K.K. Mathur and A statement giving particulars of employees under Section 217 (2A) of Mr. B. Anantharaman. This Committee has the mandate for finalizing the Companies Act, 1956 read with the Companies (Particulars of the terms of compensation for the Executive Directors and Senior Employees) Rules, 1975 for the year ended March 31, 2007 is annexed Executives of the Company and to administer the Employee Stock Option to the Report as Annexure–B. Plan–2006 of the Company. SUBSIDIARY COMPANIES EMPLOYEE STOCK PLAN - 2006 Statement pursuant to Section 212 of the Companies Act, 1956, relating In order to attract and retain talented key employees and induce them to Max Medical Services Limited, the subsidiary of your Company, and to remain with the Company, and encourage them to increase their Alps Hospital Private Limited, a Subsidiary of Max Medical Services efforts to make the Company’s business more successful, your Company Limited are annexed to this Report as Annexure–C. implemented Employee stock option plan in 2006. As of March 31, 2007, 16,70,000 stock options are issued and outstanding under the Employees PARTICULARS OF DEPOSITS Stock Plan. Your Company has not accepted any deposits from the public during the year under review. DIRECTOR’S RESPONSIBILITY STATEMENT The Board of Directors of the Company confirms that: AUDITORS (i) In the preparation of annual accounts, the applicable accounting M/s Price Waterhouse, Chartered Accountants, the Statutory Auditors standards have been followed, along with proper explanation relating of the Company, retire at the conclusion of the ensuing Annual General to material departures. Meeting and are eligible for re-appointment. The Company has received (ii) The Directors had selected such accounting policies and applied from them a certificate to the effect, that their re-appointment, if made, them consistently and made judgments and estimates that are will be in conformity with the limits specified under Section 224 (1B) reasonable and prudent, so as to give a true and fair view of the of the Companies Act, 1956. state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period. ACKNOWLEDGEMENTS (iii) The Directors had taken proper and sufficient care for the Your Directors place on record their appreciation to all the employees maintenance of adequate accounting records in accordance with of the Company, valued customers, bankers, financial institutions and the provisions of the Companies Act, 1956 for safeguarding the shareholders for their support and confidence in the Company. Your assets of the Company and for preventing and detecting fraud and Directors also place on record their sincere gratitude to Singapore other irregularities. General Hospital for their cooperation and guidance. (iv) The Directors had prepared the annual accounts on a going concern basis.

For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH JULY 31, 2007 Chairman & Managing Director

174 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED

ANNEXUERE - A

Particulars pursuant to Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 a. CONSERVATION OF ENERGY: The Company has taken measures to reduce the energy consumption, by using energy efficient equipment, incorporating latest technology and regular maintenance. b. RESEARCH AND DEVELOPMENT (R&D) : Nil c. TECHNOLOGY ABSORPTION: - Specific areas in which R & D was carried out by the Company : Nil - Benefit derived as a result of above : NA - Future plan of action : NA - Expenditure on R & D : NA d. FOREIGN EXCHANGE EARNINGS AND OUTGO Activities relating to exports, initiatives taken to increase exports, develop new export markets, export plan, etc. : NA (RS. CRORE) For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 i) Foreign Exchange Earnings 0.31 0.06 ii) Foreign Exchange Outgo CIF Value of Imports - Capital Goods 2.06 2.98 - Trading Goods 0.71 - Others 0.97 3.74 1.87 4.85

For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH JULY 31, 2007 Chairman & Managing Director

MAX INDIA ANNUAL REPORT 2006-07 175 MAX HEALTHCARE INSTITUTE LIMITED ANALJIT SINGH Desigantion Senior Consultant- Neuro Surgery Senior Consultant- Neuro Additional Professor Dirctor-Invasive & Interventional Dirctor-Invasive & Chief of Cath Lab Cardiology Sr. Consultant - HOD of Anaesthesia Sr. & Multi Speciality Cardiac Sr. Consultant Cardiologist - Consultant Cardiologist Sr. Invasive & Interventional Cardiology - Sr. Honarary Consultant & Head of Honarary Sr. Dept ENT Director, Div of Joint Replacement Director, Senior Consultant Surgery Orthopaedics Orthopaedics & Trauma Hony. Director & Eye Surgeon Director Hony. Chief Executive Officer Chief Executive- Human Capital Senior Consultant Anaesthisia & ICU Chief Executive Officer General Manager Finance General Senior VP - Sales Colonel Consultant-Radiology Additional Professor- Neurosurgery Additional Professor- Medical Director Consultant Managing Director Principal Consultant VP/ Chief Financial Officer - Chief Engineer Medical Superitendant Chairman & Managing Director For and on behalf of the Board of Directors For and on behalf of the Board Indraprastha Apollo Hospital Indraprastha AIIMS Escorts Heart Institute & Research Center Research Fortis Heart Institute Escorts Heart Institute & Research Center & Research - Sant Parmanand Hospital Sant Parmanand Indraprastha Apollo Hospital Indraprastha M R Eye Institute & Laser Center Max Speciality Products Max India Limited Jaipur Golden Hospital Cradle Healthcare Cradle Max India Limited Oberoi's ( Trident Hilton) ( Trident Oberoi's Indian Army Indraprastha Apollo Hospital Indraprastha All India Institute of Medical Sciences Perfect Vision Eye Hospital Perfect - Maan Hospital Escorts Heart Institute & Center Research Max India Limited - ITC Limited ITC Sant Parmanand Hospital Sant Parmanand Organisation 21 24 26 26 30 26 39 23 20 34 30 33 35 17 28 17 15 16 15 25 38 26 20 30 19 37 (Years) Experience Date of 01.11.2004 22.11.2004 01.03.2007 01.10.2005 01.10.2005 01.01.2006 07.12.2004 25.07.2005 03.07.2000 12.10.2005 01.04.2006 15.01.2003 03.01.2005 01.06.2005 01.04.2006 01.03.2006 01.12.2005 01.03.2004 15.01.2006 01.06.2005 02.12.2004 02.06.2003 02.06.2003 29.12.2004 18.08.2005 12.05.2003 Commencement of employement MBBS, MS, FICS, FRCS MBBS, MS, MCH MBBS, FRCP(LON), FACC, FSCAI, DSc. MBBS, MD MBBS, MD, DM MBBS, MD, DABP (Paediatrics) MBBS, MS, FICS M.S., DNB, MCh.(U.K.), FICS MBBS, MS, MBA BE ( Mechanical) B Tech, PGDM B Tech, MBBS, MD B Tech ( Hons), PGDM B Tech B. Com, CA B. B A MBBS, MS, MCH MBBS, DMRD, DNB, MD MBBS, MS, MCH MBBS,DO,MS PGDIM MBBS, MD MBBS, MS, Ph. D CA, B.Com (H) CA, B.Com MBBS, Residency in Internal Medicine & Fellowship in Cardiology B. Tech ( Electrical) Tech B. MBBS, Dip in Aviation Medicine, PG Adv. Dip in Hospital Admin PG Adv. Qualification (Rs.) Amount 1,071,110 9,513,811 8,090,411 2,836,511 3,880,211 5,141,310 7,336,261 2,636,961 4,209,041 3,372,803 2,596,309 7,983,263 6,637,939 2,489,753 4,003,880 2,460,898 4,085,572 3,144,327 3,386,432 3,937,876 1,249,875 3,788,993 1,003,699 11,830,649 17,444,772 4,939,448 Medical Practice Medical Practice Medical Practice Medical Practice Medical Practice MI Service Medical Practice New Businesses Medical Practice Medical Practice Operations Operations Medical Practice Projects Finance & Accounts Sales & Marketing Medical Practice Medical Practice Medical Practice Medical Practice Human Resources Medical Practice Medical Practice Finance & Accounts Medical Practice Projects Medical Practice Nature of Duties Director - Neuro Surgery - Neuro Director Director-Cardiovascular Surgery & Chief Coordinator Surgery Chairman & Chief Cardiologist Max Heart Cardiologist & Cascular Institute Director - Cardiac Anaesthesiology - Cardiac Director Director - Cath Lab & Acute Director Director - Paediatric Services - Paediatric Director Executive Director- New Business Executive Director- Development Director Orthopaedics Director Regional Director - Medical Operations Regional Director Regional Director - Operations Regional Director Executive Director - Operations Executive Director HOD - Anesthesiology Chief Project Officer Chief Project Vice President Finance Vice President Director - Sales & Marketing Director Sr.Consultant-Neurosurgery Head of Department - Radiology Sr.Consultant-Neurosurgery Head of Department-Opthalmology Chief HR Chief Administrator Sr. Consultant & Director Cardiavascular Consultant & Director Sr. Chief Financial Officer Executive Director - Medical Operations Executive Director Head Project Chief Executive North Zone Desigantion 61 52 50 52 53 44 60 49 45 54 54 35 57 44 49 46 40 42 45 47 60 53 43 59 43 60 Age (Years) Name Dr. Ajay N Jha Dr. Dr. Anil Bhan Dr. Dr. Ashok Seth Dr. Dr. Bishnu P Panigrahi Dr. Dr. Praveen Chandra Praveen Dr. Dr. Arvind Taneja Dr. Dr. Narottam Puri Narottam Dr. Dr. Sanjiv K S Marya Dr. Dr. Sanjiv Malik Dr. Mr. K. S. Ramsinghaney Mr. Mr. Mukesh Shivdasani Mr. Dr. P. N. Kakar P. Dr. Mr. Narinder Singh Mr. Mr. Arvind Kakar Mr. Mr. Sanjay Rai Mr. Dr. Bipin Walia Dr. Dr. Devlina Chakravarty Devlina Chakravarty Dr. Dr. Sandeep Vaishya Dr. Dr. Sanjay Dhawan Dr. Ms. Celine George Ms. Dr. Vijay Aggarwal Dr. Dr. Yugal Mishra Yugal Dr. Mr. Sudip Dasgupta Mr. Dr. Pervez Ahmed Pervez Dr. Mr. K Arun Raju Mr. Dr. S. C. Marwah Dr. Remuneration includes salary, allowances, value of rent free accommodation, bonus, medical reimbursement, leave travel assistance, personal accident and health insurance, Company's contribution to Provident, Pension, Gratuity and Superannuation Gratuity Pension, Company's contribution to Provident, accident and health insurance, assistance, personal leave travel medical reimbursement, accommodation, bonus, free value of rent allowances, includes salary, Remuneration fund, leave encashment and monetary value of perquisites. of the Company. of any director None of the above employees is a relative in nature. Ashok Seth is contractual The services of Dr. of the Company. Equity Shares 2% or more None of the above employees hold by himself or alongwith his spo use and dependent children Sl No. A. Employed throughout the year and were in receipt of remuneration of not less than Rs. 24,00,000/- per annum of not less than Rs. of remuneration in receipt the year and were A. Employed throughout 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 B. Employed for part of the year and were in receipts of remuneration of not less than Rs. 200,000/- per month of not less than Rs. of remuneration in receipts Employed for part of the year and were B. 1 2 3 4 5 6 7 Notes : 1 2 3 4 FOR THE YEAR ENDED MARCH 31,2007 INFORMATION AS PER SECTION 217(2A) READ WITH THE COMPANIES ( PARTICULARS OF EMPLOYEES) RULES,1975 AND FORMING PART OF THE DIRECTORS REPORT OF THE DIRECTORS OF EMPLOYEES) RULES,1975 AND FORMING PART ( PARTICULARS READ WITH THE COMPANIES AS PER SECTION 217(2A) INFORMATION ANNEXUERE - B New Delhi 2007 31, JULY

176 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED 100% 100% of Financial incorporating Year/Period of Year/Period ANALJIT SINGH Holding Company's changes since close Subsidiary Company interest as at 31.3.07 interest Chairman & Managing Director NIL NIL Years For the Previous Financial (Rs. Lacs) (Rs. For and on behalf of the Board of Directors For and on behalf of the Board NIL NIL Year vice-versa, so far as it For the Current company which are dealt company which are Net aggregate amount of Net aggregate Financial (Rs. Lacs) (Rs. after deducting its losses or Subsidiary Company's profits concerns Members of Holding within the Company's Account N.A. (1,342.38) (Rs. Lacs) (Rs. Financial Years For the Previous (5.03) 317.48 not dealt within the Company's Account (Rs. Lacs) (Rs. Financial Year For the Current concerns Members of Holding company which are after deducting its losses or vice-versa, so far as it Net aggregate amount of Subsidiary Company's profits Net aggregate 100% 100% Extent of Holding Company 40,700 Equity 40,700 Shareholding 1,41,42,535 Equity 1,41,42,535 of Financial Year of the Subsidiary of Financial Year Shares of Rs. 10 each 10 of Rs. Shares Shares of Rs. 10 each 10 of Rs. Shares Holding Company's interest as at close Holding Company's interest relate which Year to Year Financial Accounts 31-03-2007 31-03-2007 Name of the Subsidary ANNEXURE - C ANNEXURE of 'The Companies Act, 1956'. and 212(5) to Section 212(3) subsidiary Companies pursuant Statement regarding New Delhi 2007 31, JULY Max Medical Services Ltd. Alps Hospital Private Limited # # Includes holding through subsidiary Max Medical Services Limited # Includes holding through indicate loss in brackets Figures year of operation/acquisition. N.A. indicates Not Applicable in view of first

MAX INDIA ANNUAL REPORT 2006-07 177 MAX HEALTHCARE INSTITUTE LIMITED

AUDITORS’ REPORT

TO THE MEMBERS OF MAX HEALTHCARE INSTITUTE LIMITED (b) The Company has not taken any loans, secured or unsecured, 1. We have audited the attached Balance Sheet of Max Healthcare from companies, firms or other parties covered in the Institute Limited, as at March 31, 2007, and the related Profit and register maintained under Section 301 of the Act. Loss Account and Cash Flow Statement for the year ended on that iv. In our opinion and according to the information and date annexed thereto, which we have signed under reference to explanations given to us, having regard to the explanation that this report. These financial statements are the responsibility of the certain items purchased are of special nature for which suitable Company’s management. Our responsibility is to express an opinion alternative sources do not exist for obtaining comparative on these financial statements based on our audit. quotations, there is an adequate internal control system commensurate with the size of the Company and the nature 2. We conducted our audit in accordance with the auditing standards of its business for the purchase of fixed assets and for the sale generally accepted in India. Those standards require that we plan of goods and services. Further, on the basis of our examination and perform the audit to obtain reasonable assurance about whether of the books and records of the Company, and according to the financial statements are free of material misstatement. An audit the information and explanations given to us, we have neither includes examining, on a test basis, evidence supporting the amounts come across nor have been informed of any continuing failure and disclosures in the financial statements. An audit also includes to correct major weaknesses in the aforesaid internal control assessing the accounting principles used and significant estimates system. made by management, as well as evaluating the overall financial v. In our opinion and according to the information and statement presentation. We believe that our audit provides a explanations given to us, the Company has not entered into reasonable basis for our opinion. any contracts or arrangements referred to in Section 301 of the Act. 3. As required by the Companies (Auditor’s Report) Order, 2003, as vi. The Company has not accepted any deposits from the public amended by the Companies (Auditor’s Report) (Amendment) Order, within the meaning of Sections 58A and 58AA of the Act and 2004, issued by the Central Government of India in terms of sub- the rules framed there under. section (4A) of Section 227 of ‘The Companies Act, 1956’ of India vii. In our opinion, the Company has an internal audit system (the ‘Act’) and on the basis of such checks of the books and records commensurate with its size and nature of its business. of the Company as we considered appropriate and according to viii. The Central Government of India has not prescribed the the information and explanations given to us, we further report maintenance of cost records under clause (d) of sub-section that: (1) of Section 209 of the Act for any of the products of the i. (a) The Company is maintaining proper records showing full Company. particulars including quantitative details and situation of ix. (a) According to the information and explanations given to fixed assets. us and the records of the Company examined by us, in our (b) The fixed assets are physically verified by the management opinion, the Company is generally regular in depositing according to a phased programme designed to cover all the undisputed statutory dues including provident fund, the items over a period of three years, which in our opinion, investor education and protection fund, income tax, sales is reasonable having regard to the size of the Company tax, wealth tax, service tax, customs duty, excise duty, cess and the nature of its assets. Pursuant to the programme, and other material statutory dues as applicable with the a portion of the fixed assets has been physically verified appropriate authorities. by the management during the year and no material (b) According to the information and explanations given to discrepancies between the book records and the physical us and the records of the Company examined by us, there inventory have been noticed. are no dues of income tax, sales tax, wealth tax, service (c) In our opinion and according to the information and tax, customs duty, excise duty and cess which have not explanations given to us, a substantial part of fixed assets been deposited on account of any dispute. have not been disposed off by the Company during the x. The Company has accumulated losses, as at March 31, 2007 year. more than fifty percent of its net worth and has incurred cash ii. (a) The inventory has been physically verified by the losses in the financial year ended on that date and the management during the year. In our opinion, the frequency immediately preceding financial year. of verification is reasonable. xi. According to the records of the Company examined by us and (b) In our opinion, the procedures of physical verification of the information and explanation given to us, the Company has inventory followed by the management are reasonable not defaulted in repayment of dues to any financial institution and adequate in relation to the size of the Company and or bank as at the balance sheet date. the nature of its business. xii. The Company has not granted any loans and advances on the (c) On the basis of our examination of the inventory records, basis of security by way of pledge of shares, debentures and in our opinion, the Company is maintaining proper records other securities. of inventory. The discrepancies noticed on physical xiii. The provisions of any special statute applicable to chit fund / verification of inventory as compared to book records were nidhi / mutual benefit fund/societies are not applicable to the not material. Company. iii. (a) The Company has not granted any loans, secured or xiv. In our opinion, the Company has maintained proper records unsecured, to companies, firms or other parties covered of transactions and contracts relating to dealing or trading in in the register maintained under Section 301 of the Act. shares, securities, debentures and other investments during

178 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED

AUDITORS’ REPORT

the year and timely entries have been made therein. Further, (a) We have obtained all the information and explanations, which such securities have been held by the Company in its own to the best of our knowledge and belief were necessary for the name. purposes of our audit; xv. In our opinion, and according to the information and (b) In our opinion, proper books of account as required by law explanations given to us, the Company has not given any have been kept by the Company so far as appears from our guarantee for loans taken by others from banks or financial examination of those books; institutions during the year. (c) The Balance Sheet, Profit and Loss Account and Cash Flow xvi. In our opinion, and according to the information and Statement dealt with by this report are in agreement with the explanations given to us, , on an overall basis, the term loans books of account; have been applied for the purposes for which they were obtained. (d) In our opinion, the Balance Sheet, Profit and Loss Account and xvii. On the basis of an overall examination of the balance sheet of Cash Flow Statement dealt with by this report comply with the the Company, in our opinion and according to the information accounting standards referred to in sub-section (3C) of Section and explanations given to us, there are no funds raised on a 211 of the Act; short-term basis which have been used for long-term (e) On the basis of written representations received from the investment. directors, as on March 31, 2007 and taken on record by the xviii.The Company has not made any preferential allotment of shares Board of Directors, none of the directors is disqualified as on to parties and companies covered in the register maintained March 31, 2007 from being appointed as a director in terms of under Section 301 of the Act during the year. clause (g) of sub-section (1) of Section 274 of the Act; xix. The Company has not issued any debentures during the year. (f) In our opinion and to the best of our information and according xx. The Company has not raised any money by public issues during to the explanations given to us, the said financial statements the year. together with the notes thereon and attached thereto give in xxi. During the course of our examination of the books and records the prescribed manner the information required by the Act and of the Company, carried out in accordance with the generally give a true and fair view in conformity with the accounting accepted auditing practices in India, and according to the principles generally accepted in India: information and explanations given to us, we have neither (i) in the case of the Balance Sheet, of the state of affairs of come across any instance of fraud on or by the Company, the Company as at March 31, 2007; noticed or reported during the year, nor have we been informed (ii) in the case of the Profit and Loss Account, of the loss for of such case by the management. the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows 4. Further to our comments in paragraph 3 above, we report that: for the year ended on that date.

V. NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse MAY 16, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 179 MAX HEALTHCARE INSTITUTE LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

(RS. LACS)

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 22800.36 20639.28 Reserves and Surplus 2 9639.05 9687.80 32439.41 30327.08 LOAN FUNDS 3 Secured Loans 24000.00 20100.60 Unsecured Loans 3107.29 112.08 27107.29 20212.68

Deferred Tax Liability (Net) 4 953.88 552.82 60500.58 51092.58 APPLICATION OF FUNDS FIXED ASSETS 5 Gross Block 24232.76 9941.95 Less: Depreciation 3758.69 2502.89 Net Block 20474.07 7439.06 Capital Work in Progress 869.35 10039.28 21343.42 17478.34

INVESTMENTS 6 2094.25 6601.11

CURRENT ASSETS, LOANS AND ADVANCES 7 Inventories 833.11 328.20 Sundry Debtors 6125.10 2395.38 Cash and Bank Balances 832.48 527.42 Loans and Advances 20376.83 15452.14 28167.52 18703.14 Less: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 8 5946.44 3925.97 Provisions 9 208.47 151.86 6154.91 4077.83

NET CURRENT ASSETS 22012.61 14625.31

MISCELLANEOUS EXPENDITURE 10 6.12 20.58 (To the extent not written off or adjusted)

PROFIT AND LOSS ACCOUNT 15044.18 12367.24 60500.58 51092.58

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 17

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN K.K. MATHUR Director Partner AMAN MEHTA Director Membership No. F-87228 B. ANANTHARAMAN Director For and on behalf of Price Waterhouse ARVIND KAKAR Vice President-Finance Chartered Accountants ANKUR JOLLY Company Secretary

New Delhi MAY 16, 2007

180 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Income from Healthcare Services 11 14994.09 8132.76 Other Income 12 2061.72 1728.44 17055.81 9861.20 EXPENDITURE Stores and Spares Consumed 13 4804.33 2481.71 Personnel, Operating and Administrative Expenses 14 10964.31 6628.46 Financial Expenses 15 2195.16 2022.90 Depreciation 5 1319.07 779.27 19282.87 11912.34

(LOSS) BEFORE TAX (2227.06) (2051.14)

Tax Expense 16 449.88 (16.54)

(LOSS) AFTER TAX (2676.94) (2034.60)

(LOSS) BROUGHT FORWARD (12367.24) (10332.64)

BALANCE CARRIED FORWARD TO THE BALANCE SHEET 15044.18 12367.24

Earnings Per Share (Rs. per equity share of Rs. 10/- each) (Refer Note C8 on Schedule 17) - Basic and Diluted (1.30) (1.02)

Number of shares used in computing earnings per share: - Basic 206,511,182 199,982,629 - Diluted 207,564,869 199,982,629

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 17

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN K.K. MATHUR Director Partner AMAN MEHTA Director Membership No. F-87228 B. ANANTHARAMAN Director For and on behalf of Price Waterhouse ARVIND KAKAR Vice President-Finance Chartered Accountants ANKUR JOLLY Company Secretary

New Delhi MAY 16, 2007

MAX INDIA ANNUAL REPORT 2006-07 181 MAX HEALTHCARE INSTITUTE LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) before tax (2227.06) (2051.14)

Adjustments for: Depreciation 1319.07 779.27 Interest Expense 2155.14 2004.96 Interest Income (1737.21) (1293.64) Net (Profit)/Loss on Sale of Fixed Assets 30.74 15.29 Net (Profit)/Loss on Sale of Investments (135.81) (399.90) Miscellaneous Expenditure Written Off 0.03 0.03 Deferred Revenue Expenditure Written Off 14.43 14.43 Advances Written Off - 1.94 Fixed Assets and Capital Work in Progress Written Off 45.80 - Provision for Bad and Doubtful Debts 49.87 52.42 Liability No Longer Required Written Back (46.59) - Provision for Fringe Benefit Tax - 5.00 Provision for Gratuity and Leave Encashment 57.86 82.97 Provision for Doubtful Advances 6.33 25.00 TDS on Technical/Service/Other Operating Income (161.31) - Any Other Non Cash Item/Other Provisions - 1.95 Operating Profit/(Loss) Before Working Capital Changes (628.71) (761.42)

Adjustments for: Trade Receivables (3779.59) (1871.94) Other Receivables 159.81 (900.66) Inventories (504.91) (48.85) Trade Payables 2415.72 1064.56 Cash Generated From Operations (2337.68) (2518.31)

Direct Taxes (Paid)/Refunded (50.07) (39.48) Cash From/(Used in) Operating Activities (2387.75) (2557.79)

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (14686.37) (1298.50) Capital Work in Progress 6719.93 (4825.21) Increase in Pre-operative Expenses 2359.10 (177.90) Proceeds from Sale of Fixed Assets 34.62 22.57 Proceeds from Sale of Investments 9342.67 55827.86 Purchase of Investements (4700.00) (54747.36) Advances to Group Companies (3015.88) (1329.15) Loan Given to Other Healthcare Service Providers (364.30) (3234.34) Interest Received 187.86 113.01 Cash From/(Used In) Investing Activities (4122.37) (9649.02)

182 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

(RS. LACS)

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds form Issue of Share Capital 2161.08 11405.58 Share Issue Expenses (48.75) - Proceeds from Long Term Borrowings 4200.00 11605.31 Working Capital Funding (net) (300.60) 300.60 Repayment of Long Term Loans - (8500.00) Proceeds from Bridge Loan 3000.00 - Proceeds from Short Term Loans 55.10 - Repayment of Short Term Loans (59.89) - Interest Paid (2130.27) (2009.99) Interest Paid - Capitalised (61.49) (250.88) Cash From/(Used In) Financing Activities 6815.18 12550.62

Increase/(Decrease) in Cash and Cash Equivalents 305.06 343.81

Cash and Cash Equivalents - Opening Balance 527.42 183.61 Cash and Cash Equivalents - Closing Balance 832.48 527.42 Net Increase/(Decrease) in Cash and Cash Equivalents 305.06 343.81

Notes: 1. The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2. Figures in brackets indicate cash outgo. 3. Cash and Cash Equivalents at the end of the year consist of Cash, Cheques in hand and Balances with Banks: (RS. LACS)

As at As at March 31, 2007 March 31, 2006 Cash in Hand 35.89 1.49 Cheques in Hand 37.07 39.69 Fixed Deposits* 0.33 0.25 Balance with Banks 759.19 485.99 Total 832.48 527.42 * Not available for use by the Company since under lien.

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 17

The Schedules referred to above form an integral part of the Cash Flow For and on behalf of the Board of Directors Statement This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN K.K. MATHUR Director Partner AMAN MEHTA Director Membership No. F-87228 B. ANANTHARAMAN Director For and on behalf of Price Waterhouse ARVIND KAKAR Vice President-Finance Chartered Accountants ANKUR JOLLY Company Secretary New Delhi MAY 16, 2007

MAX INDIA ANNUAL REPORT 2006-07 183 MAX HEALTHCARE INSTITUTE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL AUTHORISED 300,000,000 (Previous year 225,000,000) Equity Shares of Rs. 10/- each 30000.00 22500.00 30000.00 22500.00

ISSUED, SUBSCRIBED AND PAID UP 228,003,639 (Previous year 206,392,766) Equity Shares of Rs. 10/- each fully paid up 22800.36 20639.28 22800.36 20639.28 Notes: 1. During the year 21,610,873 equity shares were issued to Max India Limited, the holding company (at par). 2. As at March 31, 2007, 166,100,000 (Previous year 144,489,127) equity shares are held by Max India Limited, the holding Company along with its nominees. 3. 103,779,127 (Previous year 103,779,127) equity shares have been issued for consideration other than cash to Max India Limited, the holding company.

SCHEDULE-2 RESERVES AND SURPLUS (Refer Note C17 on Schedule 17) As at Addition Utilization As at April 1, 2006 March 31, 2007 Securities Premium Account 9687.02 - 48.75 9638.27 Capital Reserve 0.78 - - 0.78

9687.80 - 48.75 9639.05

SCHEDULE-3 LOAN FUNDS

As at As at March 31, 2007 March 31, 2006

SECURED LOANS (Refer Note C3 on Schedule 17)

Term Loans - From Financial Institutions* 24000.00 19800.00 - Fund based Working Capital Facility - 300.60 24000.00 20100.60

* Amount repayable within one year Rs. 438.90 Lacs (Previous year Nil)

UNSECURED LOANS Bridge Loan from Bank ** 3000.00 - Other loans from Banks *** 107.29 112.08 3107.29 112.08 ** Amount repayable within one year Rs. 3000.00 Lacs (Previous year Nil) *** Amount repayable within one year Rs. 36.73 Lacs (Previous year Rs. 38.16 Lacs)

184 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-4 DEFERRED TAX LIABILITY (NET) (Refer Note C6 on Schedule 17) (RS. LACS) As at Addition Deletion/ As at April 1, 2006 Adjustements March 31, 2007 Deferred Tax Liability 714.81 601.67 158.63 1157.85 Deferred Tax (Asset) (161.99) (97.56) (55.58) (203.97)

Net Deferred Tax Liability 552.82 504.11 103.05 953.88

SCHEDULE-5 FIXED ASSETS (Refer Note C2 on Schedule 17) (RS. LACS) Particulars Gross Block Depreciation Net Block As at Additions Deletions/ As at As at For the Deletions/ As at As at As at April 1, Adjustments March 31, April 1, Year Adjustments March 31, March 31, March 31, 2006 2007 2006 2007 2007 2006

Tangible Assets Land 1143.03 597.07 - 1740.10 - - - - 1740.10 1143.03 Building - 6376.90 - 6376.90 - 88.48 - 88.48 6288.42 - Building (Leasehold Improvement) 2594.74 - 49.29 2545.45 891.20 277.88 29.11 1139.97 1405.48 1703.54 Plant and Machinery 918.47 1523.17 6.52 2435.12 155.83 107.07 1.54 261.36 2173.76 762.64 Furniture and Fixture 476.07 370.63 8.31 838.39 134.42 95.65 2.49 227.58 610.81 341.65 Office Equipment and Computers 873.94 597.17 11.23 1459.88 380.18 170.78 7.04 543.92 915.96 493.76 Medical Equipment 3441.73 4835.39 25.40 8251.72 781.85 525.40 8.76 1298.49 6953.23 2659.88 Motor Vehicles 208.63 111.53 56.37 263.79 36.05 20.09 14.33 41.81 221.98 172.58

Intangible Assets Software 285.34 36.07 - 321.41 123.36 33.72 - 157.08 164.33 161.98

Total 9941.95 14447.93 157.12 24232.76 2502.89 1319.07 63.27 3758.69 20474.07 7439.06 Previous Year 8683.67 1307.55 49.27 9941.95 1735.03 779.27 11.41 2502.89

Capital Work in Progress [includes Capital Advances Rs. 265.09 Lacs (Previous year Rs. 346.85 Lacs)] 869.35 10039.28 21343.42 Notes: 1. Additions include interest capitalised Rs. 306.76 Lacs (Previous year Rs. 1.28 Lacs). 2. Capital Work in progress includes interest Rs. 8.17 Lacs (Previous year Rs. 291.83 Lacs) and preoperative expenditure pending allocation Rs. 20.09 Lacs (Previous year Rs. 2387.36 Lacs). 3. Of the above, motor vehicles hypothecated amount to Rs. 162.80 Lacs (Previous year Rs. 186.35 Lacs). 4. Land is under perpetual Lease. Additions in land relates to payment to concerned authority for increasing the Floor Area Ratio. 5. Leasehold improvements consists of civil and other improvements at premises taken on long term lease by the Company.

SCHEDULE-6 INVESTMENTS (RS. LACS) As at As at March 31, 2007 March 31, 2006 a) Subsidiary (Unquoted), at cost Equity Shares Max Medical Services Limited 14,142,535 (Previous year 14,142,535) Equity Shares of Rs. 10/- each 2094.25 2094.25 b) Current Investments (Non Trade) (Unquoted), at cost Units in Mutual Fund Balance of Unutilised Monies Raised by Preferential Issue - 4506.86 (Refer Note C13 on Schedule 17) 2094.25 6601.11

Aggregate value of unquoted investments 2094.25 6601.11 Aggregate value of quoted investments - - Market value of quoted investments - -

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(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-7 CURRENT ASSETS, LOANS AND ADVANCES Inventories Stock of Medicines and Consumables 455.37 230.05 Medical and Surgical Instruments 377.74 102.29 833.11 332.34 Less: Provision for Slow Moving Inventory - 833.11 (4.14) 328.20 833.11 328.20

Sundry Debtors (Unsecured) Debts Exceeding Six Months - Considered Good 2358.10 660.69 - Considered Doubtful 165.03 115.15 Less: Provision for Doubtful Debts (165.03) 2358.10 (115.15) 660.69 Other Debts - Considered Good 3767.00 1734.69 6125.10 2395.38

Amounts outstanding from companies under the same management: - Max India Ltd. 1.03 0.04 - Max New York Life Insurance Company Ltd. 4.07 0.31 - Neeman Medical International (Asia) Ltd. 1.18 0.02 - Max HealthStaff International Ltd. 0.06 0.51 - Max Medical Services Ltd. 75.82 -

Maximum amount outstanding during the year from companies under the same management: - Max India Ltd. 3.84 1.74 - Max New York Life Insurance Company Ltd. 7.27 11.27 - Neeman Medical International (Asia) Ltd. 1.18 0.02 - Max HealthStaff International Ltd. 0.51 0.57 - Max Medical Services Ltd. 75.82 -

Amount outstanding from Directors 0.25 0.28 Maximum amount outstanding from Directors during the year 0.47 0.38

Cash and Bank Balances Cash in Hand 35.89 1.49 Cheques in Hand 37.07 39.69 Balances with Scheduled Banks - In Current Accounts 759.19 485.99 - In Margin Accounts 0.33 0.25 832.48 527.42

Loans and Advances (Considered good, unless otherwise stated)

Unsecured Subsidiary Company: Inter Corporate Deposit 9417.15 6401.27 Advances - Pre-operative expenses recoverable 1565.65 1565.65 - Interest Recoverable 2108.40 1295.89

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SCHEDULE-7 (Contd.) (RS. LACS)

As at As at March 31, 2007 March 31, 2006

- Others 16.53 102.38

Due from Other Healthcare Service Providers: - Loan 3660.49 3296.19 - Interest Recoverable 543.64 196.64 - Others 648.18 1125.96

Due from Others: Advances Recoverable in Cash or Kind or for Value to be Received - Considered Good 369.05 216.73 - Considered Doubtful 31.33 25.00 Less: Provision for Doubtful Advances (31.33) 369.05 (25.00) 216.73

Loans to Employees 1.05 0.71 Prepaid Expenses 84.19 84.56 Security Deposits 616.54 561.04 Advance Income Tax 1118.06 566.93 Income Accrued 227.90 38.19 20376.83 15452.14

Amount due from Directors 102.23 150.37 Amounts due from companies under the same management: - Max Medical Services Ltd. 13107.73 2963.92

Maximum amount outstanding from Directors during the year 157.30 150.37 Maximum amount outstanding during the year from companies under the same management: - Max Medical Services Ltd. 13107.73 2963.92

SCHEDULE-8 CURRENT LIABILITIES (Refer Note C11 on Schedule 17) Sundry Creditors: - Total outstanding dues of small scale industrial undertakings 0.54 2.32 - Total outstanding dues of creditors other than small scale industrial undertakings 5359.78 3686.28 Advance from Customers 280.17 43.06 Other Liabilities 238.99 152.22 Interest accrued but not due on: - Term Loan 66.29 40.66 - Other Loan 0.67 1.43 5946.44 3925.97

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(RS. LACS)

As at As at March 31, 2007 March 31, 2006 SCHEDULE-9 PROVISIONS Leave Encashment 146.24 99.94 Gratuity 58.02 46.46 Provision for Wealth Tax 1.00 0.46 Provision for Fringe Benefit Tax 92.01 44.19 Less: Advance Fringe Benefit Tax (88.80) 3.21 (39.19) 5.00 208.47 151.86

SCHEDULE-10 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) (Refer Note C9 on Schedule 17) - Preliminary and Share Issue Expenses 0.10 0.13 - Deferred Revenue Expenditure 6.02 20.45 6.12 20.58

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-11 INCOME FROM HEALTHCARE SERVICES Revenue from Centres* 10310.29 4616.47 Less: Discount (199.72) (135.47) 10110.57 4481.00 Trading Sales: - Drugs, Pharmaceuticals and Medical Supplies 3303.25 2187.41 - Medical Equipments 75.82 -

Income earned from Other Healthcare Service Providers** 1500.00 1462.50

Sponsorships Received 4.45 1.85 14994.09 8132.76 * Includes tax deducted at source Rs. 71.69 Lacs (Previous year Rs. 12.28 Lacs) ** Includes tax deducted at source Rs. 85.52 Lacs (Previous year Rs. 83.18 Lacs)

SCHEDULE-12 OTHER INCOME Interest on: - Bank Deposits* - 0.81 - Loans Given to Subsidiary** 1289.75 1046.57 - From Other Healthcare Service Providers*** 447.39 245.95 - Loans/Advances 0.07 0.31 Profit on Sale of Non Trade Investments-Current 135.81 399.90 Liabilities/Provisions No Longer Required Written Back 46.59 - Income from Laundry Services**** 112.48 24.18 Miscellaneous Income 29.63 10.72 2061.72 1728.44 * Includes tax deducted at source Nil (Previous year Rs. 0.11 Lacs) ** Includes tax deducted at source Rs. 289.42 Lacs (Previous year Rs. 234.85 Lacs) *** Includes tax deducted at source Rs. 100.41 Lacs (Previous year Rs. 55.19 Lacs) **** Includes tax deducted at source Rs. 0.61 Lacs (Previous year Rs. 0.54 Lacs

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(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-13 STORES AND SPARES CONSUMED Consumption of Medical Consumables 1807.44 476.15 Cost of Traded Goods Sold: - Drugs, Pharmaceuticals and Medical Supplies 2926.27 2005.56 - Medical Equipments 70.62 - 4804.33 2481.71

SCHEDULE-14 PERSONNEL, OPERATING AND ADMINISTRATIVE EXPENSES (Refer Note C7 and C12 on Schedule 17) Personnel* Salaries, Wages and Bonus 3514.49 1697.62 Contribution to Provident and Other Funds 181.25 129.45 Recruitment 57.38 70.15 Staff Welfare 129.14 92.72 3882.26 1989.94

Other Operating and Administration Expenses Professional and Consultation Fees 2385.75 1414.01 Outside Lab Investigations 105.22 64.63 Patient Catering Expenses 182.70 92.00 Rent 776.27 703.63 Insurance 118.80 66.63 Rates and Taxes 15.48 53.85 Facility Maintenance Expenses 904.57 393.32 Power and Fuel 650.88 321.99 Repairs and Maintenance: - Building 102.28 132.14 - Plant and Machinery 138.25 64.52 - Others 225.79 157.57 Printing and Stationery 240.80 139.65 Travelling and Conveyance 331.00 170.94 Communication 171.03 130.39 Legal and Professional 272.68 283.71 Directors' Fee 0.77 1.10 Watch and Ward 123.75 55.42 Advertisement and Publicity 147.73 234.89 Charity and Donation 7.89 0.65 Registration and Delegation Fees 3.96 12.35 Equipment Hiring Charges 8.13 7.57 Provision for Doubtful Debts 49.87 52.42 Provision for Doubtful Advances 6.33 25.00 Advances Written Off - 1.94 Provision for Slow Moving Inventory - 1.95 Loss on Sale/Disposal of Fixed Assets 30.76 18.28 Gain on Sale/Disposal of Fixed Assets (0.02) (2.99) Net Loss on Sale/Disposal of Fixed Assets 30.74 15.29 Fixed Assets and CWIP Written Off 45.80 - Loss on Foreign Exchange Fluctuation 0.55 1.35 Gain on Foreign Exchange Fluctuation (0.16) (0.13) Net Loss on Foreign Exchange Fluctuation 0.39 1.22 Miscellaneous 20.73 25.28 Amortization of Miscellaneous Expenditure 14.46 14.46 7082.05 4638.52

10964.31 6628.46 * Includes tax deducted at source Rs. 3.48 Lacs (Previous Year Nil )

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(RS. LACS)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-15 FINANCIAL EXPENSES Interest on: Inter Corporate Loan - 87.61 Term Loans - Banks 22.26 511.37 - Financial Institutions 2079.45 1404.37 Working Capital Loan 46.08 - Others 7.35 1.62 Bank Charges 40.02 17.93 2195.16 2022.90

SCHEDULE-16 TAX EXPENSE (Refer Note C6 on Schedule 17) Current Year Tax Wealth Tax 1.00 0.45 Fringe Benefit Tax 47.82 44.19 Deferred Tax for the Year 401.06 (61.18) 449.88 (16.54)

SCHEDULE–17 A NATURE OF BUSINESS The Company is in the process of substantially completing Phase I of its plans which include setting up a network of healthcare facilities in the National Capital Region, comprising of primary care clinics, secondary care hospitals/medcenters and tertiary care facilities. The financials of the Company include the performance of a tertiary care facility launched in the current year and other hospitals and centres, which are operational and the central support team, which is meant to support the current and future operations. Healthcare facilities have long gestation periods, ranging between three to five years from the commencement of its operations and accordingly require significant cash outlay. Also, as part of the plan, the Company had entered into long term service contracts either directly or through its subsidiary with other healthcare service providers to provide support/services to them in their operations. Accordingly, amounts recoverable against these contracts are disclosed under “Loans and Advances and Sundry Debtors”.

B SIGNIFICANT ACCOUNTING POLICIES 1 Accounting Convention The Financial Statements are prepared under the historical cost convention on an accrual basis and in accordance with accounting standards issued by the Institute of Chartered Accountants of India.

2 Revenue Recognition a) Revenue from Centres is recognised on the performance of related service and includes services for patients undergoing treatment and pending billing. b) Revenue from pharmacy sale is recognised on delivery of goods. c) Income from Healthcare Service Providers is recognised on the performance of related services as per terms of contracts.

3 Fixed Assets a) Fixed Assets are stated at their original cost including freight, duties, taxes and other incidental expenses relating to acquisition and installation. b) Assets acquired under the business transfer agreement are stated at amounts based on a valuation report. c) Intangible assets are recognised if they are separately identifiable and the Company controls the future economic benefits arising out of them. All other expenses on intangible items are charged to the Profit and Loss account. Intangible assets are stated at cost less accumulated amortisation and impairment. d) Expenses of revenue nature, which can be regarded as incidental and related to project setup are transferred to “Preoperative expenses pending capitalisation”. These expenses are allocated to fixed assets in the year of commencement of the related project.

4 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset in accordance with Accounting Standard 16 on “Borrowing Costs”. Interest on working capital is charged to the revenue.

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5 Depreciation a) Depreciation is charged on straight-line method on a pro-rata basis at rates prescribed under Schedule XIV to the Companies Act, 1956. b) Leasehold improvements are depreciated over respective Lease Periods. c) Assets costing not more than Rs. 5,000/- each individually have been depreciated at 100%. d) Software in the nature of intangible assets are depreciated over a period of six years.

6 Investments a) Investments are classified into current investments and long-term investments. The cost of investments includes acquisition charges such as brokerage, fees and duties. b) Long-term investments are valued at cost. Provision for diminution is made to recognise a decline, other than temporary in nature. c) Current investments are carried at lower of cost or fair value.

7 Inventories Inventories are valued at lower of cost or net realisable value. Cost for this purpose is calculated on a ‘First In First Out’ method.

8 Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. Provision for tax consists of current tax and deferred tax. A provision is made for income tax annually based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.The differences that result between the profit offered for income tax and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying value at each balance sheet date.

9 Employee Benefits a) Gratuity In accordance with the Payment of Gratuity Act, 1972, the Company provides gratuity, a benefit plan (the “Gratuity Plan”) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, based upon which, the Company contributes to a Master policy with Life Insurance Corporation of India. b) Superannuation Certain employees of the Company are participants of a defined superannuation plan. The Company makes contributions under the superannuation plan to “Max India Limited Superannuation Fund” based on a specified percentage of each covered employee’s salary. c) Provident Fund Eligible employees receive benefits from a provident fund, which is a defined contribution plan. The Company makes contributions under Provident Fund to “Max India Limited Employees Provident Fund Trust”. Both the employee and the Company make monthly contributions to the provident fund trust equal to a specified percentage of the covered employee’s salary. d) Leave Encashment Accrual for leave encashment is made on the basis of actuarial valuation done at the year end. e) Employee Stock Option Scheme The value of options is equal to the aggregate of the fair value of the options granted. Fair value is the face value of the paid up equity shares at which the share capital was introduced last by the Company or the net asset value, whichever is higher. As and when the options are exercised, the same are accounted for as paid up capital to the extent of the face value. Options that lapse are reversed by a credit to employee compensation expense equal to the amortised portion of the value of the lapsed options and a credit to deferred employee compensation expense equal to the unamortised options.

10 Foreign Exchange Transactions a) Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at year-end rates. b) The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions, other than relating to Fixed Assets, are recognised in the Profit and Loss account. c) Exchange difference in respect of liabilities incurred to acquire Fixed Assets is adjusted to the carrying amount of Fixed Assets.

11 Miscellaneous Expenditure a) Preliminary expenses are amortised over a period of 10 years. b) Other Deferred Revenue Expenditure is amortised from the year it is incurred/related projects commence operations, over 3 to 5 years based on the period over which future benefit are expected to be received.

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12 Leases Lease charges relating to operating leases are charged to revenue on a straight-line basis.

13 Provisions and Contingencies A provision is recognized when there is a present obligation as a result of past event, it is probable that an outflow of a resource will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each Balance Sheet date and adjusted to reflect the current tax estimate.

C NOTES TO THE ACCOUNTS (RS. LACS) Current Year Previous Year 1 Contingent Liabilities a) Claims against the Company not acknowledged as debts 632.03 489.08 b) Bank Guarantees 7.25 1.25 c) Letter of Credit outstanding 17.37 63.14 d) Income Tax – Refer Note C4 below (RS. LACS) Current Year Previous Year 2 Capital Commitments Estimated amount of contracts remaining to be executed on capital account and not provided for 1382.00 1979.49 Less: Capital Advances 265.09 346.85 Balance Value of Contracts 1116.91 1632.64 3 Loans (a) The Company has availed term loans from financial institutions to finance its hospital project. The details of loans availed till date are as follows: Rs. 10500.00 Lacs (Previous year Rs. 8200.00 Lacs) from Housing Development Finance Corporation Limited Rs. 6000.00 Lacs (Previous year Rs. 6000.00 Lacs) from Infrastructure Development Finance Company Limited Rs. 7500.00 Lacs (Previous year Rs. 5600.00 Lacs) from Export Import Bank of India

The above loans from financial institutions are secured by way of: - Equitable mortgage of the immovable properties of the Company and a Society - Hypothecation of moveable fixed assets of the Company and its subsidiary - Corporate guarantees by the Holding Company (b) Fund based working capital facility from Yes Bank for Nil (sanctioned amount Rs. 800.00 Lacs) is secured by way of hypothecation of all current assets of the Company and a Society.

4 Income Tax Cases During the year, the Company received an order under section 143(3) of the Income Tax Act, 1961 relating to assessment year 2003-04 whereby certain expenses relating to Rs. 1157.72 Lacs were disallowed. The Company has preferred to file an appeal against the said order before the CIT Appeals.

5 Employee Stock Option Plan Employee Stock Option Plan – 2006 (”the 2006 Plan”) The Company has instituted the 2006 Plan, which was approved by the Board of Directors on July 31, 2006 and subsequently by the shareholders on August 10, 2006. The 2006 Plan provides for grant of stock options aggregating not more than 5% of number of issued equity shares of the Company to eligible employees of the Company. The 2006 Plan is administered by the Remuneration Committee appointed by the Board of Directors. The options can be exercised during two to four years from the vesting date.

Details of the 2006 Plan are given below (NOS.) Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Options outstanding, beginning of the year - - Options granted during the year 1,926,000 - Options forfeited/lapsed during the year (256,000) - Options outstanding, end of the year 1,670,000 -

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6 The movement of provision for deferred tax is given below: (RS. LACS) Opening As at Addition Deletion/ Closing As at April 1, 2006 Adjustments March 31, 2007 Deferred Tax Liability Depreciation related 714.78 601.66 (158.63) 1157.81 Preliminary expense 0.03 0.01 - 0.04 714.81 601.67 (158.63) 1157.85 Deferred Tax Asset Deduction u/s 43B of the Income Tax Act (50.46) (19.47) 1.18 (68.75) Other Provisions (78.48) (78.09) 21.35 (135.22) Change in Tax Rate (33.05) - 33.05 - (161.99) (97.56) 55.58 (203.97) Net Deferred Tax Liability 552.82 504.11 (103.05) 953.88 Deferred Tax Asset are created to the extent of their realisability. 7 Directors’ Remuneration (RS. LACS) Current Year* Previous Year

a) Directors’ remuneration paid/provided in the accounts: (i) Salary and Allowances 262.69 117.67 (ii) Perquisites 5.29 6.30 (iii) Contribution to Provident Fund and Superannuation Fund 11.79 15.80 279.77 139.77 b) Professional Fees paid to Directors 4.57 12.15 Total 284.34 151.92 The above does not include leave encashment and gratuity.

* During the year, the Company paid remuneration to executive directors in accordance with the resolution passed by board of directors and shareholders. With regard to certain directors an amount of Rs. 102.23 Lacs (Previous year Rs. 151.10 Lacs) is paid in excess of limits prescribed under Section II of Part II of Schedule XIII of Companies Act, 1956. The Company is in the process of taking approval from Central Government for this excess amount. In view of aforesaid, the excess amount of Rs. 102.23 Lacs (Previous year Rs. 151.10 Lacs) received by the concerned directors is held in trust for the Company. Remuneration for current year also includes an amount of Rs. 151.10 Lacs (Previous year Nil) relating to earlier years for which the Company has received Central Government Approval during the year.

8 Earnings Per Share Calculation of EPS (Basic and Diluted)

Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

Basic (Loss) after tax (Rs. Lacs) (2676.94) (2034.60) Weighted average number of Equity Shares 206,511,182 199,982,629 Earnings Per Share (Rupees) (1.30) (1.02) Equity Share Details (Nos.) Outstanding as at the beginning of the year 206,392,766 136,942,766 Issued on June 06, 2005 - 69,450,000 Issued on March 30, 2007 21,610,873 - Outstanding as at the end of the year 228,003,639 206,392,766

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Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Diluted (Loss) after tax (Rs. Lacs) (2676.94) (2034.60) Weighted average number of Equity Shares 207,564,869 199,982,629 Earning Per Share (Rupees) (1.30) (1.02) Equity Share Details (Nos.) Outstanding as at the beginning of the year 206,392,766 136,942,766 Issued on June 06, 2005 - 69,450,000 ESOPs granted under the 2006 Plan 1,926,000 - ESOPs forfeited/lapsed during the year (256,000) - Issued on March 30, 2007 21,610,873 - Outstanding as at the end of the year 229,673,639 206,392,766

Reconciliation of denominators used for calculating basic and diluted earnings per share Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Denominator used for computing basic Earnings Per Share 206,511,182 199,982,629 Dilutive impact of ESOPs granted under the 2006 Plan 1,129,347 - Dilutive impact of ESOPs lapsed under the 2006 Plan (75,660) - Denominator used for computing diluted Earnings Per Share 207,564,869 199,982,629

9 Miscellaneous Expenditure represents: (RS. LACS) Particulars As at Addition Amortised As at April 1, 2006 during the Year March 31, 2007 Preliminary and Issue Expenses 0.13 - 0.03 0.10 Deferred Revenue Expenditure 20.45 - 14.43 6.02 20.58 - 14.46 6.12

10 As the Company operates in a single business segment of Healthcare services, the provisions of Accounting Standard 17 on “Segment Reporting” issued by the Institute of Chartered Accountants of India are not applicable to the Company.

11 Small Scale Industries The dues of small scale industrial undertakings to whom the Company owes any sum outstanding for more than thirty days as at the Balance Sheet date are Appasamy Ocular Devices (P) Ltd., Dr. Beli Ram & Sons, Lifieline Systems Pvt. Ltd. and Sri Dhanlakshmi Industries Ltd. Additionally, the Company is in the process of identifying Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006. Therefore, it is not possible for the Company to ascertain whether payment to such enterprises has been made within 45 days from the date of acceptance of goods supplied or services rendered by such enterprise and to make requisite disclosure.

12 Leases Accounting for leases has been made in accordance with Accounting Standard-19 issued by the Institute of Chartered Accountants of India. Following are the details of lease transactions for the year: a) Finance Lease The Company has not entered into any finance lease agreement. b) Operating Lease Lease rentals recognized in the Profit and Loss account for the year is Rs. 776.27 Lacs (Previous Year Rs. 703.63 Lacs)

The total of future minimum lease payments under non-cancellable leases are as follows: (RS. LACS) Particulars March 31, 2007 March 31, 2006 Not later than one year 323.70 649.29 Later than one year and not later than five years 615.85 4095.27 Later than five years 228.81 13144.25 Total 1168.36 17888.81

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13 Details of movement of Current Non Trade Investments (Unquoted) during the year:

Face value Purchase Sales Name of the Investments per share (Rupees) Share/Units Value Share/Units Value (Numbers) (Rs. Lacs) (Numbers) (Rs. Lacs) DSP ML Liquidity Fund - Institutional Plan-Growth 10 452,223 4700.00 777,451 8078.63 Grindlays FRF - STP- Plan C - Super IP (Growth Plan) 10 - - 223,135 24.96 J M Floater Fund - STP- Growth 10 - - 10,734,438 1239.08

14 Related Parties (as identified by the Management) are classified as: Holding Company Max India Ltd.

Subsidiaries Max Medical Services Ltd., Alps Hospital Pvt. Ltd.( w.e.f. April 6, 2006)

Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Ateev Ltd., Neeman Medical International BV, Neeman Medical International NV, Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A., Max UK Ltd., Pharmax Corporation Ltd., Neeman Medical International (Asia) Ltd., Max HealthStaff International Ltd. (w.e.f. June 30, 2005), Max Estates Ltd.*, Malsi Estates Ltd.*, Max Asia Pac Ltd.**, Max Telecom Ventures Ltd.**

Key Management Personnel (Directors) Mr. Analjit Singh, Mr. B Anantharaman, Dr. Ashok Seth, Mr. Mukesh Shivdasani***, Dr. Narottam Puri***, Dr. R.P. Soonawala.

Relatives of Key Management Personnel Mrs. Neelu Analjit Singh, Ms. Piya Singh, Mr. Veer Singh, Mrs. Sheela Anantharaman.

Enterprises over which key management Liquid Investments & Trading Company, New Delhi House Services Ltd., Medicare Investments personnel have significant influence Ltd., Maxopp Investments Ltd., Cheminvest Ltd., Pivet Finances Ltd., Lakeview Enterprises, Delhi Guest House Pvt Ltd., Trophy Holdings Pvt. Ltd., Boom Investments Pvt. Ltd., M.V. Healthcare Services Pvt. Ltd., ND Callus Info Services Pvt. Ltd., Malsi Holdings Ltd., Dynavest India Pvt. Ltd., Scorpio Beverages Pvt. Ltd., Trophy Guest Houses & Resorts Pvt. Ltd., Trophy Estates Pvt. Ltd., Gaylord Impex Ltd., Pen Investments Ltd., Mohair Investment, PVT Investment Ltd., TVP Investments Pvt. Ltd., BAS Investments Pvt. Ltd., Vitasta Estate Pvt. Ltd., Terra Planet Estate Pvt. Ltd., Malsi Estates Ltd. (w.e.f. June 1, 2006), Max Estates Ltd. (from June 1, 2006 to August 31, 2006).

Employee benefit funds Max India Ltd. Employees Provident Fund Trust, Max India Ltd. Superannuation Fund

* Fellow Subsidiaries till May 31, 2006 ** Fellow Subsidiaries till November 30, 2005 *** Till January 01, 2007 Summary of significant related party transactions (as identified by management) carried out in ordinary course of business are as follows:

(RS. LACS) S. Particulars Holding Subsidiaries Fellow Key Relatives of Enterprise Employee No. Company Subsidiaries Management Key over which key Benefit Personnel Management management Funds Personnel personnel have significant influence

1 Fixed Assets Purchased 0.07 - - - - 14.79 - (9.00) (-) (5.18) (-) (-) (-) (-)

2 Loans given - 2913.50 - - - - - (-) (1329.15) (-) (-) (-) (-) (-)

3 Corporate Gaurantee taken ------(24000.00) (-) (-) (-) (-) (-) (-)

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(RS. LACS)

S. Particulars Holding Subsidiaries Fellow Key Relatives of Enterprise Employee No. Company Subsidiaries Management Key over which key Benefit Personnel Management management Funds Personnel personnel have significant influence

4 Income and Reimbursements - Interest income - 1289.75 - - - - - (-) (1046.58) (-) (-) (-) (-) (-)

- Sale of Goods - 75.82 - - - - - (-) (-) (-) (-) (-) (-) (-)

- Services rendered 2.01 - 6.71 0.43 0.16 1.16 - (10.63) (-) (14.34) (0.12) (5.23) (0.40) (-)

- Reimbursement of Expenses - 16.53 1.90 - - 3.47 - (-) (-) (-) (-) (-) (0.07) (-)

5 Expenses - Service received - - 210.91 - - 103.45 - (-) (-) (50.57) (-) (-) (75.69) (-)

- Interest Paid ------(87.61) (-) (-) (-) (-) (-) (-)

- Other Expenses 518.69 - - - 1.73 6.88 - (710.29) (-) (76.01) (-) (-) (3.12) (-)

- Directors’ Remuneration - - - 284.34 - - - (-) (-) (-) (151.92) (-) (-) (-)

- Co's contribution to Superannuation ------35.56 (-) (-) (-) (-) (-) (-) (33.40)

- Company's contribution to PF trust ------120.36 (-) (-) (-) (-) (-) (-) (60.68)

6 Equity Contribution 2161.09 ------(4070.00) (-) (-) (-) (-) (-) (-)

7 Amount Outstanding - Corporate Guarantee 24000.00 ------(24000.00) (-) (-) (-) (-) (-) (-)

- Against Loan given - 10982.80 - - - - - (-) (6401.27) (-) (-) (-) (-) (-)

- Interest Receivable - 2108.40 - - - - - (-) (1295.89) (-) (-) (-) (-) (-)

- Other Receivable - 16.53 - 102.23 - 3.47 - (-) (1668.03) (0.31) (150.37) (0.01) (-) (-)

- Other Payable 965.99 - 5.86 - - 27.72 27.76 (555.47) (-) (8.08) (-) (-) (6.88) (17.24)

- Debtors 1.03 75.82 5.31 0.25 0.15 1.15 - (-) (-) (-) (-) (-) (-) (-) Figures in brackets are for previous year

196 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHCARE INSTITUTE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

ADDITIONAL INORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPH 3, 4C AND 4D OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956:

15 A. Material consumed consists of items of varied nature. Accordingly it is not feasible to give details as required under part II of Schedule VI to the Companies Act, 1956. (RS. LACS) Current Year Previous Year B. Value of Imports calculated on CIF Basis - Capital Goods 205.53 298.21 - Trading Goods 70.62 - 276.15 298.21

C. Expenditure in Foreign Currency - Professional Fee 66.19 163.49 - Others 30.60 23.02 96.79 186.51

D. Income in Foreign Currency - Consultation fees 30.74 5.97

16 Auditors’ Remuneration

Current Year Previous Year

Audit fees (including service tax) 8.98 8.98 Reimbursement of out of pocket expenses 0.52 0.26 9.50 9.24

17 Utilization of Securities Premium account is as follows:

Current Year Previous Year

Opening Balance 9687.02 1156.44 Add: Premium received during the year - 8625.00 Less: Registration fees paid to Registrar of Companies 37.50 37.52 Less: Expenses incurred on issue of fresh share capital 11.25 56.90 Closing Balance 9638.27 9687.02

18 Previous year’s figures have been regrouped/reclassified, wherever considered necessary, to conform to current year’s classification.

For and on behalf of the Board of Directors

K.K. MATHUR Director AMAN MEHTA Director B. ANANTHARAMAN Director

ARVIND KAKAR Vice President-Finance New Delhi ANKUR JOLLY Company Secretary MAY 16, 2007

MAX INDIA ANNUAL REPORT 2006-07 197 MAX HEALTHCARE INSTITUTE LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 1 1 1 3 1 3 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Others N I L 2 1 6 1 0 8

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 6 0 5 0 0 5 8 6 0 5 0 0 5 8 SOURCES OF FUND Paid-up Capital Reserves and Surplus 2 2 8 0 0 3 6 9 6 3 9 0 5 Secured Loans 2 4 0 0 0 0 0 Unsecured Loans Deferred Tax Liability 3 1 0 7 2 9 9 5 3 8 8 APPLICATION OF FUNDS Net Fixed Assets Investments 2 1 3 4 3 4 2 2 0 9 4 2 5 Net Current Assets Misc. Expenditure 2 2 0 1 2 6 1 6 1 2 Accumulated Losses 1 5 0 4 4 1 8 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 1 7 0 5 5 8 1 1 9 2 8 2 8 7

+- Profit/Loss before Tax +- Profit/Loss after Tax 2 2 2 7 0 6 2 6 7 6 9 4

Earning Per Share in Rupees +- Basic and Diluted Dividend Rate (%) 1 . 3 0 N I L V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description H E A L T H C A R E R E L A T E D S E R V I C E S

198 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED) DIRECTORS’ REPORT

Your Directors are pleased to present their Thirteenth Annual Report, (i) In the preparation of annual accounts, the applicable accounting along with the Audited Accounts for the financial year ended March standards have been followed, along with proper explanation 31, 2007. relating to material departures; (ii) The Directors had selected such accounting policies and applied OPERATIONS them consistently and made judgments and estimates that are The Company has recorded an operational income of Rs. 22.51 crore reasonable and prudent, so as to give a true and fair view of the during the year 2006-07, 80 % up from its previous year income of state of affairs of the Company at the end of the financial year Rs. 12.50 crore. Besides leasing of assets, the income also includes the and of the profit or loss of the Company for that period; earnings from completed construction activities, undertaken earlier. (iii) The Directors had taken proper and sufficient care for the During the year under review, your Company has witnessed a turn maintenance of adequate accounting records in accordance with around by earning a profit of Rs. 3.91 crore vis-à-vis previous year’s loss the provisions of the Companies Act, 1956 for safeguarding the of Rs. 3.02 crore. assets of the Company and for preventing and detecting fraud and other irregularities; and DIVIDEND (iv) The Directors had prepared the annual accounts on a going concern In view of the accumulated losses, and in order to conserve the resources basis. to meet business requirements, your Directors do not recommend any dividend for the year under review. PARTICULARS OF EMPLOYEES The Company does not have any employee who is covered under the CONVERSION OF THE COMPANY INTO A PUBLIC LIMITED provisions of Section 217 (2A) of the Companies Act, 1956, read with COMPANY the Companies (Particulars of Employees) Rules, 1975. As informed last year, your Company converted into a public Company within the meaning of Section3 (1) (iv) and Section 2 (37) of the DIRECTORS Companies Act, 1956 and the Registrar of Companies had issued a fresh Mr. Arvind Kakar was appointed as an Additional Director to hold office Certificate of Incorporation on February 15, 2007 in this regard. up to the ensuing Annual General Meeting. The Company has received a notice under Section 257 of the Companies Act, 1956, from a member BUSINESS INVESTMENT proposing candidature of Mr. Arvind Kakar for being appointed as a During the year under review, your Company has acquired 40,700 equity Director of the Company. shares of Rs. 10/- each representing 100% stake of Alps Hospitals Private During the year under review, Mr. Sudip Dasgupta resigned from the Limited for Rs. 13.47 crore. The said subsidiary has commissioned a 110 Board of Directors of the Company. The Board places on record its bed capacity hospital with 4 OTs under the brand name “Max Hospital appreciation for the valuable contribution made by Mr. Sudip Dasgupta Gurgaon” in July 2007. This specialty hospital will focus on Nephrology during his association as a director of the Company. & Urology, General & Minimally Invasive surgeries, Plastic & Reconstructive In accordance with the provisions of the Companies Act, 1956, Mr. Surgeries, Woman & Child (including Infertility), Health Checks and 24- Mukesh Shivdasani and Mr. Analjit Singh are liable to retire by rotation hour Chemist. at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment. PARTICULARS OF DEPOSITS During the year under review, your Company has not accepted any SUBSIDIARY COMPANY deposits from the public. Statement pursuant to Section 212 of the Companies Act, 1956, relating to Alps Hospital Private Limited, the subsidiary of your Company, is ADDITIONAL INFORMATION annexed to this Report as Annexure–A. Your Company does not carry on any manufacturing activity. The provisions of Section 217(1)(e) of the Companies Act, 1956 read with AUDITORS the Companies (Disclosure of Particulars in the Report of Board of M/s Price Waterhouse, Chartered Accountants, the Statutory Auditors Directors) Rules, 1988 are not applicable. of the Company, retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received DIRECTOR’S RESPONSIBILITY STATEMENT from them a Certificate to the effect, that their re-appointment, if As per the provisions of Section 217(2AA) of the Companies Act, 1956, made, will be in conformity with the limits specified under Section 224 the Directors confirm that: (1B) of the Companies Act, 1956.

For and on behalf of the Board of Directors

New Delhi JULY 20, 2007 ANALJIT SINGH Chairman

200 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED) Chairman 100% Holding Company Subsidiary Company's 31.03.2007 interest as at interest incorporating Year/Period of Year/Period Changes Since Close of Financial ANALJIT SINGH NIL For the Previous (Rs. Lacs) (Rs. Financial Years NIL Company's Account For and on behalf of the Board of Directors For and on behalf of the Board For the Current (Rs. Lacs) (Rs. Net aggregate amount of Net aggregate which are dealt within the which are after deducting its losses or Financial Year Subsidiary Company's profits vice-versa, so far as it concerns Members of Holding Company N.A. For the Previous (Rs. Lacs) (Rs. Financial Years Company's Account (5.03) Net aggregate amount of Net aggregate For the Current versa, so far as it concerns (Rs. Lacs) (Rs. Subsidiary Company's profits Members of Holding Company which are not dealt within the which are after deducting its losses or vice- Financial Year 100% Extent of Holding (ii) Financial Year of Subsidiary Company Financial Year Holding Company's interest as at close of Holding Company's interest 40,700 Equity Shares of Rs 10 each of Rs 10 Equity Shares 40,700 (i) Shareholding relate to which Accounts 31-03-2007 Financial Year New Delhi 20, 2007 JULY Figures in brackets indicate loss in brackets Figures year of operation/acquisition. N.A. indicates Not Applicable in view of first Alps Hospital Private Limited STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212(3) AND 212(5) OF THE COMPANIES ACT,1956 OF THE COMPANIES AND 212(5) SECTION 212(3) PURSUANT TO REGARDING SUBSIDIARY COMPANIES STATEMENT Name of the Subsidiary Company ANNEXUERE - A

MAX INDIA ANNUAL REPORT 2006-07 201 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED) AUDITORS’ REPORT

TO THE MEMBERS OF MAX MEDICAL SERVICES LIMITED explanations given to us, having regard to the explanation (formerly Max Medical Services Private Limited) that certain items purchased are of special nature for which 1. We have audited the attached Balance Sheet of Max Medical Services suitable alternative sources do not exist for obtaining Limited, as at March 31, 2007, and the related Profit and Loss comparative quotations, there is an adequate internal control Account and Cash Flow Statement for the year ended on that date system commensurate with the size of the Company and the annexed thereto, which we have signed under reference to this nature of its business for the purchase of fixed assets and for report. These financial statements are the responsibility of the the sale of goods and services. Further, on the basis of our Company’s management. Our responsibility is to express an opinion examination of the books and records of the Company, and on these financial statements based on our audit. according to the information and explanations given to us, we have neither come across nor have been informed of any 2. We conducted our audit in accordance with the auditing standards continuing failure to correct major weaknesses in the aforesaid generally accepted in India. Those standards require that we plan internal control system. and perform the audit to obtain reasonable assurance about whether v. In our opinion and according to the information and the financial statements are free of material misstatement. An audit explanations given to us, the Company has not entered into includes examining, on a test basis, evidence supporting the amounts any contracts or arrangements referred to in Section 301 of and disclosures in the financial statements. An audit also includes the Act. assessing the accounting principles used and significant estimates vi. The Company has not accepted any deposits from the public made by management, as well as evaluating the overall financial within the meaning of Sections 58A and 58AA of the Act and statement presentation. We believe that our audit provides a the rules framed there under. reasonable basis for our opinion. vii. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. 3. As required by the Companies (Auditor’s Report) Order, 2003, as viii. The Central Government of India has not prescribed the amended by the Companies (Auditor’s Report) (Amendment) Order, maintenance of cost records under clause (d) of sub-section 2004, issued by the Central Government of India in terms of sub- (1) of Section 209 of the Act for any of the products of the section (4A) of Section 227 of ‘The Companies Act, 1956’ of India Company. (the ‘Act’) and on the basis of such checks of the books and records ix. (a) According to the information and explanations given to of the Company as we considered appropriate and according to us and the records of the Company examined by us, in the information and explanations given to us, we further report our opinion, the Company is generally regular in depositing that: the undisputed statutory dues including provident fund, i. (a) The Company is maintaining proper records showing full investor education and protection fund, employees’ state particulars including quantitative details and situation insurance, income tax, sales tax, wealth tax, service tax, of fixed assets. customs duty, excise duty, cess and other material statutory (b) The fixed assets of the Company have been physically dues as applicable with the appropriate authorities. verified by the management during the year and no material discrepancies between the book records and the (b) According to the information and explanations given to physical inventory have been noticed. In our opinion, the us and the records of the Company examined by us, there frequency of verification is reasonable. are no dues of income tax, sales tax, wealth tax, service (c) In our opinion and according to the information and tax, customs duty, excise duty and cess which have not explanations given to us, a substantial part of fixed assets been deposited on account of any dispute. have not been disposed of by the Company during the x. The Company has accumulated losses, as at March 31, 2007 year. more than fifty percent of its net worth and has not incurred ii. (a) The inventory has been physically verified by the any cash loss in the financial year ended on that date. However, management during the year. In our opinion, the frequency the Company had cash losses in the immediately preceding of verification is reasonable. There is no inventory lying financial year. with the third parties. xi. According to the records of the Company examined by us (b) In our opinion, the procedures of physical verification of and the information and explanation given to us, the Company inventory followed by the management are reasonable has not defaulted in repayment of dues to any financial and adequate in relation to the size of the Company and institution or bank or debenture holders as at the balance the nature of its business. sheet date. (c) On the basis of our examination of the inventory records, xii. The Company has not granted any loans and advances on the in our opinion, the Company is maintaining proper records basis of security by way of pledge of shares, debentures and of inventory. The discrepancies noticed on physical other securities. verification of inventory as compared to book records xiii. The provisions of any special statute applicable to chit fund were not material. / nidhi / mutual benefit fund/societies are not applicable to iii. (a) The Company has not granted any loans, secured or the Company. unsecured, to companies, firms or other parties covered xiv. In our opinion, the Company has maintained proper records in the register maintained under Section 301 of the Act. of transactions and contracts relating to dealing or trading (b) The Company has not taken any loans, secured or in shares, securities, debentures and other investments during unsecured, from companies, firms or other parties covered the year and timely entries have been made therein. Further, in the register maintained under Section 301 of the Act. such securities have been held by the Company in its own iv. In our opinion and according to the information and name.

202 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED) AUDITORS’ REPORT

xv. In our opinion, and according to the information and for the purposes of our audit; explanations given to us, the Company has not given any (b) In our opinion, proper books of account as required by law guarantee for loans taken by others from banks or financial have been kept by the Company so far as appears from our institutions during the year. However, reference is drawn to examination of those books; Note 5 on Schedule 17. (c) The Balance Sheet, Profit and Loss Account and Cash Flow xvi. The Company has not taken any term loans. Statement dealt with by this report are in agreement with xvii. On the basis of an overall examination of the balance sheet the books of account; of the Company, in our opinion and according to the (d) In our opinion, the Balance Sheet, Profit and Loss Account information and explanations given to us, there are no funds and Cash Flow Statement dealt with by this report comply raised on a short-term basis which have been used for long- with the accounting standards referred to in sub-section (3C) term investment. of Section 211 of the Act; xviii. The Company has not made any preferential allotment of (e) On the basis of written representations received from the shares to parties and companies covered in the register directors, as on March 31, 2007 and taken on record by the maintained under Section 301 of the Act during the year. Board of Directors, none of the directors is disqualified as on xix. The Company has not issued any debentures during the year. March 31, 2007 from being appointed as a director in terms xx. The Company has not raised any money by public issues of clause (g) of sub-section (1) of Section 274 of the Act; during the year (f) In our opinion and to the best of our information and according xxi. During the course of our examination of the books and records to the explanations given to us, the said financial statements of the Company, carried out in accordance with the generally together with the notes thereon and attached thereto give accepted auditing practices in India, and according to the in the prescribed manner the information required by the Act information and explanations given to us, we have neither and give a true and fair view in conformity with the accounting come across any instance of fraud on or by the Company, principles generally accepted in India: noticed or reported during the year, nor have we been informed (i) in the case of the Balance Sheet, of the state of affairs of such case by the management. of the Company as at March 31, 2007; (ii) in the case of the Profit and Loss Account, of the profit 4. Further to our comments in paragraph 3 above, we report that: for the year ended on that date; and (a) We have obtained all the information and explanations, (iii) in the case of the Cash Flow Statement, of the cash flows whichto the best of our knowledge and belief were necessary for the year ended on that date.

V.NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse MAY 11, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 203 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006

SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 141,425,350 141,425,350

RESERVE SURPLUS Share Premium 2,999,650 2,999,650

LOAN FUNDS Unsecured Loan 2 1,098,279,947 806,929,732

Deferred Tax Liability (Net) 3 56,228,949 49,174,633 1,298,933,896 1,000,529,365

APPLICATION OF FUNDS FIXED ASSETS 4 Gross Block 428,189,584 420,052,178 Less: Accumulated Depreciation 66,440,731 38,229,863 Net Block 361,748,853 381,822,315 Capital Work in Progress 10,202,806 7,448,297 371,951,659 389,270,612

INVESTMENTS 5 134,665,781 -

CURRENT ASSETS, LOANS AND ADVANCES Inventories 6 2,412,204 2,412,204 Sundry Debtors 7 273,419,839 108,985,129 Cash and Bank Balances 8 3,348,595 402,984 Other Current Assets 9 10,537,347 11,617,128 Loans and Advances 10 648,920,076 490,482,540 938,638,061 613,899,985

Less: CURRENT LIABILITIES AND PROVISIONS 11 280,185,003 182,230,735 280,185,003 182,230,735

NET CURRENT ASSETS 658,453,058 431,669,250

MISCELLANEOUS EXPENDITURE 12 33,169,678 47,147,529 (To the extent not written off or adjusted)

PROFIT AND LOSS ACCOUNT 100,693,720 132,441,974 1,298,933,896 1,000,529,365

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 17

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Director Partner ARVIND KAKKAR Director Membership No. F-87228 For and on behalf of LALJI KUMAR Company Secretary Price Waterhouse Chartered Accountants New Delhi MAY 11, 2007

204 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME (Refer Note B2 on Schedule 17) Income from Lease and Maintenance Activities 13 167,702,582 102,184,485 Other Income 14 57,377,305 22,817,180 225,079,887 125,001,665 EXPENDITURE Personnel, Administrative and Other expenses 15 28,826,924 23,122,218 Financial Expenses 16 128,976,079 104,657,909 Depreciation 4 28,210,868 27,385,495 186,013,871 155,165,622

PROFIT/(LOSS) FOR THE YEAR BEFORE TAX 39,066,016 (30,163,957) Provision for Taxation - Current Tax 262,480 - - Deferred Tax 7,054,316 14,546,955 (Refer Note C7 on Schedule 17) Fringe Benefit Tax 966 1,748

PROFIT/(LOSS) FOR THE YEAR AFTER TAX 31,748,254 (44,712,660)

(LOSS) BROUGHT FORWARD FROM THE PREVIOUS YEAR (132,441,974) (87,729,314)

BALANCE CARRIED FORWARD TO THE BALANCE SHEET (100,693,720) (132,441,974)

Earning Per Share (Rs. per equity share of Rs. 10 each) (Refer Note C8 on Schedule 17) - Basic 2.24 (322.90) - Diluted 2.24 (322.90)

Number of Shares used in computing Earning per Share - Basic 14,142,535 138,473 - Diluted 14,142,535 138,473

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 17

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Director Partner ARVIND KAKKAR Director Membership No. F-87228 For and on behalf of LALJI KUMAR Company Secretary Price Waterhouse Chartered Accountants New Delhi MAY 11, 2007

MAX INDIA ANNUAL REPORT 2006-07 205 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) before tax 39,066,016 (30,163,957)

Adjustments for: Depreciation 28,210,868 27,385,495 Interest Expense 128,974,626 104,657,578 Interest Income (36,414,481) (9,862,907) Miscellaneous Expenditure written off 1,076 1,076 Deferred revenue expenditure written off 13,976,775 14,555,700 Works Contract Tax written off - 1,437,854 Advances Written off 1,472,743 - Provision no longer required written back - (179,801) TDS on technical/service /other operating income (31,460,972) (3,815,974) Operating Profit Before Working Capital Changes 143,826,651 104,015,064

Adjustments for: Trade receivables (165,907,453) (92,344,284) Other receivables (116,677,391) (9,180,069) Inventories - (357,008) Trade payables 9,513,166 (52,928,475) Cash Generated From Operations (129,245,027) (50,794,772)

FBT( Paid) (2,714) -

Cash From / (Used in) Operating Activities (129,247,741) (50,794,772)

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets (1,208,140) (94,294,608) Capital Work in Progress (2,754,508) 21,970,948 Loan given (2,127,764) (920,938) Interest Received (Revenue) 29,322,852 - Purcahse of Investment (134,665,781) - Cash From/ (Used In) Investing Activities (111,433,341) (73,244,598)

C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Short term borrowings 291,350,215 135,261,902 Interest Paid (47,723,522) (11,200,000) Cash From/ (Used In) Financing Activities 243,626,693 124,061,902

Net Increase/(Decrease) in Cash and Cash Equivalents 2,945,611 22,532 Cash and Cash Equivalents - Opening Balance 402,984 380,452 Cash and Cash Equivalents - Closing Balance 3,348,595 402,984

206 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

Notes: 1 The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Cash, Cheques in hand and balances with banks: RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 Cash in Hand 41,990 7,576 Balance with banks 3,306,605 395,408 Total 3,348,595 402,984

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 17

The Schedules referred to above form an integral part of the Cash Flow For and on behalf of the Board of Directors Statement This is the Cash Flow Statement referred to in our report of even date V. NIJHAWAN B. ANANTHARAMAN Director Partner ARVIND KAKKAR Director Membership No. F-87228 For and on behalf of LALJI KUMAR Company Secretary Price Waterhouse Chartered Accountants New Delhi MAY 11, 2007

MAX INDIA ANNUAL REPORT 2006-07 207 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL Authorised 35,000,000 (Previous year 35,000,000) Equity Shares of Rs. 10/- each 350,000,000 350,000,000 350,000,000 350,000,000

Issued, Subscribed and Paid Up 14,142,535 (Previous year 14,142,535) Equity Share of Rs 10/- each 141,425,350 141,425,350

141,425,350 141,425,350 - 14,142,535 Equity Shares (Previous year 14,142,535 Equity Shares) held by Max Healthcare Institute Limited (The Holding Company) and its nominees.

SCHEDULE-2 UNSECURED LOANS -From Max Healthcare Institute Ltd. 1,098,279,947 806,929,732 (The Holding Company) (Repayable on Demand) 1,098,279,947 806,929,732

SCHEDULE-3 DEFERRED TAX LIABILITY ( Refer Note C7 on Schedule 17) Deferred Tax Liability Opening Balance 49,174,633 34,627,678 Movement during the Year 7,054,316 14,546,955

Closing Balance 56,228,949 49,174,633

SCHEDULE-4 FIXED ASSETS (Refer Notes B3, B4, B5 and C6 on Schedule 17) Gross Block Depreciation Net Block Particulars As at Addition Sale/ As at As at Depreciation Depreciation As at As at As at April 1, 2006 During the Adjustment March 31, April 1, 2006 for the on Sale/ March 31, March 31, March 31, Year During the 2007 Year Adjustment 2007 2007 2006 Year During the Year Tangible Assets Plant and Machinery 123,093,150 - - 123,093,150 7,146,624 5,846,925 - 12,993,549 110,099,601 115,946,526 Medical Equipments 241,930,606 6,380,000 - 248,310,606 21,276,813 17,486,697 - 38,763,510 209,547,096 220,653,793 Office Equipments 22,646,532 - - 22,646,532 3,532,220 2,506,543 - 6,038,763 16,607,769 19,114,312 Furniture and Fixture 28,344,569 - - 28,344,569 5,774,849 1,550,011 - 7,324,860 21,019,709 22,569,720 Intangible Assets Computer Software 4,037,321 1,757,406 - 5,794,727 499,357 820,692 - 1,320,049 4,474,678 3,537,964

TOTAL 420,052,178 8,137,406 - 428,189,584 38,229,863 28,210,868 - 66,440,731 361,748,853 381,822,315 CAPITAL WORK IN PROGRESS 10,202,806 7,448,297 GRAND TOTAL 420,052,178 8,137,406 - 428,189,584 38,229,863 28,210,868 - 66,440,731 371,951,659 389,270,612 Previous Year 349,029,959 71,022,219 - 420,052,178 10,844,368 27,385,495 - 38,229,863 381,822,315 Notes: 1. Capital Work In Progress Includes: - Capital Advances of Rs. 2,620,760 (Previous year Rs. 7,448,297) - Equipment in Transit Rs. 7,582,046 (Previous year Nil)

208 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SCHEDULE-5 INVESTMENTS ( Refer Note C14 of Schedule 17) Subsidiaries, at cost (Unquoted) Alps Hospital Private Limited, a Subsidiary Company 40,700 (Previous year- Nil) Equity Shares of Rs. 10/- each 134,665,781 - 134,665,781 - Aggregate value of unquoted investments 134,665,781 -

SCHEDULE-6 INVENTORIES (Refer Note B7 on Schedule 17) Stock of hand Instruments 2,412,204 2,412,204 2,412,204 2,412,204

SCHEDULE-7 SUNDRY DEBTORS (Refer Notes C3 and C4 on Schedule 17) (Unsecured) Debtors exceeding six months -Considered Good 174,378,613 19,545,206 Other Debts -Considered Good 99,041,226 89,439,923 273,419,839 108,985,129

SCHEDULE-8 CASH AND BANK BALANCES Cash-in-hand 41,990 7,576 Balance with Banks -In Current Accounts 3,306,605 395,408 3,348,595 402,984

SCHEDULE-9 OTHER CURRENT ASSETS Interest Receivable 10,537,347 11,617,128 10,537,347 11,617,128

SCHEDULE-10 LOANS AND ADVANCES (Considered good, unless otherwise stated) (Refer Notes C3, C4, C5 and C14 on Schedule 17) Unsecured Advances Recoverable in Cash or kind or for value to be received 3,780 3,780 -Loan to Subsidiary company 109,988,988 - Recoverable from other Healthcare services provider -Loan 31,738,701 29,610,937 -Deferred Credit 26,165,552 9,906,786 -Construction Cost Recoverable 215,801,911 224,610,152 -Expenses Recoverable 132,290,718 132,290,718 -Security Deposits 78,300,000 78,300,000 Other recoverable from subsidiary 1,127,513 - Prepaid Expenses 1,521,954 400,012 TDS and Other Taxes Recoverable 51,980,959 15,360,155 648,920,076 490,482,540

MAX INDIA ANNUAL REPORT 2006-07 209 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-11 CURRENT LIABILITIES Sundry Creditors -Total outstanding of creditors other than small scale industrial undertakings*# 31,562,576 28,272,157 -Interest Accrued and not due (to the Holding Company) 210,840,142 129,589,038 -Other Liabilities 37,782,285 24,369,540 280,185,003 182,230,735 * Payable to Holding Company Rs. 9,234,765/- (Previous Year Rs. Nil) #As identified by the management, there are no dues outstanding to small scale undertakings

SCHEDULE-12 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) (Refer Note B8 on Schedule 17) Opening Balance Amortised Closing Balance as at April 1, 2006 during the Year as at March 31, 2007 a) Deferred Revenue Expenditure 45,405,370 12,240,000 33,165,370 b) Professional Fees & Other Expenses 1,736,775 1,736,775 - c) Preliminary Expenses 5,384 1,076 4,308 47,147,529 13,977,851 33,169,678

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-13 INCOME FROM LEASE AND MAINTENANCE ACTIVITIES (Refer Notes C3 and C4 on Schedule 17) Income from Lease* 104,814,114 63,865,303 Income from Maintainence of Healthcare facility** 62,888,468 38,319,182 167,702,582 102,184,485 * Tax Deducted at Source Rs. 25,172,964/- (Previous year Nil) ** Tax Deducted at Source Rs. 1,583,950/- (Previous year Rs. 9,49,699/-)

SCHEDULE-14 OTHER INCOME ( Refer Notes C3 and C14 on Schedule 17 ) Income from Deferred Credit* 20,962,824 12,773,061 Interest -On Loans** 10,341,423 4,031,593 -On Receivables*** 26,073,058 5,831,314 Provisions no longer required written back - 179,801 Miscellaneous Income - 1,411 57,377,305 22,817,180 * Tax Deducted at Source Rs. 4,704,058/- (Previous year Rs. 2,866,275/-) ** Tax Deducted at Source Rs. 2,320,615/- (Previous year Rs. 904,689/-) *** Tax Deducted at Source Rs. 5,850,794/- (Previous year Rs. 1,308,546/-)

210 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-15 PERSONNEL, ADMINISTRATIVE AND OTHER EXPENSES

Personnel Expenses Salaries Wages and Bonus 449,183 617,565 Contribution to Provident and other funds 18,748 43,744 Staff Welfare 810 -

Administrative and Other Expenses Work Contract Tax Written Off - 1,437,854 Legal and Professional 131,503 1,735,526 Registration and Delegation Expenses 36,972 - Travelling and Conveyance 16,805 22,107 Repair and Maintenance -Building 9,828,342 2,915,920 -Plant and Machinery 968,613 1,052,682 -Others 1,041,888 72,881 Books and Periodicals 3,180 - Communication Expenses - 84 Printing and Stationery 1,096 4,864 Advance Written Off 1,472,743 - Insurance 750,114 540,727 Miscellaneous Expenses - 3,285 Audit Fees 129,076 118,203 Deferred Revenue Expenditure Written Off 13,977,851 14,556,776 28,826,924 23,122,218

SCHEDULE-16 FINANCIAL EXPENSES Interest on Inter Corporate Loans 128,974,626 104,657,578 Bank Charges 1,453 331 128,976,079 104,657,909

MAX INDIA ANNUAL REPORT 2006-07 211 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-17

A NATURE OF BUSINESS The Company is in the business of construction of hospitals and leasing of medical and other equipment to customers.

B SIGNIFICANT ACCOUNTING POLICIES 1 Accounting Conventions The accompanying financial statements are prepared in accordance with General Accepted Accounting Principles in India (“GAAP”), under the historical cost convention, on an accrual basis. GAAP comprises mandatory accounting standard issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956, as adopted consistently by the Company.

2 Revenue Recognition The Company is in the business of constructing and leasing of medical and other equipments. Income from leasing activity is recognized on straight line basis over the period of contract. Contingent lease rent is recognized based on the occurrence of the contingency.

3 Fixed Assets a) Fixed Assets are stated at their original cost including freight, duties, taxes and other incidental expenses relating to acquisition and installation. b) Expenses of revenue nature, which can be regarded as incidental and related to the fixed assets are transferred to “Preoperative Expenditure Pending Capitalisation”. These expenses are allocated to fixed assets in the year of commencement of the related project.

4 Depreciation a) Depreciation is charged on the straight line method at the rates specified in schedule XIV of the Companies Act, 1956 on a prorata basis. b) Assets costing not more than Rs 5,000/- each individually have been depreciated at 100%.

5 Borrowing Cost Borrowing cost that are directly attributable to the acquisition, installation of the fixed assets have been capitalized in accordance with the Accounting Standard 16 “Borrowing Cost” as issued by The Institute of Chartered Accountants of India. Other borrowing costs are recognized as an expense in the period in which they are incurred. Capitalization of the borrowing costs ceases when substantially all activities necessary to prepare the qualifying assets for its intended use or sale are complete.

6 Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. Provision for tax consists of current tax and deferred tax. A provision is made for income tax annually based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. The differences that result between the profit offered for income tax and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying value at each balance sheet date.

7 Inventories Inventories are valued at lower of cost or net realizable value. Cost for this purpose is calculated on a “First In First Out” method.

8 Miscellaneous Expenditure a) Preliminary expenses are amortised over a period of 10 years. b) Deferred Revenue Expenditure includes consultancy charges for structuring the business and is being amortised over a period of 5 years.

9 Provision and Contingencies A provision is recognized when there is a present obligation as a result of past events and it is probable that an outflow of a resource will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each Balance Sheet date and adjusted to reflect the current estimates. Contingent liabilities are disclosed after an evaluation of facts and legal aspects of the matter involved.

212 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

C. NOTES TO ACCOUNTS

1. Contingent Liability - Capital Contracts: Rupees Particulars Current Year Previous Year Estimated value of Contracts remaining to be executed 4,772,615 22,701,213 Less: Capital Advances (2,620,760) (7,448,297) Net Amount 2,151,855 15,252,916

2. In the Financial year 2001-02, the Company had paid Non Compete fees as per the agreement, amounting to Rs 61,200,000/-. In accordance with the stated accounting policy, the same is being amortized over a period of five years.

3. As at December 10, 2001 the Company had entered into an agreement with a healthcare service provider to construct a hospital building. The construction, as aforesaid had been completed and the building handed over as on March 31, 2005 to the healthcare service provider for a consideration of Rs. 243,100,018/-. The said consideration is repayable in equal installments over 26.5 years from the handover date. As of March 31, 2007, out of the aforesaid consideration an amount of Rs. 17,616,482/- (Previous Year Rs. 8,808,241/-) has fallen due for payment and has accordingly been transferred to Sundry Debtors and the balance amount not due amounting to Rs. 215,801,911/- has been disclosed under Loans and Advances. In addition, since the receipt of the consideration of Rs. 243,100,018/- is spread over 26.5 years, an income amounting to Rs. 20,962,824/- (Previous year Rs. 12,773,061/-) , which is receivable based on a fixed percentage of the turnover of the healthcare service provider has been accrued and disclosed under Loans and Advances as deferred credit.

4. The Company had entered into a lease with a healthcare service provider on December 10, 2001 for supply of medical, other equipments and fixtures for an initial term of 30 years. Under the terms of the lease, the company is responsible for: i. Acquisition of equipment including its repair and servicing; ii. Ensuring adequate insurance coverage for the assets; and iii. Replacement of any existing equipment or suitable equipment in lieu thereof. As per terms, lease rentals based on a fixed percentage of the turnover of the healthcare service provider are due to the Company on a monthly basis. Accordingly, as at March 31, 2007 an amount of Rs 104,814,114/- (Previous year Rs. 63,865,303/-) has been accrued as lease rentals for the current year. The lease rent is contingent on turnover, and therefore cannot be quantified for any future periods. The amount outstanding as at March 31, 2007 amounting to Rs. 149,678,034/- ( Previous Year Rs. 62,672,015/-) has been disclosed under Sundry Debtors.

5. Performance Guarantee of Rs 78,300,000/- had been deposited with the healthcare service provider, in earlier years, as per the agreements mentioned in point 3 and 4 above and disclosed under Loans & Advances.

6. The Movable Fixed Assets of the company are hypothecated by way of a first charge against loan taken by the holding company, Max Healthcare Institute Limited.

7. The movement of provision for deferred tax is given below: Rupees Particulars Opening as at Addition Deletion/ Closing as at April 1, 2006 Adjustment March 31, 2007 Deferred Tax Liability Depreciation related 33,339,500 11,727,526 - 45,067,026 Preliminary and Deferred Revenue Expenses 17,325,348 - 4,673,210 12,652,138 Reversal due to Tax Rate (1,490,215) - - (1,490,215) Total 49,174,633 11,727,526 4,673,210 56,228,949 Deferred Tax Asset - - Net Deferred Tax Liability 49,174,633 11,727,526 4,673,210 56,228,949 Deferred Tax assets are created to the extent of their realisability.

8. Earning Per Share: Particulars Current Year Previous year Basic and Diluted a) Profit/(Loss) after tax ( Rs.) 31,748,254 (44,712,660) b) Weighted Average Number of Equity Shares 14,142,535 138,473 c) Earning per Share 2.24 (322.90) d) Outstanding at the beginning of the year 14,142,535 100,000 e) Issued on March 31, 2006 - 14,042,535 f) Outstanding at the end of the year 14,142,535 14,142,535

MAX INDIA ANNUAL REPORT 2006-07 213 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

9. Related Parties (as identified by the Management) are classified as under Ultimate Holding Company Max India Ltd. Holding Company Max Healthcare Institute Ltd. Subsidiary Alps Hospital Pvt. Ltd*. Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Ateev Ltd., Neeman Medical International BV, Neeman Medical International NV, Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A., Max UK Ltd., Pharmax Corporation Ltd., Neeman Medical International (Asia) Ltd., Max HealthStaff International Ltd. (w.e.f. June 30, 2005), Max Estates Ltd.**, Malsi Estates Ltd.**, Max Asia Pac Ltd.***, Max Telecom Ventures Ltd.*** * w.e.f April 6, 2006. ** Fellow Subsidiaries till May 31, 2006 *** Fellow Subsidiaries till November 30, 2005 Summary of significant related party transactions (as identified by management) carried out in ordinary course of business are as follows: S.No Particulars Max Healthcare Alps Hospital Institute Limited (Holding Company) Private Limited (Subsidary Company) 1. Loan Taken 291,350,215 - (132,915,200) (-) 2. Fixed Assets Purchased 7,582,046 - (-) (-) 3. Purchase of Investment - 134,665,781 (-) (-) 4. Income: Reimbursement of Expenses - 1,127,513 (-) (-) 5. Expenses: Services Received 1,652,719 - (-) (-) 6 Loan Given - 109,988,988 ( -) (-) 7. Interest Expenses 128,974,627 - (104,657,578) (-) 8. Interest Income - 6,638,282 ( -) (-) 9. Amount Outstanding a. Against Loan taken 1098,279,946 - (806,929,732) (-) b. Sundry Creditors Balance 7,582,046 - (-) (-) c. Other Payable 1,652,719 - (-) (-) d. Interest Payable 210,840,142 - (129,589,038) (-) e. Against Loan Given - 109,988,988 (-) (-) f. Interest Receivable - 5,148,651 (-) (-) g. Other Receivable - 1,127,513 (-) (-) Previous years figures are given in brackets 10. Leases Accounting for leases has been made in accordance with Accounting Standard-19 issued by the Institute of Chartered Accountants of India. Following are the details of lease transactions for the year: a) Finance Lease The Company has not entered into any finance lease agreement. b) Operating Lease Income from lease rentals recognized for the year is Rs. 104,814,114/- (Previous Year Rs. 63,865,303/-) As mentioned above, the company has entered into an agreement for supply of equipment on lease. The lease rent is entirely contingent on turnover, hence cannot be quantified for any future periods (Refer note C4 above).

11. As the Company operates in a single business segment of construction of hospitals and leasing of medical & other equipment, the provisions of Accounting Standard 17 on Segment Reporting issued by The Institute of Chartered Accountants of India is not applicable to the Company. The Company operates in single geographical segment.

214 MAX INDIA ANNUAL REPORT 2006-07 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

12. Auditors’ Remuneration: Rupees Particulars Current Year Previous year Audit Fees* 112,240 112,240 Out of Pocket Exp.* 16,836 5,963 Total 129,076 118,203 * Including Service Tax and Education Cess

13. In the Extra-ordinary General meeting held on March 31, 2006 the shareholders have approved the conversion of the Company from Private limited company to a Public limited company for which the company has got the necessary approval and fresh certificate of incorporation w.e.f. February 15, 2007 from the concerned authority.

14. During the year, the company acquired entire share holding in Alps Hospital Private Limited making it a 100% subsidiary. The said subsidiary has a sub lease in its favour for a plot of land in NCR. The sub lease is for an initial period of 97 years, with an option to renew the same for two terms of 97 years each. The designated usage of the plot of land is for setting up a healthcare facility. The subsidiary is in the process of setting up a healthcare facility. As part of project, an amount of Rs. 109,988,988/-has been given to the subsidiary to set up the healthcare facility.

15. The Company is in the process of identifying Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006. Therefore, it is not possible for the Company to ascertain whether payment to such enterprises has been made within 45 days from the date of acceptance of goods supplied or services rendered by such enterprise and to make requisite disclosure.

16. Previous year’s figures have been regrouped/reclassified, wherever considered necessary, to conform to current year’s classification.

17. Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

For and on behalf of the Board of Directors

B. ANANTHARAMAN Director ARVIND KAKKAR Director New Delhi MAY 11, 2007 LALJI KUMAR Company Secretary

MAX INDIA ANNUAL REPORT 2006-07 215 MAX MEDICAL SERVICES LIMITED (Formerly MAX MEDICAL SERVICES PRIVATE LIMITED)

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 6 1 3 1 4 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 1 2 9 8 9 3 4 1 2 9 8 9 3 4 SOURCES OF FUND Paid-up Capital Reserves and Surplus 1 4 1 4 2 5 3 0 0 0 Share Application Secured Loans N I L N I L Unsecured Loans Deferred Tax Liability 1 0 9 8 2 8 0 5 6 2 2 9 APPLICATION OF FUNDS Net Fixed Assets Investments 3 7 1 9 5 2 1 3 4 6 6 6 Net Current Assets Misc. Expenditure 6 5 8 4 5 3 3 3 1 6 9 Accumulated Losses 1 0 0 6 9 4 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 2 2 5 0 8 0 1 8 6 0 1 4

+- Profit/Loss before Tax +- Profit/Loss after Tax 3 9 0 6 6 3 1 7 4 8

Earning Per Share in Rupees +- Basic and Diluted Dividend Rate (%) 2 . 2 4 N I L V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description C O N S T R U C T I O N & L E A S I N G

216 MAX INDIA ANNUAL REPORT 2006-07 ALPS HOSPITAL PRIVATE LIMITED ALPS HOSPITAL PRIVATE LIMITED

DIRECTORS’ REPORT

Your Directors are pleased to present their Eighteenth Annual Report the Directors confirm that: along with the Audited Accounts for the financial year ended March (i) In the preparation of annual accounts, the applicable accounting 31, 2007. standards have been followed, along with proper explanation relating to material departures; OPERATIONS (ii) The Directors had selected such accounting policies and applied Your Company became a wholly-owned subsidiary of Max Medical them consistently and made judgments and estimates that are Services Limited, on April 06, 2006. During the month of July 2007, your reasonable and prudent, so as to give a true and fair view of the Company commissioned multi-specialty healthcare facility in a prime state of affairs of the Company at the end of the financial year and location in Gurgaon. The facility has been designed by an international of the profit or loss of the Company for that period; architect and constructed in conformity with the accepted global (iii) The Directors had taken proper and sufficient care for the standards for hospitals. It is spread over a total area of 97,000 sq. feet, maintenance of adequate accounting records in accordance with in four patient floors. the provisions of the Companies Act, 1956 for safeguarding the The hospital is designed to provide the highest levels of professional assets of the Company and for preventing and detecting fraud and expertise and world-class care in all the major disciplines of Cardiology, other irregularities; and Neurosciences, Orthopaedics, Obstetrics and Gynaecology, Paediatrics, (iv) The Directors had prepared the annual accounts on a going concern Bariatric and Minimally Access Surgery, Endocrinology, Gastroenterology, basis. General Surgery, Internal Medicine, Mental Health & Behavioural Sciences, Nephrology, Pulmonology, Rehabilitative Services and Urology. PARTICULARS OF EMPLOYEES The hospital has more than 100 beds, 2 modular operation theatres and The Company does not have any employee who is covered under the a 12-bed ICU. The clinical services are supported with the most advanced provisions of Section 217 (2A) of the Companies Act, 1956, read with in-house diagnostic services. It is also equipped with a state-of-the-art the Companies (Particulars of Employees) Rules, 1975. Emergency Response and Management System. The hospital also provides other specialised services like a Neonatal Intensive Care Unit (NICU), a DIRECTORS Paediatric Intensive Care Unit (PICU), an Endoscopy suite and a Dialysis Mr. Arvind Kakar was appointed as an Additional Director to hold office facility. up to the ensuing Annual General Meeting. The Company has received The Company was under a project stage as on March 31, 2007 and a notice under Section 257 of the Companies Act, 1956, from a member thereby has incurred a pre-operative loss of Rs. 5 Lacs during the year proposing candidature of Mr. Arvind Kakar for being appointed as a under review. Director of the Company. During the year under review, Mr. Sudip Dasgupta resigned from the DIVIDEND Board of Directors of the Company. The Board places on record its In view of the losses, your Directors do not recommend any dividend appreciation for the valuable contribution made by Mr. Sudip Dasgupta for the year under review. during his association as a director of the Company. In accordance with the provisions of the Companies Act, 1956, PARTICULARS OF DEPOSITS Mr. B.Anantharaman is liable to retire by rotation at the ensuing Annual During the year under review, your Company has not accepted any General Meeting and being eligible, offers himself for re-appointment. deposits from the public. AUDITORS ADDITIONAL INFORMATION M/s Price Waterhouse, Chartered Accountants, the Statutory Auditors Your Company does not carry on any manufacturing activity. The of the Company, retire at the conclusion of the ensuing Annual General provisions of Section 217(1)(e) of the Companies Act, 1956 read with Meeting and are eligible for re-appointment. The Company has received the Companies (Disclosure of Particulars in the Report of Board of from them a Certificate to the effect, that their re-appointment, if Directors) Rules, 1988 are not applicable. made, will be in conformity with the limits specified under Section 224 (1B) of the Companies Act, 1956. DIRECTOR’S RESPONSIBILITY STATEMENT As per the provisions of Section 217(2AA) of the Companies Act, 1956, For and on behalf of the Board of Directors

New Delhi B. ANANTHARAMAN Director JULY 20, 2007 ARVIND KAKAR Director

MAX INDIA ANNUAL REPORT 2006-07 219 ALPS HOSPITAL PRIVATE LIMITED

AUDITORS’ REPORT

TO THE MEMBERS OF ALPS HOSPITAL PRIVATE LIMITED years immediately preceding the financial year did not exceed 1. We have audited the attached Balance Sheet of Alps Hospital Private Rupees Five Crores, clause (vii) of paragraph 4 of the Companies Limited, as at March 31, 2007, and the related Profit and Loss (Auditor’s Report) Order, 2003 is not applicable to the Company Account and Cash Flow Statement for the year ended on that date for the current year. annexed thereto, which we have signed under reference to this viii The Central Government of India has not prescribed the report. These financial statements are the responsibility of the maintenance of cost records under clause (d) of sub-section Company’s management. Our responsibility is to express an opinion (1) of Section 209 of the Act for any of the products of the on these financial statements based on our audit. Company. 2. We conducted our audit in accordance with the auditing standards ix (a) According to the information and explanations given to generally accepted in India. Those standards require that we plan us and the records of the Company examined by us, in our and perform the audit to obtain reasonable assurance about whether opinion, the Company is generally regular in depositing the financial statements are free of material misstatement. An audit the undisputed statutory dues including provident fund, includes examining, on a test basis, evidence supporting the amounts investor education and protection fund, employees’ state and disclosures in the financial statements. An audit also includes insurance, income-tax, sales-tax, wealth tax, service tax, assessing the accounting principles used and significant estimates customs duty, excise duty, cess and other material statutory made by management, as well as evaluating the overall financial dues as applicable with the appropriate authorities. statement presentation. We believe that our audit provides a (b) According to the information and explanations given to reasonable basis for our opinion. us and the records of the Company examined by us, there 3. As required by the Companies (Auditor’s Report) Order, 2003, as are no dues of income-tax, sales tax, wealth tax, service amended by the Companies (Auditor’s Report) (Amendment) Order, tax, customs duty, excise duty and cess which have not 2004, issued by the Central Government of India in terms of sub- been deposited on account of any dispute. section (4A) of Section 227 of `The Companies Act, 1956’ of India x The Company has accumulated losses, as at March 31, 2007 (the ‘Act’) and on the basis of such checks of the books and records more than fifty percent of its net worth and has incurred cash of the Company as we considered appropriate and according to loss in the financial year ended on that date and in the the information and explanations given to us, we further report immediately preceding financial year. that: xi According to the records of the Company examined by us and i The Company does not have any fixed assets. the information and explanation given to us, the Company ii The Company does not have any inventory. has not defaulted in repayment of dues to any financial iii (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered institution or bank or debenture holders as at the balance in the register maintained under Section 301 of the Act. sheet date. (b) The Company has not taken any loans, secured or unsecured, xii The Company has not granted any loans and advances on the from companies, firms or other parties covered in the basis of security by way of pledge of shares, debentures and register maintained under Section 301 of the Act. other securities. iv In our opinion and according to the information and xiii The provisions of any special statute applicable to chit fund explanations given to us, having regard to the explanation / nidhi / mutual benefit fund/societies are not applicable to that certain items purchased are of special nature for which the Company. suitable alternative sources do not exist for obtaining xiv In our opinion, the Company is not a dealer in shares, securities, comparative quotations, there is an adequate internal control debentures and other investments. system commensurate with the size of the Company and the nature of its business for the purchase of fixed assets. Further, xv In our opinion, and according to the information and on the basis of our examination of the books and records of explanations given to us, the Company has not given any the Company, and according to the information and guarantee for loans taken by others from banks or financial explanations given to us, we have neither come across nor institutions during the year. have been informed of any continuing failure to correct major xvi The Company has not taken any term loans. weaknesses in the aforesaid internal control system. xvii On the basis of an overall examination of the balance sheet v In our opinion and according to the information and of the Company, in our opinion and according to the information explanations given to us, the Company has not entered into and explanations given to us, there are no funds raised on a any contracts or arrangements referred to in Section 301 of short-term basis which have been used for long-term the Act. investment. vi The Company has not accepted any deposits from the public xviii The Company has not made any preferential allotment of within the meaning of Sections 58A and 58AA of the Act and the rules framed there under. shares to parties and companies covered in the register vii As the Company is not listed on any stock exchange or the maintained under Section 301 of the Act during the year. paid-up capital and reserves as at the commencement of the xix The Company has not issued any debentures during the year. financial year did not exceed Rupees Fifty Lakhs or the average xx The Company has not raised any money by public issues during annual turnover for a period of three consecutive financial the year.

220 MAX INDIA ANNUAL REPORT 2006-07 ALPS HOSPITAL PRIVATE LIMITED

AUDITORS’ REPORT

xxi During the course of our examination of the books and records the accounting standards referred to in sub-section (3C) of of the Company, carried out in accordance with the generally Section 211 of the Act; accepted auditing practices in India, and according to the (e) On the basis of written representations received from the information and explanations given to us, we have neither directors, as on March 31, 2007 and taken on record by the come across any instance of fraud on or by the Company, Board of Directors, none of the directors is disqualified as on noticed or reported during the year, nor have we been informed March 31, 2007 from being appointed as a director in terms of such case by the management. of clause (g) of sub-section (1) of Section 274 of the Act; 4. Further to our comments in paragraph 3 above, we report that: (f) In our opinion and to the best of our information and according (a) We have obtained all the information and explanations, which to the explanations given to us, the said financial statements to the best of our knowledge and belief were necessary for together with the notes thereon and attached thereto give in the purposes of our audit; the prescribed manner the information required by the Act (b) In our opinion, proper books of account as required by law and give a true and fair view in conformity with the accounting have been kept by the Company so far as appears from our principles generally accepted in India: examination of those books; (i) in the case of the Balance Sheet, of the state of affairs of (c) The Balance Sheet, Profit and Loss Account and Cash Flow the Company as at March 31, 2007; Statement dealt with by this report are in agreement with the (ii) in the case of the Profit and Loss Account, of the loss for books of account; the year ended on that date; and (d) In our opinion, the Balance Sheet, Profit and Loss Account and (iii) in the case of the Cash Flow Statement, of the cash flows Cash Flow Statement dealt with by this report comply with for the year ended on that date.

V. NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse MAY 10, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 221 ALPS HOSPITAL PRIVATE LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 407,000 407,000

LOAN FUNDS Unsecured Loan 2 109,988,988 14,317,451 110,395,988 14,724,451

APPLICATION OF FUNDS CAPITAL WORK IN PROGRESS 3 122,546,553 15,110,491 122,546,553 15,110,491

CURRENT ASSETS, LOANS AND ADVANCES Cash and Bank Balances 4 452,127 57,678 Loans and Advances 5 1,382,236 521,640 1,834,363 579,318

Less: CURRENT LIABILITIES AND PROVISIONS 6 14,545,211 1,022,570 14,545,211 1,022,570

NET CURRENT ASSETS (12,710,848) (443,252)

PROFIT AND LOSS ACCOUNT 560,283 57,212 110,395,988 14,724,451

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the For and on behalf of the Board of Directors Balance Sheet This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Director Partner ARVIND KAKAR Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants

New Delhi MAY 10, 2007

222 MAX INDIA ANNUAL REPORT 2006-07 ALPS HOSPITAL PRIVATE LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

INCOME Other Income 2,315 - 2,315 - EXPENDITURE Administrative and other expenses 8 502,149 - 502,149 -

(LOSS) FOR THE YEAR (499,834) -

Provision for Taxation - Fringe Benefit Tax 3,237 -

(LOSS) FOR THE YEAR AFTER TAX (503,071) -

(LOSS) BROUGHT FORWARD FROM THE PREVIOUS YEAR (57,212) (57,212)

BALANCE CARRIED FORWARD TO THE BALANCE SHEET (560,283) (57,212)

Earning Per Share (Rs. per equity share of Rs. 10 each) (Refer Note B4 on Schedule 9) - Basic (12.36) - - Diluted (12.36) -

No. of Shares used in computing earning per share - Basic 40,700 40,700 - Diluted 40,700 40,700

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Director Partner ARVIND KAKAR Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants

New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 223 ALPS HOSPITAL PRIVATE LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

A. CASH FLOW FROM OPERATING ACTIVITIES Net (Loss) before Tax (499,834) - Operating Profit Before Working Capital Changes (499,834) -

Adjustments for: Other Receivables (860,596) - Trade Payables 13,522,641 - Cash Generated From Operations 12,162,211 - Direct Taxes Refunded/(Paid) - Net (3,237) - Cash From / (Used in) Operating Activities 12,158,974 -

B. CASH FLOW FROM INVESTING ACTIVITIES Capital Work in Progress (107,436,062) (2,847,861) Cash From/ (Used In) Investing Activities (107,436,062) (2,847,861)

C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Short Term Borrowings 95,671,537 2,540,000 Cash From/ (Used In) Financing Activities 95,671,537 2,540,000

Net Increase/(Decrease) in Cash And Cash Equivalents 394,449 (307,861)

Cash and Cash Equivalents - Opening Balance 57,678 365,539 Cash and Cash Equivalents - Closing Balance 452,127 57,678

Notes 1 The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Cash in hand and balances with banks: RUPEES Schedule As at As at March 31, 2007 March 31, 2006 Cash in Hand 72,250 52,123 Balance with banks 379,877 5,555 Total 452,127 57,678

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Cash Flow Statement For and on behalf of the Board of Directors This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Director Partner ARVIND KAKAR Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants

New Delhi MAY 10, 2007

224 MAX INDIA ANNUAL REPORT 2006-07 ALPS HOSPITAL PRIVATE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL AUTHORISED 1,250,000 (Previous year 1,250,000) Equity Shares of Rs 10/- each 12,500,000 12,500,000 12,500,000 12,500,000 ISSUED, SUBSCRIBED AND PAID UP 40,700 (Previous year 40,700) Equity Share of Rs 10/- each 407,000 407,000 - 40,700 Equity Shares (Previous year Nil Equity Shares) are held by Max Medical Services Limited, the holding company and its nominees. (Refer Note B1 on Schedule 9) 407,000 407,000

SCHEDULE-2 UNSECURED LOANS -From Erstwhile Directors - 13,317,451 -From Others - 1,000,000 -From Holding Company, Max Medical Services Limited 109,988,988 - 109,988,988 14,317,451

SCHEDULE-3 CAPITAL WORK IN PROGRESS (Refer Notes A2 and A3 on Schedule 9) Opening Balance 15,110,491 10,008,489 Addition during the year 83,186,212 4,111,183 Transfer from pre-operative expenses 24,249,850 990,819 (Refer Schedule 7) Closing Balance 122,546,553 15,110,491

Capital Work In Progress as at March 31, 2007 includes: -Capital Advances of Rs. 13,304,438 (Previous year Nil) -Pre-operative Expenses of Rs. 25,612,867 (Previous year Rs. 1,363,017)

SCHEDULE-4 CASH AND BANK BALANCES Cash-in-hand 72,250 52,123 Balance with Banks -In Current Accounts 279,877 5,555 -In Fixed Deposit 100,000 - 452,127 57,678

SCHEDULE-5 LOANS AND ADVANCES (Considered good, unless otherwise stated) Unsecured Water harvesting - 121,640 Interest Accured but not Due 676 - Security Deposit 1,346,076 400,000 Prepaid Expenses 35,484 - 1,382,236 521,640

MAX INDIA ANNUAL REPORT 2006-07 225 ALPS HOSPITAL PRIVATE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-6 CURRENT LIABILITIES Sundry Creditors -Total outstanding of creditors other than small scale industrial undertakings * 7,545,263 761,815 -Interest Accured but not Due** 5,148,651 - -Other Liabilities 1,851,297 260,755 14,545,211 1,022,570 * Includes payable to Holding company Rs. 1,127,513 (Previous year Nil) ** Payable to Holding Company Rs. 5,148,651 (Previous year NIL)

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-7 PREOPEARTIVE EXPENSES

Salaries Wages and Bonus 1,083,521 142,000 Contribution to Provident and other funds 43,992 - Rates and Fees - 348,458 Legal and Professional 1,705,918 198,300 Travelling and Conveyance 570 30,000 Repair and Maintenance 489,043 17,500 Electricity and Water 2,209,045 99,119 Watch and Ward 321,657 - Printing and Stationery 49,841 - Lease charges 501 501 Other Expenses- Consultant 1,512,593 147,774 Consultant Expenses* 9,915,997 - Consumables 21,754 - Staff Welfare 43,101 - Communication Expenses 63,945 - Insurance 7,261 - Interest Expenses 6,638,282 1,045 Bank Charges 9,970 320 Foreign Fluctuation Exp. 8,585 - Audit Fees 123,464 3,479 Miscellaneous Expenses 810 2,323 24,249,850 990,819 * Transfer from holding company amounting to Rs. 2,152,804 (Previous year Nil)

SCHEDULE-8 ADMINISTRATIVE AND OTHER EXPENSES Advances Written Off 121,640 - Rates and Fees 380,509 - 502,149 -

226 MAX INDIA ANNUAL REPORT 2006-07 ALPS HOSPITAL PRIVATE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-9

A SIGNIFICANT ACCOUNTING POLICIES

1 Accounting Conventions The accompanying financial statements are prepared in accordance with General Accepted Accounting Principles in India (“GAAP”), under the historical cost convention, on an accrual basis. GAAP comprises mandatory accounting standard issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956, as adopted consistently by the Company.

2 Fixed Assets a) Fixed Assets are stated at their original cost including freight, duties, taxes and other incidental expenses relating to acquisition and installation. b) Expenses of revenue nature, which can be regarded as incidental and related to the fixed assets are transferred to “Preoperative Expenditure Pending Capitalisation”. These expenses are allocated to fixed assets in the year of commencement of the related project.

3 Depreciation a) Depreciation is charged on the straight line method at the rates specified in schedule XIV of the Companies Act, 1956 on a prorata basis. b) Assets costing not more than Rs 5,000/- each individually have been depreciated at 100%.

4 Borrowing Cost Borrowing cost that are directly attributable to the acquisition, installation of the fixed assets have been capitalized in accordance with the Accounting Standard 16 “Borrowing Cost” issued by the Institute of Chartered Accountants of India. Other borrowing costs are recognized as an expense in the period in which they are incurred. Capitalization of the borrowing costs ceases when substantially all activities necessary to prepare the qualifying assets for its intended use or sale are complete.

5 Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. Provision for tax consists of current tax and deferred tax. A provision is made for income tax annually based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. The differences that result between the profit offered for income tax and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying value at each balance sheet date.

6 Inventories Inventories are valued at lower of cost or net realizable value.

7 Miscellaneous Expenditure Preliminary expenses are amortised over a period of 10 years.

8 Provision and Contingencies A provision is recognized when there is a present obligation as a result of past events and it is probable that an outflow of a resource will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each Balance Sheet date and adjusted to reflect the current estimates. Contingent liabilities are disclosed after an evaluation of facts and legal aspects of the matter involved.

B NOTES TO ACCOUNTS

1 The company became a 100% subsidiary of Max Medical Services Limited on April 6, 2006.

2 Contingent Liability - Capital Contracts : RUPEES Particulars Current Year Previous Year Estimated value of Contracts remaining to be executed 108,656,724 - Less: Capital Advances (13,304,438) - Net Amount 95,352,286 -

MAX INDIA ANNUAL REPORT 2006-07 227 ALPS HOSPITAL PRIVATE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

3 The company has in its favour a sub lease for a plot of land in Gurgaon, for an initial period of 97 years, which can be further renewed for two terms of 97 years each. The plot of land measures 1.23 acres, and the designated usage is for healthcare facility. Accordingly the company has incurred an amount of Rs. 122,546,553/- towards constructing and setting up a healthcare facility on the said land, which is disclosed as capital work in progress.

4 Earning Per Share:

Particulars Current Year Previous Year

Basic & Diluted a) (Loss) after tax (Rs.) (503,071) - b) Weighted Average number of Equity Shares 40,700 40,700 c) Earning Per Share (12.36) - d) Outstanding at the beginning of the year 40,700 40,700 e) Outstanding at the end of the year 40,700 40,700

5 Related Parties (as identified by the Management) are classified as under:

Ultimate Holding Company Max India Ltd. Holding Company Max Medical Services Limited, Max Healthcare Institute Ltd (Holding company for Max Medical Services Limited) Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Ateev Ltd., Neeman Medical International BV, Neeman Medical International NV, Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A., Max UK Ltd., Pharmax Corporation Ltd., Neeman Medical International (Asia) Ltd., Max HealthStaff International Ltd. (w.e.f. June 30, 2005), Max Estates Ltd.*, Malsi Estates Ltd.*, Max Asia Pac Ltd.**, Max Telecom Ventures Ltd.** * Fellow Subsidiaries till May 31, 2006 ** Fellow Subsidiaries till November 30, 2005

Summary of significant related party transactions (as identified by management) carried out in ordinary course of business are as follows:

Particulars Max Medical Services Limited (Holding Company) 1 Loan Taken 109,988,988 (-)

2 Services Received 1,127,513 (-)

3 Interest accrued 6,638,282 (-) 4 Amount Outstanding

a. Against Loan taken 109,988,988 (-)

b. Interest Payable 5,148,651 (-)

c. Other Payable 1,127,513 (-) Previous years figures are given in brackets

6 The provisions of Accounting Standard 17 on Segment Reporting issued by the Institute of Chartered Accountants of India are not applicable to the Company as the Company operates in a single business segment of construction of hospitals and leasing of medical and other equipment. The company operates in single geographical segment.

228 MAX INDIA ANNUAL REPORT 2006-07 ALPS HOSPITAL PRIVATE LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

7 Auditors’ Remuneration: RUPEES Particulars Current Year Previous Year Audit Fees * 112,240 3,479 Out of Pocket Exp.* 11,224 - Total 123,464 3,479 * Includes Service Tax and Education Cess

8 Previous year’s figures have been regrouped/reclassified, wherever considered necessary, to conform to current year’s classification.

9 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

For and on behalf of the Board of Directors

New Delhi B. ANANTHARAMAN Director MAY 10, 2007 ARVIND KAKAR Director

MAX INDIA ANNUAL REPORT 2006-07 229 ALPS HOSPITAL PRIVATE LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 3 6 4 1 3 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placements/Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 1 1 0 3 9 6 1 1 0 3 9 6 SOURCES OF FUND Paid-up Capital Reserves and Surplus 4 0 7 N I L Share Application Money Secured Loans N I L N I L Unsecured Loans Deferred Tax Liability 1 0 9 9 8 9 N I L

APPLICATION OF FUNDS Net Fixed Assets Investments 1 2 2 5 4 7 N I L +- Net Current Assets Misc. Expenditure 1 2 7 1 1 N I L Accumulated Losses 5 6 0 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 2 5 0 2 +- Profit/Loss before Tax +- Profit/Loss after Tax 5 0 0 5 0 3 Earning Per Share in Rupees Dividend Rate (%) Basic - 1 2 . 3 6 N I L

V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description H O S P I T A L

230 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED MAX HEALTHSTAFF INTERNATIONAL LIMITED

DIRECTORS’ REPORT

Your Directors have pleasure in presenting their Fourth Annual Report along with the Audited Accounts for the year ended March 31, 2007.

OPERATIONS Addressing the Shortage for Healthcare Professionals Overseas: Over the last three years, India has emerged as a large supplier of nurses to the US, with Indian nurses gaining wide acceptance in the hospitals there. At present, India has over 2,200 nursing school producing nearly 80,000 graduates per year. With the start of NCLEX-RN examination centers in India in the year 2006, the industry got a major thrust attracting many new, small and large-scale companies entering the sector. The competition will grow fierce with several global players expected to enter Indian market soon. According to industry estimate, demand for trained nurses in the US alone is expected to reach 800,000 by 2020. The accelerating demand-supply gap of healthcare staff is no more confined to the US, Middle East, and Europe alone, it has spilled over to other countries namely Canada, Ireland and Australia as well. Apart from nurses, the shortage also exists in other allied healthcare resources such as therapists, pharmacists and radiographers etc. The Max Overseas Nursing Program has continued to grow during the year. With over 1000 nurses already registered in the program, it is one of the largest and most organized programs in the country. 55 Nurses have already been successfully placed in well established Hospitals across the US and many more are expected to reach US shores in the coming months. MHS is considering the expansion of its operations to cover allied healthcare staffing personnel including Physical therapists, for placement in US based hospitals, nursing homes, clinics and surgical and ambulatory care centers on a long term assignments. The Company is also evaluating expansion of its network to other cities of India in addition to four existing training and sourcing centers in New Delhi, Chandigarh, Kottayam and Chennai.

MARKETING ARRANGEMENTS MHS has entered into non-exclusive strategic alliances with large reputed staffing companies in the US to provide healthcare personnel staffing to hospitals and healthcare facilities in US. There are three alliance partners presently. Your Company remains highly optimistic regarding the long-term opportunities thrown up by this business.

VISA RETROGRESSION The sector is significantly dependent on the ability of its contract workers to be able to receive valid immigration visas (EB-3 visa, green card) in a timely manner. There is a cap on the maximum number of visas that can be issued by the USCIS, which got exhausted in November 2006 leading to visa retrogression. Until the visa retrogression is lifted, MHS will not be able to place any more nurses in the US. The issue is currently being debated in the US. The best-case scenario envisages lifting of all visa caps for nurses and physical therapists until 2017. However, there is no visibility on the timelines for the immigration reforms.

FINANCIAL RESULTS Gross revenue for the year under review was Rs. 257.69 lacs against Rs. 56.64 lacs in the previous year. The Company incurred a net loss after tax of Rs. 390.35 lacs during the current year against a loss of Rs. 485.83 lacs in the previous year.

DIVIDEND In view of the losses, your Directors are unable to recommend any dividend for the year under review.

DIRECTORS In accordance with the provisions of the Companies Act 1956 and the Company’s Articles of Association, Dr. Narottam Puri and Mr. Analjit Singh are due to retire by rotation and are eligible for re-appointment.

PARTICULARS OF DEPOSITS Your Company has not accepted any deposits from the public during the year under review.

DIRECTORS’ RESPONSIBILITY STATEMENT As per the provisions of Section 217(2AA) of the Companies Act,1956, the Directors confirm that: i in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii the Directors had selected such accounting policies and applied them 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 at the end of the financial year and of the profit or loss of the Company for that period; iii the Directors had 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 the Company and for preventing and detecting fraud and other irregularities; and iv the Directors had prepared the annual accounts, on a going concern basis.

ADDITIONAL INFORMATION As your Company does not carry on any manufacturing activity, information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not furnished herewith.

232 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

DIRECTORS’ REPORT

PARTICULARS OF EMPLOYEES Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 for the year ended March 31, 2007 is as under:

Name Age Designation Nature Remuneration Qualifications Date of Experience Last Designation (Yrs) of duties (Rs.) commencement Employment of employment held

(a) Employed throughout the year and was in receipt of remuneration of not less than Rs.24, 00,000/- per annum : Nil

(b) Employed for part of the year and was in receipt of remuneration of not less than Rs.2,00,000/- per month.

Mr Ajay 44 Chief Executive Operations 20,22,46 B.E., PGDBM 08.05.2006 21 NIIT Ltd Vice President Mohan Goel Officer

Notes: 1. Remuneration includes salary, allowances, value of rent free accommodation, bonus, medical reimbursement, leave travel assistance, Company’s contribution to Provident, Pension and Superannuation funds, leave encashment and monetary value of perquisites. 2. The above employee does not hold by himself or along with his spouse and dependent children 2% or more of Equity Shares of the Company. 3. He is not a relative of any Director of the Company.

AUDITORS M/s Nangia & Co., Chartered Accountants, Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received from them a Certificate to the effect that their re-appointment, if made, will be in accordance with the limits specified under Section 224(1B) of the Companies Act, 1956.

ACKNOWLEDGEMENTS Your Directors acknowledge and appreciate the support received from shareholders, its business partners and employees.

For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH JULY 20, 2007 Chairman

MAX INDIA ANNUAL REPORT 2006-07 233 MAX HEALTHSTAFF INTERNATIONAL LIMITED

AUDITORS’ REPORT

1. We have audited the attached Balance Sheet of Max HealthStaff to the best of our knowledge and belief were necessary for the International Limited, New Delhi as at March 31, 2007 and the purpose of our audit; related Profit and Loss Account and Cash Flow Statement for the (b) In our opinion, proper books of accounts as required by law year ended on that date annexed thereto, which we have signed have been kept by the Company, so far as appears from our under reference to this report. These financial statements are the examination of the books; responsibility of the Company’s management. Our responsibility is (c) The Balance Sheet, Profit and Loss Account and Cash Flow to express an opinion on these financial statements based on our Statement dealt with by this report are in agreement with the audit. books of account; (d) In our opinion, the Balance Sheet, Profit and Loss Account and 2. We conducted our audit in accordance with auditing standards Cash Flow Statement dealt with by this report comply with the generally accepted in India. Those standards require that we plan requirements of Accounting Standards referred to in sub- and perform the audit to obtain reasonable assurance about whether section (3C) of Section 211 of the Act, to the extent applicable. the financial statements are free of material misstatement. An audit (e) On the basis of written representations received from the includes examining on a test basis, evidence supporting the amounts Directors of the Company and taken on record by the Board of and disclosures in the financial statements. An audit also includes Directors, none of the Directors is disqualified as on March 31, assessing the accounting principles used and significant estimates 2007 from being appointed as a Director of the Company in by management, as well as evaluating the overall financial terms of clause (g) of sub-section (1) of Section 274 of the Act. presentation. We believe that our audit provides a reasonable basis (f) In our opinion and to the best of our information and according for our opinion. to the explanations given to us, the said financial statements read together with ‘Significant Accounting Policies & Notes 3. As required by the Companies (Auditors’ Report) (Amendment) to Accounts’ in Schedule ‘13’, give the information required Order, 2004, issued by the Central Government in terms of sub- by the Act, in the manner so required and give a true and fair section 4A of section 227 of the Companies Act, 1956, (hereinafter view in conformity with the accounting principles generally referred to as the ‘Act’) we give in an annexure, a statement on accepted in India: the matters specified in paragraphs 4 and 5 of the said order, to (i) in the case of the Balance Sheet, of the state of affairs of the extent applicable. the Company as at March 31, 2007; (ii) in the case of the Profit and Loss Account, of the loss of 4. Further to our comments in the annexure referred to in paragraph (3) the Company for the year ended on that date; and above, we report that: (iii) in the case of Cash Flow Statement, of the cash flows for (a) We have obtained all the information and explanations which the year ended on that date.

RAKESH NANGIA FCA, Partner Membership No. 70776

New Delhi For Nangia & Company MAY 12, 2007 Chartered Accountants

234 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

AUDITORS’ REPORT

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF AUDITORS’ REPORT authorities. According to the information and explanations given OF EVEN DATE ON THE FINANCIAL STATEMENTS FOR THE YEAR to us, there were no undisputed amounts payable in respect of ENDED ON MARCH 31, 2007. Provident Fund, Employees’ State Insurance, Income-Tax, Wealth On the basis of such checks as we considered appropriate and according Tax, Service Tax, Cess and any other statutory dues as applicable, to the information and explanation given to us during the course of audit, outstanding as at the last day of the financial year concerned we report that: - for a period of more than six months from the date they became payable. 1. (a) The Company is maintaining proper records showing full particulars, (b) According to the records of the Company, there are no dues of including quantitative details and situation of fixed assets. Provident Fund, Employees’ State Insurance, Income-tax, Service (b) As explained to us, all the fixed assets have been physically verified Tax, Cess and any other statutory dues as applicable to it, which by the management according to a regular program of verification have not been deposited on account of any dispute. which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies 10. As the Company has been registered for less than five years, we are between book records and the physical inventory have been not required to comment whether the accumulated losses of the noticed on such verification. Company are more than fifty percent of its net worth and whether (c) In our opinion and according to the information and explanations the Company has incurred cash losses during the financial year covered given to us, a substantial part of fixed assets has not been disposed by our audit and in the immediately preceding previous financial year. off by Company during the year. 11. Based on our audit procedures and according to the information and 2. The Company being a Service Company engaged in the field of Health- explanations given by the management, we are of the opinion that care Staffing, carries no inventories, hence the provisions of Clause the Company has not defaulted in repayment of its dues of any 4(ii)(a) to 4(ii)(c) of the Companies (Auditors’ Report) (Amendment) financial institution or bank during the year. Order, 2004 are not applicable. 12. The Company has not granted any loans and advances on the basis 3. (a) In our opinion and according to the information and explanations of security by way of pledge of shares and other securities. given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the 13. The provisions of any special statute applicable to chit fund/nidhi/mutual register maintained under Section 301 of the Act. benefit fund/societies are not applicable to the Company. (b) As the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained 14. Based on our examination of the records and documents of the under Section 301 of the Act, the provisions of clause 4(iii)(b), Company, and according to the information and explanation given to 4(iii)(c) & 4(iii)(d) are not applicable. us, we are of the opinion that the Company is not dealing or trading (c) In our opinion and according to the information and explanations in shares, securities, debentures and other investments, and therefore given to us, the Company has not taken any loans, secured or clause (xiv) of The Companies (Auditors’ Report) (Amendment) Order, unsecured, from companies, firms or other parties listed in the 2004 is not applicable to the Company. Register maintained under Section 301 of the Companies Act, 1956. 15. Based on our examination of the records of the Company and according to the information and explanation given to us, we are of the opinion 4. In our opinion and according to the information and explanations that the Company has not given guarantee for loans taken by others given to us, there are adequate internal control procedures from banks or financial institutions. commensurate with the size of the Company and the nature of its business for purchase of fixed assets and for sales of services. Further, 16. The Company has not obtained any term loans that were not applied on the basis of our examination and according to the explanations for the purposes for which these were raised. given to us, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control 17. Based on the information and according to the information and system of the Company. explanations given to us and on an overall examination of the balance sheet of the Company, in our opinion, there are no funds raised on 5. Based on the information and explanations given to us, there are no a short term basis which have been used for long term investment or transactions that need to be entered into the register in pursuance vice versa. of Section 301 of the Act. 18. The Company has not made any preferential allotment of shares to 6. In our opinion and according to information given to us, the Company parties and companies covered in the Register maintained under has not accepted deposits from the public within the meaning of section 301 of the Companies Act, 1956 during the year. Section 58A and 58AA of the Companies Act, 1956 and rules framed there under. 19. The Company has not issued any debentures during the year.

7. In our opinion, the Company has an internal audit system, which is 20. The Company has not raised any money by public issue during the commensurate with the size and nature of its business. year.

8. The Central Government of India has not prescribed the maintenance 21. Based upon audit procedures performed and information and of cost records under Section 209(1)(d) of the Act, for any of the explanations given by the management of the Company, we report products of the Company. no fraud on or by the Company has been noticed or reported during the course of our audit. 9. (a) In our opinion and according to the information and explanations RAKESH NANGIA given to us and according to the books and records as produced FCA, Partner and examined by us, the Company is regular in depositing undisputed statutory dues including Provident Fund, Employees’ Membership No. 70776 State Insurance, Income-Tax, Wealth Tax, Service Tax, Cess and any other statutory dues as applicable with the appropriate New Delhi For Nangia & Company MAY 12, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 235 MAX HEALTHSTAFF INTERNATIONAL LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 39,450,000 39,450,000

LOAN FUNDS Secured Loans 2 - 181,747 Unsecured Loans 3 121,662,179 83,984,731

Deferred Tax Liability (Net) 2,370,586 2,480,169 (Refer Note II (e) on Schedule 13) Total 163,482,765 126,096,647

APPLICATION OF FUNDS FIXED ASSETS 4 Gross Block 29,320,400 20,468,673 Less : Accumulated Depreciation 13,204,221 9,395,575 Net Block 16,116,179 11,073,098 Capital Work in Progress - 1,780,175 16,116,179 12,853,273

CURRENT ASSETS, LOANS AND ADVANCES 5 Sundry Debtors 5,260,267 2,831,617 Cash and Bank Balances 2,155,840 4,289,318 Loans and Advances 4,855,781 3,929,272 12,271,888 11,050,207 Less : CURRENT LIABILITIES AND PROVISIONS 6 Current Liabilities 12,927,764 8,373,631 Provisions 385,614 121,443 13,313,378 8,495,074

NET CURRENT ASSETS (1,041,490) 2,555,133

MISCELLANEOUS EXPENDITURE 7 1,369,671 2,684,556 (To the extent not written off or adjusted)

Profit and Loss Account 147,038,405 108,003,685 Total 163,482,765 126,096,647

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

Schedule 1 to 13 form an integral part of Accounts. For and on behalf of the Board of Directors

As per our report of even date attached

RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner NAROTTAM PURI Director Membership No. 70776 ABHISHEK ANAND Company Secretary For Nangia & Company Chartered Accountants

New Delhi MAY 12, 2007

236 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Placement Revenue 24,377,464 3,685,656 Other Income 8 1,391,334 1,978,337 Total 25,768,798 5,663,993

EXPENDITURE Candidate Related Expenses 9 13,660,520 7,660,024 Personnel Expenses 10 19,747,157 12,406,721 General and Administrative Expenses 11 24,088,267 19,130,656 Financial Expenses 12 116,325 6,870,663 Depreciation 4 5,419,414 3,977,608 Amortization of Preliminary Expenses 1,314,885 1,314,885 (Refer Note II (c) on Schedule 13) Total 64,346,568 51,360,557

LOSS BEFORE TAX 38,577,770 45,696,564

Tax Expense - Provision for Income Tax - - - Fringe Benefit Tax 566,533 406,000 - Deferred Tax for the year (109,583) 2,480,169 456,950 2,886,169

LOSS AFTER TAX 39,034,720 48,582,733

Loss Brought Forward 108,003,685 59,420,952

LOSS CARRIED FORWARD TO THE BALANCE SHEET 147,038,405 108,003,685

Earning Per Share (Rs. per equity share of Rs. 10/- each) (Refer Note II (f) on Schedule 13) -Basic and Diluted (9.89) (12.32)

Number of Shares used in computing earning per share -Basic and Diluted 3,945,000 3,945,000

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

Schedule 1 to 13 form an integral part of Accounts. For and on behalf of the Board of Directors

As per our report of even date attached

RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner NAROTTAM PURI Director Membership No. 70776 ABHISHEK ANAND Company Secretary For Nangia & Company Chartered Accountants

New Delhi MAY 12, 2007

MAX INDIA ANNUAL REPORT 2006-07 237 MAX HEALTHSTAFF INTERNATIONAL LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES Loss Before Tax (38,577,770) (45,696,564)

Adjustments for: Depreciation 5,419,414 3,977,608 Amortization of Preliminary Expenses 1,314,885 1,314,885 Provision for Gratuity 157,296 7,000 Provision for Leave Encashment 99,342 (81,801) Net Loss on Sale of Fixed Assets 189,394 56,492 Interest Expense 54,928 6,796,005 Interest Income (67,030) (33,959) Assets Written Off 581,528 - Liability/Provision no Longer Required Written Back (561,651) (1,670,121) Unrealised Foreign Exchange Loss/ (Gain) 56,612 (3,787) Operating Loss Before Working Capital Changes (31,333,052) (35,334,242)

Adjustments For: Account Receivable (2,486,525) (2,765,848) Other Current Assets (2,346,688) (389,101) Accounts Payable and Accrued Expenses 5,767,354 2,786,755 Cash Used in Operations (30,398,911) (35,702,436)

Direct Taxes Paid (554,098) (326,210) Cash Used in Operating Activities (30,953,009) (36,028,646)

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (9,584,263) (2,342,881) Capital Work in Progress - (824,501) Sale of Fixed Assets 963,021 390,560 Cash Used in Investing Activities (8,621,242) (2,776,822)

C. CASH FLOW FROM FINANCING ACTIVITIES Loan from Parent Company 37,677,448 42,778,243 Interest Paid (54,928) (59,119) Secured Loans Taken 800,000 - Repayment of Secured Loans (981,747) (981,450) Cash from Financing Activities 37,440,773 41,737,674

Increase in Cash and Cash Equivalents (2,133,478) 2,932,206 Cash and Cash Equivalents at the Beginning of the Year 3,289,318 357,112 Cash and Cash Equivalents at the End of the Year 1,155,840 3,289,318 Notes 1) The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2) Cash and Cash Equivalents at the end of the year consist of Cash and Balances with Banks (Refer Schedule-5). SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

Schedule 1 to 13 form an integral part of Accounts. For and on behalf of the Board of Directors As per our report of even date attached RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner NAROTTAM PURI Director Membership No. 70776

For Nangia & Company ABHISHEK ANAND Company Secretary Chartered Accountants New Delhi MAY 12, 2007

238 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

Particulars As at As at March 31, 2007 March 31, 2006

SCHEDULE-1 SHARE CAPITAL Authorized Capital 5,000,000 Equity Shares of Rs. 10/- each 50,000,000 50,000,000 (Previous year 5,000,000 Equity Shares of Rs. 10/- each)

Issued, Subscribed and Paid up: 3,945,000 Equity Shares of Rs. 10/- each fully paid up 39,450,000 39,450,000 (Previous year 3,945,000 Equity Shares of Rs. 10/- fully paid up)

Of the above, 3,945,000 (Previous year 3,945,000) equity shares are held by Max India Limited, the holding company

SCHEDULE-2 SECURED LOANS From banks - Secured against hypothecation of vehicles - 181,747 Total - 181,747

SCHEDULE-3 UNSECURED LOANS Loan from Max India Limited (the holding company) 121,662,179 83,984,731 (Repayable on demand) Total 121,662,179 83,984,731

SCHEDULE-4 FIXED ASSETS

Particulars Gross Block Depreciation Net Block

As at Additions Deletions As at As at Additions Deletions As at As at As at April 1, March 31, April 1, March 31, March 31, March 31, 2006 2007 2006 2007 2007 2006 Tangible Assets Leasehold Improvements 1,742,715 3,501,382 1,606,120 3,637,977 1,006,108 554,611 1,168,360 392,359 3,245,618 736,607 Computers 2,014,550 3,713,659 - 5,728,209 712,907 749,437 - 1,462,344 4,265,865 1,301,643 Furniture and Fixtures 710,901 1,170,625 92,714 1,788,812 623,511 988,316 43,668 1,568,159 220,653 87,390 Office Equipments 1,077,906 1,610,773 348,021 2,340,658 351,258 219,330 237,751 332,837 2,007,821 726,648 Vehicles 1,149,457 800,000 1,297,857 651,600 195,406 104,480 160,989 138,897 512,703 954,051

Intangible Assets Business Development 13,773,144 - - 13,773,144 6,506,385 2,754,629 - 9,261,014 4,512,130 7,266,759 Software - 1,400,000 - 1,400,000 - 48,611 - 48,611 1,351,389 -

TOTAL 20,468,673 12,196,439 3,344,712 29,320,400 9,395,575 5,419,414 1,610,768 13,204,221 16,116,179 11,073,098

Previous year 19,903,116 1,078,819 513,262 20,468,673 5,484,177 3,977,608 66,210 9,395,575 11,073,098 14,418,939

Capital Work in Progress - 1,780,175

Note : 1) Leasehold improvements represent civil and other improvement done at the leased premises of the Company. 2) Deletions in office equipments include Rs. 35,072 (net) charged off to library books during the year.

MAX INDIA ANNUAL REPORT 2006-07 239 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

Particulars As at As at March 31, 2007 March 31, 2006 SCHEDULE-5 CURRENT ASSETS, LOANS AND ADVANCES Sundry Debtors Unsecured Debts exceeding six months - Considered good - - - Considered doubtful - -

Other Debts - Considered good 5,260,267 2,831,617 5,260,267 2,831,617 Cash and Bank Balances Cash in Hand 39,700 16,363 Balances with Scheduled Banks - In Current Accounts 1,116,140 3,272,955 - In Fixed Deposit Accounts* 1,000,000 1,000,000 2,155,840 4,289,318 Loans and Advances (Considered Good, unless otherwise stated) Unsecured Advances recoverable in cash or in kind or for value to be received 2,964,228 3,005,110 Income Tax Receivable 46,484 38,963 Prepaid Expenses 164,672 112,051 Interest Receivable 114,485 54,976 Security Deposits 1,565,912 718,172 4,855,781 3,929,272

Total 12,271,888 11,050,207

Note: * Fixed Deposits are held under lien by Canara Bank against guarantees given to The President of India, acting through the Protector General of Emigrants, Ministry of Overseas Indian Affairs, New Delhi

Amounts due from companies under the same management Neeman Medical International (Asia) Ltd. 10,674 459,587

Maximum amount outstanding during the year from companies under the same management Neeman Medical International (Asia) Ltd. 868,905 459,587

SCHEDULE-6 CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry Creditors - Total outstanding dues of small scale industrial undertakings - - - Total outstanding dues of creditors other than small scale industrial undertakings 5,683,481 3,793,250 Other Liabilities 7,244,283 4,580,381 12,927,764 8,373,631 Provisions Leave Encashment 138,785 39,443 Gratuity 164,296 7,000 Provision for Fringe Benefit Tax 82,533 75,000 385,614 121,443

Total 13,313,378 8,495,074

240 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

Particulars As at As at March 31, 2007 March 31, 2006 SCHEDULE-7 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) (Refer Note I (j) of Schedule 13 ) Preliminary Expenses 1,369,671 2,684,556

Total 1,369,671 2,684,556

Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-8 OTHER INCOME Interest on Fixed Deposits 67,030 33,959 (Tax Deducted at Source Rs.7,521 (Previous Year Rs 4,790)) Liabilities/Provisions No Longer Required Written Back 561,651 1,670,121 Gain on Foreign Exchange Fluctuation 120,555 7,277 Miscellaneous Income 642,098 266,980

Total 1,391,334 1,978,337

SCHEDULE-9 CANDIDATE RELATED EXPENSES Training Costs 1,438,887 2,665,844 Examination Fees 3,478,937 2,486,357 Immigration Costs 7,087,543 2,462,998 Lodging charges 1,353,158 - Library Books 293,995 - Other Expenses 8,000 44,825

Total 13,660,520 7,660,024

SCHEDULE-10 PERSONNEL EXPENSES Salaries, Wages and Bonus 16,484,134 11,260,421 Contribution to Provident and Other Funds 850,273 421,836 Recruitment Expenses 1,816,975 443,410 Staff Welfare 595,775 281,054

Total 19,747,157 12,406,721

MAX INDIA ANNUAL REPORT 2006-07 241 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-11 GENERAL AND ADMINISTRATIVE EXPENSES Rent 6,979,347 5,839,280 Repairs and Maintenance- Others 2,159,903 1,791,849 Insurance 41,842 191,364 Rates and Taxes - 326,661 Electricity and Water Charges 1,736,929 1,336,641 Printing and Stationery 852,455 513,253 Traveling and Conveyance 3,291,658 2,925,868 Communication Expenses 1,583,758 1,278,482 Legal and Professional Expenses 2,876,984 3,062,833 Business Promotion 163,097 71,793 Brokerage 112,128 34,112 Conference Expenses 202,943 170,614 Advertisement and Publicity 2,530,772 1,377,008 Loss on Foreign Exchange Fluctuation 387,315 78,870 Books and Periodicals 19,132 28,117 Membership and Subscription 23,055 36,685 Charity and Donation 2,200 1,100 Gifts 72,362 - Fixed Assets Written Off 546,456 - Website Development Charges 165,323 - Loss on Sale/Disposal of Fixed Assets 195,394 - Less: Profit on Sale/Disposal of Fixed Assets (6,000) 189,394 56,492 Miscellaneous Expenses 151,214 9,634

Total 24,088,267 19,130,656

SCHEDULE-12 FINANCIAL EXPENSES Interest - On Vehicle Loans 54,928 59,119 - On Unsecured Loans - 6,736,886 54,928 6,796,005 Bank Charges 61,397 74,658

Total 116,325 6,870,663

242 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-13

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS I SIGNIFICANT ACCOUNTING POLICIES: a) Accounting basis and convention The accompanying financial statements are prepared in accordance with Generally Accepted Accounting Principles in India (“GAAP”), under the historical cost convention, on the accrual basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956, as adopted consistently by the Company. b) Revenue Recognition a) Revenue from overseas placement of Healthcare staff is recognized on the basis of time sheets received from Alliance Partners on accrual basis. b) Interest Income is recognized on a time proportion basis taking into account the amounts invested and the rate of interest. Income is stated in full with the tax thereon being accounted for under advance tax. c) Revenue from Registration and Training Fees is recognized on accrual basis. c) Fixed Assets a) Fixed Assets are stated at their original cost including freight, duties (net of CENVAT), taxes and other incidental expenses relating to acquisition and installation. b) Expenses of revenue nature, which can be regarded as incidental and related to project set-up, are transferred to “Preoperative expenses pending capitalization”. These expenses are allocated to fixed assets in the year of commencement of the related project. d) Intangible Assets Intangible assets are recognized as per the criteria specified in Accounting Standard (AS) 26 issued by the Institute of Chartered Accountants of India and are amortized as follows – a) The expenses incurred for purposes of business development including consultancy (commercial, legal and technical) and overseas traveling (market related) is capitalized under the Head “Business Development” as an intangible asset, to be amortized proportionately over a period of five years. b) Costs relating to acquisition of computer software are capitalized as Intangible Asset and amortized on a straight line basis over a period of six years. e) Borrowing Costs Borrowing costs, other than those that are directly attributable to the acquisition, construction or production of a qualifying asset, are recognized as an expense in the period in which they are incurred. f) Depreciation a) Depreciation is charged on straight-line method on a pro-rata basis at rates prescribed under Schedule XIV to the Companies Act, 1956. b) Leasehold improvements are depreciated over the respective lease periods. c) Assets costing not more than Rs. 5,000/- each are depreciated at hundred percent in the year of capitalization. g) Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. Provision for tax consists of current tax and deferred tax. A provision is made for income tax annually based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. The differences that result between the profit offered for income tax and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date. h) Employee benefits a) Gratuity In accordance with the Payment of Gratuity Act 1972, the Company provides gratuity, a benefit plan (the “Gratuity Plan”) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, based upon which, the Company contributes to a Master policy with Life Insurance Corporation of India.

MAX INDIA ANNUAL REPORT 2006-07 243 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

b) Provident Fund Eligible employees receive benefits from a provident fund, which is a defined contribution plan. The Company makes contributions under Provident Fund to “Max India Limited Employees Provident Fund Trust”. Both the employee and the Company make monthly contributions to the provident fund trust equal to a specified percentage of the covered employee’s salary. c) Leave Encashment Accrual for leave encashment is made on the basis of actuarial valuation done at the year end.

i) Foreign Exchange Transactions a) Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at year- end rates. b) The difference in translation of monetary assets and liabilities and realized gains and losses on foreign exchange transactions, other than relating to Fixed Assets, are recognized in the profit and loss account.

j) Miscellaneous Expenditure Preliminary expenses are amortized over a period of 5 years.

k) Leases Leases of assets under which the lessor effectively retains all the risks and benefits of ownership are classified as operating lease. Payments made under operating lease are charged to Profit and Loss Account on a straight-line basis over the period of lease.

II NOTES TO ACCOUNTS

a) Contingent Liabilities not provided for in respect of RUPEES Particulars Current Year Previous Year

Bank Guarantees 1,000,000 1,000,000 Claims against the Company not acknowledged as Debts 15,204,588 -

b) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 147,628 (Previous Year: Rs. 1,978,543)

c) Preliminary Expenses RUPEES Particulars Current Year Previous Year

Balance at beginning of the year 2,684,556 3,999,441 Add: Additions - - Less: Amount Amortized 1,314,885 1,314,885 Balance at end of the year 1,369,671 2,684,556

d) Leases Accounting for leases has been done in accordance with the Accounting Standard 19 issued by the Institute of Chartered Accountants of India. Following are the details of lease transactions for the year. i Financial Lease The company does not have any Finance Lease arrangement. ii Operating Lease RUPEES Particulars Current Year Previous Year

Lease rentals recognized in the Profit and Loss Account 6,979,347 5,839,280

The total of future minimum lease payments under non-cancellable leases are as follows: RUPEES Particulars Current Year Previous Year

Not Later than one year 341,120 1,050,464 Later than 1 year and not later than 5 years - - Later than five years - -

244 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES e) Deferred Tax

The break-up and movement of deferred tax assets and liabilities into major components is given below:

Particulars Opening as at Movement Closing As at April 01, 2006 During the year March 31, 2007 Deferred Tax Liability Depreciation 2,130,920 874,872 3,005,792 Deduction u/s 35D 638,044 (309,801) 328,243 2,768,964 565,071 3,334,035 Deferred Tax (Asset) Deduction u/s 43B (13,277) (88,741) (102,018) Other Provisions (275,518) (585,913) (861,431) (288,795) (674,654) (963,449) Net Deferred Tax Liability 2,480,169 (109,583) 2,370,586 f) Earnings per Share RUPEES Particulars Current Year Previous Year

Basic and Diluted Loss After Tax (Rs.) 39,034,720 48,582,733 Weighted average number of equity shares 3,945,000 3,945,000 EPS (Rs.) (9.89) (12.32) Equity Share Details (Nos) Outstanding as at the beginning of the year 3,945,000 3,945,000 Outstanding as at the end of the year 3,945,000 3,945,000 g) There are no sums payable to Small Scale / Ancillary Industrial Undertakings which are due for more than 30 days. Payments against supplies from small scale industries, if any, are made in accordance with agreed terms. Besides, there are no claims from the parties for interest on overdue payments. h) Related Parties (as identified by the management) are classified as:

Holding Company Max India Ltd.

Fellow Subsidiaries Max New York Life Insurance Co Ltd., Max Healthcare Institute Ltd., Max Medical Services Ltd., Neeman Medical International BV, Netherlands, Neeman Medical International NV, Netherlands, Neeman Medical International Inc, USA, Neeman Medical International, Latin America, S. A., Neeman Medical International (Asia) Ltd., Max Estates Ltd. (till May 31, 2006), Malsi Estates Ltd. (till May 31, 2006), Pharmax Corporation Ltd., Max Ateev Ltd., Max UK Ltd., UK, Alps Hospital Pvt Ltd. (w.e.f. April 6, 2006), Max Telecom Ventures Ltd. (till November 30, 2005), Max Asia Pac Ltd., Hong Kong (till November 30, 2005).

Employee Benefit Fund Max India Ltd. Employees Provident Fund Trust

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business RUPEES S. No. Particulars Holding Fellow Employee Subsidiaries Benefit fund 1 Fixed Assets Purchased 17,000 153,233 - (78,640) (988,585) (-) 2 Loans taken 34,700,000 - - (42,790,000) (-) (-)

MAX INDIA ANNUAL REPORT 2006-07 245 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

S. No. Particulars Holding Fellow Employee Subsidiaries Benefit Fund 3 Incomes and reimbursement - Reimbursement of expenses 40,647 1,282,283 - (249,981) (591,982) (-)

4 Expense - Interest paid - - - (6,736,886) (-) (-) - Other expenses 3,270,375 1,029,539 - (3,532,148) (30,455) (-) - Company’s contribution to PF Trust - - 423,290 (-) (-) (263,856)

5 Amount outstanding - Against loan taken 121,662,179 - - (83,984,731) (-) (-) - Other receivable - 10,674 - (-) (591,982) (-) - Other payable - 686,738 - (-) (606,360) (-) Figures in bracket are for previous year.

i) Additional information pursuant to the provisions of paragraph 3, 4C and 4D of Part II of Schedule VI of the Companies Act, 1956, together with notes thereon: i Expenditure in Foreign Currency RUPEES Particulars Current Year Previous Year

Other matters: Examination Fees 1,952,603 1,327,726 Training Costs - 130,034 Traveling and Conveyance 342,772 444,775 Immigration Expenses 6,538,326 1,866,727 Communication Expenses 45,237 64,006 Conference Expenses 399,619 140,809 Membership and Subscription 13,308 19,474 Books and Periodicals - 25,372 Office Equipments - 102,199 Total 9,291,865 4,121,122

ii Earnings in Foreign Currency

Reimbursement of Expenses 3,175,606 2,995,309 Placement Revenue 24,377,464 3,685,656 Total 27,553,070 6,680,965

iii Amount paid / payable to Auditors

Audit Fees 39,326 22,448 Tax Audit Fee 22,472 - Other Matters 38,192 -

246 MAX INDIA ANNUAL REPORT 2006-07 MAX HEALTHSTAFF INTERNATIONAL LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

j) The Company operates in a single business segment, viz. Healthcare staffing. In view of the general clarification issued by the Institute of Chartered Accountants of India for companies operating in single segment, the disclosure requirements as per Accounting Standard-17 on “Segment Reporting” are not applicable to the Company. k) Other disclosure requirements of schedule VI to the Companies Act, 1956 are not applicable to the Company. l) Previous year’s figures have been regrouped / reclassified wherever necessary to conform to current year’s classification.

For and on behalf of the Board of Directors

RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner NAROTTAM PURI Director Membership No. 70776 ABHISHEK ANAND Company Secretary For Nangia & Company Chartered Accountants

New Delhi MAY 12, 2007

MAX INDIA ANNUAL REPORT 2006-07 247 MAX HEALTHSTAFF INTERNATIONAL LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 1 1 9 2 4 9 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 1 6 3 4 8 3 1 6 3 4 8 3 SOURCES OF FUND Paid-up Capital Reserves and Surplus 3 9 4 5 0 N I L Secured Loans Unsecured Loans N I L 1 2 1 6 6 2 Deferred Tax Liability Net 2 3 7 1 APPLICATION OF FUNDS Net Fixed Assets Investments 1 6 1 1 6 N I L +- Net Current Assets Misc. Expenditure 1 0 4 1 1 3 7 0 Deferred Tax Assest Accumulated Losses N I L 1 4 7 0 3 8 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 2 5 7 6 8 6 4 3 4 6 Profit/Loss before Tax Profit/Loss after Tax +- +- 3 8 5 7 8 3 9 0 3 5 Profit/Loss after tax and Exceptional items +- exceptional items N I L 3 9 0 3 5

+- Earning Per Share in Rupees Dividend Rate (%) 9 . 8 9 N I L

V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description H E A L T H C A R E S T A F F I N G

248 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL B.V. NEEMAN MEDICAL INTERNATIONAL B.V.

DIRECTORS’ REPORT

Your Directors have pleasure in presenting their Annual Report along (ii) the Directors had selected such accounting policies and applied with the Audited Accounts for the financial year ended March 31, 2007. them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the OPERATIONS state of affairs of the Company at the end of the financial year and The principal activity of the Company was that of an intermediate of the profit or loss of the Company for that period; holding company for a group that provides clinical research services to (iii) the Directors had taken proper and sufficient care for the various pharmaceutical companies around the world. During the year maintenance of adequate accounting records in accordance with under review, the Company reported a net profit of Rs. 1.96 lacs (previous the provisions of the Companies Act, 1956 for safeguarding the year net loss was Rs. 0.53 lacs). assets of the Company and for preventing and detecting fraud and other irregularities; and DIVIDEND (iv) the Directors had prepared the annual accounts, on a going concern Your Directors do not recommend any dividend for the year under basis. review. OTHER PARTICULARS DIRECTORS Information pertaining to Section 217 (1) (e) and 217 (2A) of the The Board currently comprises of Mr. Analjit Singh, Mr. B. Anantharaman Companies Act, 1956 are not applicable. and Maprima Management BV. AUDITORS PARTICULARS OF DEPOSITS M/s Price Waterhouse, Chartered Accountants, Auditors of the Company Your Company has not accepted any deposits from the public during retire at the conclusion of the ensuing Annual General Meeting and are the year under review. eligible for re-appointment.

DIRECTORS’ RESPONSIBILITY STATEMENT As per the provisions of Section 217(2AA) of the Companies Act,1956, For and on behalf of the Board of Directors the Directors confirm that: (i) in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating New Delhi ANALJIT SINGH Director to material departures; APRIL 30, 2007 B. ANANTHARAMAN Director

MAX INDIA ANNUAL REPORT 2006-07 251 NEEMAN MEDICAL INTERNATIONAL B.V.

AUDITORS’ REPORT

TO THE MEMBERS OF NEEMAN MEDICAL INTERNATIONAL B.V. paid-up capital and reserves as at the commencement of the 1. We have audited the attached Balance Sheet of Neeman Medical financial year did not exceed Rupees Fifty Lakhs or the average International B.V., as at March 31, 2007, and the related Profit and annual turnover for a period of three consecutive financial Loss Account and Cash Flow Statement for the year ended on that years immediately preceding the financial year did not exceed date annexed thereto, which we have signed under reference to Rupees Five Crores, clause (vii) of paragraph 4 of the Companies this report. These financial statements are the responsibility of the (Auditor’s Report) Order, 2003 is not applicable to the Company Company’s management. Our responsibility is to express an opinion for the current year. on these financial statements based on our audit. viii. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section 2. We conducted our audit in accordance with the auditing standards (1) of Section 209 of the Act for any of the products of the generally accepted in India. Those Standards require that we plan Company. and perform the audit to obtain reasonable assurance about whether ix. (a) According to the information and explanations given to the financial statements are free of material misstatement. An audit us and the records of the Company examined by us, in our includes examining, on a test basis, evidence supporting the amounts opinion, the Company is generally regular in depositing and disclosures in the financial statements. An audit also includes the undisputed statutory dues including provident fund, assessing the accounting principles used and significant estimates investor education and protection fund, employees’ state made by management, as well as evaluating the overall financial insurance, income-tax, sales-tax, wealth tax, service tax, statement presentation. We believe that our audit provides a customs duty, excise duty, cess and other material statutory reasonable basis for our opinion. dues as applicable with the appropriate authorities. (b) According to the information and explanations given to 3. As required by the Companies (Auditor’s Report) Order, 2003, as us and the records of the Company examined by us, there amended by the Companies (Auditor’s Report) (Amendment) Order, are no dues of income-tax, sales tax, wealth tax, service 2004, issued by the Central Government of India in terms of sub- tax, customs duty, excise duty and cess which have not section (4A) of Section 227 of ‘The Companies Act, 1956’ of India been deposited on account of any dispute. (the ‘Act’) and on the basis of such checks of the books and records x. The Company has accumulated losses, as at March 31, 2007 of the Company as we considered appropriate and according to more than fifty percent of its net worth and has not incurred the information and explanations given to us, we further report any cash loss in the financial year ended on that date. The that: Company has incurred cash losses in the immediately preceding i. The Company does not have fixed assets. financial year. ii. There are no stocks with the Company and third parties xi. According to the records of the Company examined by us and iii. (a) The Company has not granted any loans, secured or the information and explanation given to us, the Company has unsecured, to companies, firms or other parties covered not defaulted in repayment of dues to any financial institution in the register maintained under Section 301 of the Act. (b) The Company has not taken any loans, secured or unsecured, or bank or debenture holders as at the balance sheet date. from companies, firms or other parties covered in the xii. The Company has not granted any loans and advances on the register maintained under Section 301 of the Act. basis of security by way of pledge of shares, debentures and iv. In our opinion and according to the information and other securities. explanations given to us, having regard to the explanation that xiii. The provisions of any special statute applicable to chit fund / certain items purchased are of special nature for which suitable nidhi / mutual benefit fund/societies are not applicable to the alternative sources do not exist for obtaining comparative Company. quotations, there is an adequate internal control system xiv. In our opinion, the Company is not a dealer in shares, securities, commensurate with the size of the Company and the nature debentures and other investments. of its business for the sale of services. Further, on the basis of xv. In our opinion, and according to the information and our examination of the books and records of the Company, and explanations given to us, the Company has not given any according to the information and explanations given to us, we guarantee for loans taken by others from banks or financial have neither come across nor have been informed of any institutions during the year. continuing failure to correct major weaknesses in the aforesaid xvi. The Company has not taken any term loans. internal control system. xvii On the basis of an overall examination of the balance sheet v. In our opinion and according to the information and of the Company, in our opinion and according to the explanations given to us, the Company has not entered into information and explanations given to us, there are no funds any contracts or arrangements referred to in Section 301 of raised on a short-term basis which have been used for long- the Act. term investment. vi. The Company has not accepted any deposits from the public xviii. The Company has not made any preferential allotment of within the meaning of Sections 58A and 58AA of the Act and shares to parties and companies covered in the register the rules framed there under. maintained under Section 301 of the Act during the year. vii. As the Company is not listed on any stock exchange or the xix. The Company has not issued any debentures during the year.

252 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL B.V.

AUDITORS’ REPORT

xx. The Company has not raised any money by public issues during and Cash Flow Statement dealt with by this report comply the year. with the accounting standards referred to in sub-section (3C) xxi. During the course of our examination of the books and records of Section 211 of the Act; of the Company, carried out in accordance with the generally (e) On the basis of written representations received from the accepted auditing practices in India, and according to the directors, as on March 31, 2007 and taken on record by the information and explanations given to us, we have neither Board of Directors, none of the directors is disqualified as on come across any instance of fraud on or by the Company, March 31, 2007 from being appointed as a director in terms noticed or reported during the year, nor have we been informed of clause (g) of sub-section (1) of Section 274 of the Act; of such case by the management. (f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements 4. Further to our comments in paragraph 3 above, we report that: together with the notes thereon and attached thereto give in (a) We have obtained all the information and explanations, which the prescribed manner the information required by the Act to the best of our knowledge and belief were necessary for and give a true and fair view in conformity with the accounting the purposes of our audit; principles generally accepted in India: (b) In our opinion, proper books of account as required by law (i) in the case of the Balance Sheet, of the state of affairs of have been kept by the Company so far as appears from our the Company as at March 31, 2007; examination of those books; (ii) in the case of the Profit and Loss Account, of the profit (c) The Balance Sheet, Profit and Loss Account and Cash Flow for the year ended on that date; and Statement dealt with by this report are in agreement with the (iii) in the case of the Cash Flow Statement, of the cash flows books of account; for the year ended on that date. (d) In our opinion, the Balance Sheet, Profit and Loss Account

V. NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse APRIL 30, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 253 NEEMAN MEDICAL INTERNATIONAL B.V.

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS

SHAREHOLDERS' FUNDS Share Capital 1 825,994 767,465 Share Application Money Pending Allotment 72,324,900 - Reserves and Surplus 2 1,000,896,148 -

LOAN FUNDS Unsecured Loans 3 - 795,866,087 1,074,047,042 796,633,552 APPLICATION OF FUNDS

INVESTMENTS 4 409,822,041 1,750,995

CURRENT ASSETS, LOANS AND ADVANCES 5 Bank Balances 967,138 46,102 Loans and Advances 68,897,667 253,089,032 69,864,805 253,135,134

LESS: CURRENT LIABILITIES AND PROVISIONS 6 96,701 49,169

NET CURRENT ASSETS 69,768,104 253,085,965

PROFIT AND LOSS ACCOUNT 538,185,533 538,381,471

Foreign Currency Translation Reserve 9 56,271,364 3,415,121 1,074,047,042 796,633,552

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 11

The Schedules referred to above form an integral part of the For and on behalf of the Board of Directors Balance Sheet This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants

New Delhi APRIL 30, 2007

254 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL B.V.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Interest Income 284,008 690 Miscellaneous Income - 79,654 Profit on Foreign Exchange Fluctuation - 5,324 284,008 85,668 EXPENDITURE Administrative and Other Expenses 7 69,286 62,480 Finance Charges 8 18,784 76,123 88,070 138,603

PROFIT/(LOSS) BEFORE EXCEPTIONAL ITEMS 195,938 (52,935)

Exceptional Items (Refer Note B3 on Schedule 11) 10 - (537,281,960)

PROFIT/(LOSS) AFTER EXCEPTIONAL ITEMS 195,938 (537,334,895)

(LOSS) BROUGHT FORWARD (538,381,471) (1,046,576)

BALANCE CARRIED FORWARD TO THE BALANCE SHEET (538,185,533) (538,381,471)

Earnings per Share (Refer Note B8 on Schedule 11) - Basic and Diluted 5,296 (14,925,969)

Number of ordinary shares used in computing earnings per share - Basic and Diluted 37 36

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 11

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants

New Delhi APRIL 30, 2007

MAX INDIA ANNUAL REPORT 2006-07 255 NEEMAN MEDICAL INTERNATIONAL B.V.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES Profit/(Loss) Before Exceptional Items 195,938 (52,935)

Adjustments for: Interest Expense 2,123 21,647 Interest Income (284,008) (690) Unrealised Foreign Exchange (Gain)/Loss 166 (13,108) Operating (Loss) Before Working Capital Changes (85,781) (45,086)

Adjustments for: Other Receivables - (197,633,798) Trade Payables 47,532 5,379 Cash (Used in) Operations (38,249) (197,673,505)

Cash (Used in) Operating Activities (38,249) (197,673,505)

B. CASH FLOW FROM INVESTING ACTIVITIES Interest Income 284,008 690 Purchase of Investments (133,996,836) - Cash From/(Used in) Investing Activities (133,712,828) 690

C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds form Fresh Issue of Share Capital 67,724,351 - (including Share Premium) Share Application Money 72,324,900 - Proceeds form Long Term Borrowings - 197,754,194 Interest Expense (2,123) (21,647) Cash From Financing Activities 140,047,128 197,732,547

Increase/(Decrease) in Cash and Cash Equivalents 6,296,051 59,732 Impact of Foreign Exchange Fluctuations (5,375,015) (25,488) Net Increase/(Decrease) in Cash and Cash Equivalents 921,036 34,244

Cash and Cash Equivalents As At March 31, 2006 46,102 11,858 Cash and Cash Equivalents As At March 31, 2007 967,138 46,102 Net Increase/(Decrease) in Cash and Cash Equivalents 921,036 34,244 Notes 1 The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on 'Cash Flow Statements' issued by The Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Balance with Bank: RUPEES As at As at March 31, 2007 March 31, 2006 Balance with Bank: Rabo Bank NV (The Netherlands) 967,138 46,102 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 11

The Schedules referred to above form an integral part of the Cash Flow Statement For and on behalf of the Board of Directors This is the Cash Flow Statement referred to in our report of even date V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants New Delhi APRIL 30, 2007

256 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL B.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-1 SHARE CAPITAL Authorised 180 (Previous year 180) Ordinary Shares of Euro 500 each 3,837,376 3,837,376

Issued, Subscribed and Paid Up 38 (Previous year 36) Ordinary Shares of Euro 500 each (Held by Max India Limited, the Holding Company) 825,994 767,465

During the year 2 shares of Euro 500 each were issued to Max India Limited, the Holding Company, by conversion of outstanding loan amounting Rs. 933,230,326/- as at March 31, 2006 and Rs. 67,724,351/- as at September 7, 2006, respectively.

SCHEDULE-2 RESERVES AND SURPLUS Share Premium 1,000,896,148 - 1,000,896,148 -

SCHEDULE-3 UNSECURED LOAN - From Max India Limited [(the holding company) (repayable on demand)] - 795,866,087 - 795,866,087

SCHEDULE-4 INVESTMENTS (Refer Note A5 on Schedule 11) Long Term-Trade (Unquoted) Subsidiaries, at cost 125 (Previous year 90) Ordinary Shares of Euro 500 each in Neeman Medical International NV 1,027,697,074 1,750,995 Less : Provision For Diminution (617,875,033) 409,822,041 - 409,822,041 1,750,995

SCHEDULE-5 CURRENT ASSETS, LOANS AND ADVANCES Bank Balances With Non-Scheduled Bank in Current Accounts - Rabo Bank NV* 967,138 46,102

Loans and Advances (Unsecured, Considered Good,Unless Otherwise Stated) Loan to Subsidiary (Neeman Medical International NV**) - 793,753,050 Less: Provision for Diminution - (540,664,018) 253,089,032

68,897,667 - 69,864,805 253,135,134

MAX INDIA ANNUAL REPORT 2006-07 257 NEEMAN MEDICAL INTERNATIONAL B.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-6 CURRENT LIABILITIES AND PROVISIONS Sundry Creditors* Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 96,701 49,169 96,701 49,169 * There are no dues to creditors coming under the definition of Small Scale Industrial Undertakings as at March 31, 2007 and March 31, 2006.

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-7 ADMINISTRATIVE AND OTHER EXPENSES Legal and Professional 18,357 13,619 Loss on Foreign Exchange Fluctuation 166 - Auditor's Remuneration 50,763 48,861 69,286 62,480

SCHEDULE-8 FINANCE CHARGES Bank Interest 2,123 21,647 Bank Charges 16,661 54,476 18,784 76,123

SCHEDULE-9 FOREIGN CURRENCY TRANSALTION RESERVE Opening Balance 3,415,121 26,945 Adjustment during the year 52,856,243 3,388,176 56,271,364 3,415,121

SCHEDULE-10 EXCEPTIONAL ITEMS Provision for Diminution in Loans - 537,281,960 Provision for Diminution in Investments 95,083,571 - Loan Waiver by Alda Ltd. (95,083,571) - (Refer Note B3 on Schedule 11) - 537,281,960

258 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL B.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-11

A SIGNIFICANT ACCOUNTING POLICIES

1 The Financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, accounting standards issued by the Institute of Chartered Accountants of India ('ICAI’) and the provisions of Companies Act, 1956 as adopted consistently by the Company.

2 Revenue Recognition (i) Revenue represents amounts invoiced during the year, exclusive of value added tax. (ii) Dividend is recognized as income as and when the right to receive such payment is established.

3 Expenditure Expenses are accounted for on the accrual basis and provisions are made for all known losses and liabilities.

4 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset in accordance with Accounting Standard 16 issued by ICAI on "Borrowing Costs". Other borrowing costs are recognized as an expense in the year in which they are incurred. Capitalization of borrowing costs ceases when substantially all activities necessary to prepare the qualifying asset for its intended use or sale are complete.

5 Investments (i) Investments are either classified as current investments or long-term investments. The cost of investments includes acquisition charges such as brokerage, fee and duties. Current investments are carried at lower of cost and fair value. (ii) Long-term investments are carried out at cost and provisions are recorded to recognize any decline, other than temporary, in the carrying value of each investment.

6 Taxation Provision for tax consists of current tax and deferred tax. Current tax provision is computed on current income based on the tax liability after considering allowances and exemptions. Deferred tax assets and liabilities are computed on the timing differences at the balance sheet date between the carrying amount of assets and liabilities and their respective tax bases. Deferred tax assets are recognized based on management estimates of available future taxable income and assessing its certainty.

7 Foreign Exchange Transactions (i) Monetary assets and liabilities related to foreign transactions remaining unsettled at the end of the year are translated at year-end rates. (ii) The difference in translation of monetary assets and liabilities and realized gains and losses on foreign exchange transactions, are recognized in the profit and loss account.

B NOTES TO THE ACCOUNTS

1 Country of Incorporation Neeman Medical International BV is incorporated and operates under the applicable laws of The Netherlands.

2 Basis of Preparation and Translation into Indian Rupees (i) These financial statements have been prepared for the purpose of compliance with the provisions of Section 211 and Section 212 of the Indian Companies Act, 1956 and have been translated to Indian Rupees (Rs.) in accordance with Accounting Standard-11 issued by ICAI on ‘The Effects of Changes in Foreign Exchange Rates’. The functional currency of the Company is United States Dollar (US$). (ii) The translation of foreign currency into Rs. has been carried out: a) For assets and liabilities (both monetary and non-monetary items) using the rate of exchange prevailing on the balance sheet date (1US$ = Rs. 43.4417 as at March 31, 2007 and 1US$ = Rs. 44.6176 as at March 31, 2006). b) For revenues and expenses using average exchange rates prevailing during the reporting period (1US$ = Rs. 45.1627 for the year April 1, 2006 to March 31, 2007 and 1US$ = Rs. 44.3385 for the year April 1, 2005 to March 31, 2006). c) Resulting exchange differences are taken into foreign currency translation reserve as required under Accounting Standard-11.

3 On August 31, 2006, Neeman Medical International BV (“Neeman BV”) acquired 33 shares of Euro 500 each of Neeman Medical International NV (“Neeman NV”) from Alda Ltd. By virtue of the above, Neeman NV became a wholly owned subsidiary of Neeman BV. Also, as part of the agreement, loan repayable by Neeman NV to Alda Ltd. (erstwhile shareholder of Neeman NV ) of Rs. 229,381,672 and loan given by Max India Limited to Alda Ltd. of Rs. 100,426,076 had been acquired by Neeman BV against a total consideration of Rs. 33,872,025. Consequently, the net difference of Rs. 95,083,571, which is no longer payable to Alda Ltd. has been recognised in the Profit and Loss account as an exceptional item/loan waiver under Schedule 10 and set off against the diminution of investments to that extent.

MAX INDIA ANNUAL REPORT 2006-07 259 NEEMAN MEDICAL INTERNATIONAL B.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

4 Contingent Liabilities – Nil

5 Segment Reporting:

Business Segments (Primary) The Company operates only in one business segment viz. Clinical Trial Services. Accordingly, there are no reportable business segments.

Geographical Segments (Secondary) RUPEES Netherlands Others Total

(i) Revenue from external customers - - - (-) (-) (-)

(ii) Carrying amount of segment assets by location of assets 479,686,846 - 479,686,846 (254,886,129) (-) (254,886,129)

(iii) Cost to acquire tangible and intangible fixed assets by - - - location of assets (-) (-) (-) Figures in bracket are for previous year

6 Deferred Tax: Deferred tax liability/asset is not recognized since there are no timing differences between the carrying amount of assets and liabilities and their respective tax bases.

7 Related Parties (as identified by the management) are classified as:

(i) Holding Company Max India Limited, India (w.e.f. December 01, 2005) Max Asia Pac Limited, Hongkong (Till November 30, 2005)

(ii) Subsidiaries Neeman Medical International NV, Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A.

(iii Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Healthcare Institute Ltd., Max Medical Services Ltd., Alps Hospital Pvt. Ltd.(w.e.f. April 06, 2006), Neeman Medical International (Asia) Ltd., Pharmax Corporation Ltd., Max Ateev Ltd., Max UK Ltd., Max HealthStaff International Ltd. (w.e.f. June 30, 2005), Max Estates Ltd*, Malsi Estates Ltd*. Max Telecom Ventures Ltd.**

* Fellow subsidiaries till May 31, 2006. ** Fellow subsidiary till November 30, 2005

260 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL B.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business are as follows: RUPEES Holding Company Subsidiaries

(i) Equity share capital issued 1,000,954,677 - (-) (-)

(ii) Share application money received 72,324,900 - (-) (-)

(iii) Share application money paid - 68,897,667 (-) (-)

(iv) Purchase of Investments - 1,097,601,226 (-) (-)

(v) Deposits and advances given - - (-) (197,633,798)

(vi) Deposits and advances accepted - - (197,754,194) (-)

(vii) Amount Outstanding Against share application money paid - 68,897,667 (-) (-) Against loan given - - (-) (793,753,050) Against share application money received 72,324,900 - (-) (-) Against loan taken - - (795,866,087) (-) Figures in bracket are for previous year

8 Earnings per Share Calculation of EPS (Basic and Diluted) For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Basic and Diluted Profit/(Loss) after tax 195,938 (537,334,895) Weighted average number of Equity Shares 37 36 EPS (Rupees) 5,296 (14,925,969)

Equity Share Details (Nos.) Outstanding as at the beginning of the year 36 36 Issued on August 31, 2006 1 - Issued on October 31, 2006 1 - Outstanding as at the end of the year 38 36 9 The Company does not have any finance/operating lease arrangement.

10 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

11 Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year's classification.

For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH Director APRIL 30, 2007 B. ANANTHARAMAN Director

MAX INDIA ANNUAL REPORT 2006-07 261 NEEMAN MEDICAL INTERNATIONAL B.V.

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 8 1 0 7 . 3 3 . 8 8 2 State Code N A

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placements/Others N I L 5 9

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 1 0 7 4 0 4 7 1 0 7 4 0 4 7 SOURCES OF FUND Paid-up Capital Share Application Money 8 2 6 7 2 3 2 5 Reserves and Surplus Unsecured Loans 1 0 0 0 8 9 6 N I L APPLICATION OF FUNDS Net Fixed Assets Investments N I L 4 0 9 8 2 2 Net Current Assets Misc. Expenditure 6 9 7 6 8 N I L Accumulated Losses Forigen Currency Translation Reserve 5 3 8 1 8 6 5 6 2 7 1 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 2 8 4 8 8 Profit/Loss before +- Exceptional Items Exceptional Items 1 9 6 N I L Profit/Loss after +- Exceptional Items 1 9 6

+- Earning Per Share in Rupees Dividend Rate (%) Basic 5 2 9 6 N I L Diluted 5 2 9 6 V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY Product Description C L I N I C A L R E S E A R C H

262 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL N.V. NEEMAN MEDICAL INTERNATIONAL N.V.

DIRECTORS’ REPORT

Your Directors have pleasure in presenting their Annual Report along (ii) the Directors had selected such accounting policies and applied with the Audited Accounts for the financial year ended March 31, 2007. them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the OPERATIONS state of affairs of the Company at the end of the financial year and Your Company’s principal activity is that of an intermediate holding of the profit or loss of the Company for that period; company for a group that provides clinical research services to various (iii) the Directors had taken proper and sufficient care for the pharmaceutical companies around the world. During the year under maintenance of adequate accounting records in accordance with review, your Company incurred a net loss of Rs. 532.27 lacs (previous the provisions of the Companies Act, 1956 for safeguarding the year loss was Rs. 358.80 lacs). assets of the Company and for preventing and detecting fraud and other irregularities; and DIVIDEND (iv) the Directors had prepared the annual accounts, on a going concern In view of the losses, your Directors do not recommend any dividend basis. for the year under review. OTHER PARTICULARS DIRECTORS Information pertaining to Section 217 (1) (e) and 217 (2A) of the The Board currently comprises of Mr. Analjit Singh, Mr. B. Anantharaman Companies Act, 1956 are not applicable to your Company. and Maprima Management BV. AUDITORS PARTICULARS OF DEPOSITS M/s Price Waterhouse, Chartered Accountants, Auditors of the Company Your Company has not accepted any deposits from the public during retire at the conclusion of the ensuing Annual General Meeting and are the year under review. eligible for re-appointment.

DIRECTORS’ RESPONSIBILITY STATEMENT As per the provisions of Section 217(2AA) of the Indian Companies For and on behalf of the Board of Directors Act,1956, the Directors confirm that: (i) in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating New Delhi ANALJIT SINGH Director to material departures; APRIL 30, 2007 B. ANANTHARAMAN Director

MAX INDIA ANNUAL REPORT 2006-07 265 NEEMAN MEDICAL INTERNATIONAL N.V.

AUDITORS’ REPORT

TO THE MEMBERS OF NEEMAN MEDICAL INTERNATIONAL N.V. financial year did not exceed Rupees Fifty Lakhs or the average 1. We have audited the attached Balance Sheet of Neeman Medical annual turnover for a period of three consecutive financial International N.V., as at March 31, 2007, and the related Profit and years immediately preceding the financial year did not exceed Loss Account and Cash Flow Statement for the year ended on that Rupees Five Crores, clause (vii) of paragraph 4 of the Companies date annexed thereto, which we have signed under reference to (Auditor’s Report) Order, 2003 is not applicable to the Company this report. These financial statements are the responsibility of the for the current year. Company’s management. Our responsibility is to express an opinion viii. The Central Government of India has not prescribed the on these financial statements based on our audit. maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the 2. We conducted our audit in accordance with the auditing standards Company. generally accepted in India. Those standards require that we plan ix. (a) According to the information and explanations given to and perform the audit to obtain reasonable assurance about whether us and the records of the Company examined by us, in the financial statements are free of material misstatement. An audit our opinion, the Company is generally regular in depositing includes examining, on a test basis, evidence supporting the amounts the undisputed statutory dues including provident fund, and disclosures in the financial statements. An audit also includes investor education and protection fund, employees’ state assessing the accounting principles used and significant estimates insurance, income tax, sales tax, wealth tax, service tax, made by management, as well as evaluating the overall financial customs duty, excise duty, cess and other material statutory statement presentation. We believe that our audit provides a dues as applicable with the appropriate authorities. reasonable basis for our opinion. (b) According to the information and explanations given to us and the records of the Company examined by us, there 3. As required by the Companies (Auditor’s Report) Order, 2003, as are no dues of income tax, sales tax, wealth tax, service amended by the Companies (Auditor’s Report) (Amendment) Order, tax, customs duty, excise duty and cess which have not 2004, issued by the Central Government of India in terms of sub- been deposited on account of any dispute. section (4A) of Section 227 of ‘The Companies Act, 1956’ of India x. The Company has accumulated losses, as at March 31, 2007 (the ‘Act’) and on the basis of such checks of the books and records more than fifty percent of its net worth and has incurred of the Company as we considered appropriate and according to cash loss in the financial year ended on that date and in the information and explanations given to us, we further report immediately preceding financial year. that: xi. According to the records of the Company examined by us i. The Company does not have fixed assets. and the information and explanation given to us, the Company ii. There are no stocks with the Company and third parties. has not defaulted in repayment of dues to any financial iii. (a) The Company has not granted any loans, secured or institution or bank or debenture holders as at the balance unsecured, to companies, firms or other parties covered sheet date. in the register maintained under Section 301 of the Act. (b) The Company has not taken any loans, secured or xii. The Company has not granted any loans and advances on the unsecured, from companies, firms or other parties covered basis of security by way of pledge of shares, debentures and in the register maintained under Section 301 of the Act. other securities. iv. In our opinion and according to the information and xiii. The provisions of any special statute applicable to chit fund explanations given to us, having regard to the explanation / nidhi / mutual benefit fund/societies are not applicable to that certain items purchased are of special nature for which the Company. suitable alternative sources do not exist for obtaining xiv. In our opinion, the Company is not a dealer in shares, securities, comparative quotations, there is an adequate internal control debentures and other investments. system commensurate with the size of the Company and the xv. In our opinion, and according to the information and nature of its business for the sale of services. Further, on the explanations given to us, the Company has not given any basis of our examination of the books and records of the guarantee for loans taken by others from banks or financial Company, and according to the information and explanations institutions during the year. given to us, we have neither come across nor have been xvi. The Company has not taken any term loans. informed of any continuing failure to correct major weaknesses xvii. On the basis of an overall examination of the balance sheet in the aforesaid internal control system. of the Company, in our opinion and according to the v. In our opinion and according to the information and information and explanations given to us, there are no funds explanations given to us, the Company has not entered into raised on a short-term basis which have been used for any contracts or arrangements referred to in Section 301 of long-term investment. the Act. xviii. The Company has not made any preferential allotment of vi. The Company has not accepted any deposits from the public shares to parties and companies covered in the register within the meaning of Sections 58A and 58AA of the Act and maintained under Section 301 of the Act during the year. the rules framed there under. xix. The Company has not issued any debentures during the year. vii. As the Company is not listed on any stock exchange or the xx. The Company has not raised any money by public issues paid-up capital and reserves as at the commencement of the during the year.

266 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL N.V.

AUDITORS’ REPORT

xxi. During the course of our examination of the books and records with the accounting standards referred to in sub-section (3C) of the Company, carried out in accordance with the generally of Section 211 of the Act; accepted auditing practices in India, and according to the (e) On the basis of written representations received from the information and explanations given to us, we have neither directors, as on March 31, 2007 and taken on record by the come across any instance of fraud on or by the Company, Board of Directors, none of the directors is disqualified as on noticed or reported during the year, nor have we been informed March 31, 2007 from being appointed as a director in terms of such case by the management. of clause (g) of sub-section (1) of Section 274 of the Act; (f) In our opinion and to the best of our information and according 4. Further to our comments in paragraph 3 above, we report that: to the explanations given to us, the said financial statements (a) We have obtained all the information and explanations, which together with the notes thereon and attached thereto give to the best of our knowledge and belief were necessary for in the prescribed manner the information required by the Act the purposes of our audit; and give a true and fair view in conformity with the accounting (b) In our opinion, proper books of account as required by law principles generally accepted in India: have been kept by the Company so far as appears from our (i) in the case of the Balance Sheet, of the state of affairs examination of those books; of the Company as at March 31, 2007; (c) The Balance Sheet, Profit and Loss Account and Cash Flow (ii) in the case of the Profit and Loss Account, of the loss for Statement dealt with by this report are in agreement with the year ended on that date; and the books of account; (iii) in the case of the Cash Flow Statement, of the cash flows (d) In our opinion, the Balance Sheet, Profit and Loss Account for the year ended on that date. and Cash Flow Statement dealt with by this report comply

V. NIJHAWAN Partner Membership N0. F-87228

For and on behalf of New Delhi Price Waterhouse APRIL 30, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 267 NEEMAN MEDICAL INTERNATIONAL N.V.

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 2,680,703 2,622,174 Share Application Money Pending Allotment 71,814,547 11,183 Reserves and Surplus 2 1,066,184,796 22,840,336

LOAN FUNDS Unsecured Loans 3 - 1,020,366,155 1,140,680,046 1,045,839,848

APPLICATION OF FUNDS

INVESTMENTS 4 65,805,191 67,586,437

CURRENT ASSETS, LOANS AND ADVANCES Cash and Bank Balances 5 3,759,635 608,534 Other Current Assets 6 8,645,550 3,296,527 Loans and Advances 7 303,554,558 267,712,550 315,959,743 271,617,611

LESS: CURRENT LIABILITIES AND PROVISIONS 8 14,076,535 13,128,486

NET CURRENT ASSETS 301,883,208 258,489,125

PROFIT AND LOSS ACCOUNT 772,991,647 719,764,286 1,140,680,046 1,045,839,848

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 12

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants

New Delhi APRIL 30, 2007

268 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL N.V.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

INCOME Other Income 9 5,840,716 2,949,440 5,840,716 2,949,440 EXPENDITURE Administration and Other Expenses 10 59,013,185 35,726,570 Finance Charges 11 54,892 3,102,478 59,068,077 38,829,048 (LOSS) BEFORE EXCEPTIONAL ITEMS (53,227,361) (35,879,608)

Exceptional Items - (333,988,731)

(LOSS) AFTER EXCEPTIONAL ITEMS (53,227,361) (369,868,339)

(LOSS) BROUGHT FORWARD (719,764,286) (349,895,947)

BALANCE TRANSFERRED TO THE BALANCE SHEET (772,991,647) (719,764,286)

Earnings per Share (Refer Note B7 on Schedule 12) - Basic and Diluted (429,253) (3,007,060)

Number of ordinary shares used in computing earnings per share - Basic and Diluted 124 123

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 12

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants

New Delhi APRIL 30, 2007

MAX INDIA ANNUAL REPORT 2006-07 269 NEEMAN MEDICAL INTERNATIONAL N.V.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES (Loss) Before Exceptional Items (53,227,361) (35,879,608)

Adjustments for: Interest Expense 406 1,981,599 Interest Income (5,801,679) (2,508,074) Liabilities No Longer Required Written Back (10,330) (441,366) Unrealised Foreign Exchange (Gain)/Loss (743,287) 729,902 Operating (Loss) Before Working Capital Changes (59,782,251) (36,117,547)

Adjustments for: Trade Receivables - 22,233,347 Other Receivables (35,842,008) (132,109,752) Trade Payables 1,687,707 (41,579,124) Cash (Used in) Operations (93,936,552) (187,573,076)

Cash (Used in) Operating Activities (93,936,552) (187,573,076)

B. CASH FLOW FROM INVESTING ACTIVITIES Interest Received 452,656 (9,122) Cash From/(Used in) Investing Activities 452,656 (9,122)

C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds From Fresh Issue of Share Capital (including Share Premium ) 33,744,827 - Share Application Money 71,814,547 - Proceeds From Borrowings - 201,837,184 Interest Paid (406) (1,981,599) Cash From Financing Activities 105,558,968 199,855,585

Increase/(Decrease) in Cash and Cash Equivalents 12,075,072 12,273,387 Impact of Foreign Exchange Fluctuations (8,923,971) (12,267,233) Net Increase/(Decrease) in Cash and Cash Equivalents 3,151,101 6,154

Cash and Cash Equivalents As At March 31, 2006 608,534 602,380 Cash and Cash Equivalents As At March 31, 2007 3,759,635 608,534 Net Increase/(Decrease) in Cash and Cash Equivalents 3,151,101 6,154

Notes 1 The above Cash Flow statement has been prepared under the " Indirect Method" as set out in the Accounting Standard 3 on 'Cash Flow Statements' issued by The Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Balance with Bank: As at As at March 31, 2007 March 31, 2006 Balance with Bank Rabo Bank NV (The Netherlands) 3,759,635 608,534 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 12

The Schedules referred to above form an integral part of Cash Flow Statement For and on behalf of the Board of Directors This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants New Delhi APRIL 30, 2007

270 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL N.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL Authorised 225 (Previous year 225) Ordinary Shares of Euro 500 each 4,796,660 4,796,660

Issued, Subscribed and Paid Up 125 (Previous year 123) Ordinary Shares of Euro 500 each 2,680,703 2,622,174

Of the above 125 (Previous year 90) Ordinary Shares of Euro 500 each are held by Neeman Medical International BV, the Holding Company (Ultimate Holding Company, Max India Limited) During the year 2 shares of Euro 500 each were issued to Neeman Medical International B.V., the Holding Company, by conversion of outstanding loan amounting Rs. 1,063,856,399 as at March 31, 2006 and Rs. 33,744,827 as at September 7, 2006, respectively.

SCHEDULE-2 RESERVES AND SURPLUS As at Additions Delitions/ As at April 1, 2006 Utilisations March 31, 2007 Share Premium - 1,097,542,697 - 1,097,542,697 Foreign Currency Translation Reserve 22,840,336 - 54,198,237 (31,357,901) 22,840,336 1,097,542,697 54,198,237 1,066,184,796

As at As at March 31, 2007 March 31, 2006 SCHEDULE-3 UNSECURED LOANS From Neeman Medical International BV [(the Holding Company)(Repayable on Demand)] - 793,753,050 From Others - 226,613,105 - 1,020,366,155

SCHEDULE-4 INVESTMENTS (Refer Note A5 on Schedule 12) Long Term-Trade (Unquoted) Subsidiaries, at cost 325 (Previous year 325) shares having no par value in Neeman Medical International Inc. 32,581,275 33,463,200 494,699 (Previous year 494,699) Common and Nominative Shares of $1 each in Neeman Medical International Latin America, S.A. 285,850,035 293,587,556 Less: Provision for Diminution (252,626,119) 33,223,916 (259,464,319) 34,123,237 65,805,191 67,586,437

SCHEDULE-5 CASH AND BANK BALANCES Balance with Non-Scheduled Banks in Current Accounts Rabo Bank NV* 3,759,635 608,534 3,759,635 608,534 * Maximum amount outstanding during the year Rs. 22,043,449/- (Previous year Rs. 52,998,436/-)

MAX INDIA ANNUAL REPORT 2006-07 271 NEEMAN MEDICAL INTERNATIONAL N.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-6 OTHER CURRENT ASSETS Interest Receivable 8,645,550 3,296,527 8,645,550 3,296,527

SCHEDULE-7 LOANS AND ADVANCES (Considered Good, Unless Otherwise Stated) Secured Loans to Subsidiary - Neeman Medical International Latin America, SA* 58,173,067 45,559,324 Unsecured Advances to Subsidiary - Neeman Medical International Inc.** 319,988,775 292,690,219 Less: Provision for Diminution (74,607,284) 245,381,491 (76,626,789) 216,063,430

Advances Recoverable in Cash or in Kind or for Value to be Received - 500,746 Security Deposits - 5,589,050 303,554,558 267,712,550 * Maximum amount outstanding during the year Rs. 60,528,564/- (Previous year Rs. 45,559,324/-) ** Maximum amount outstanding during the year Rs. 319,988,775/- (Previous year Rs. 292,690,219/-)

SCHEDULE-8 CURRENT LIABILITIES AND PROVISIONS Sundry Creditors*** -Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 4,729,503 4,319,379 Utlimate Holding Company - Max India Limited 8,752,990 8,198,986 Subsidiary Company 345,520 354,872 Other Liabilities 248,522 255,249 14,076,535 13,128,486 ***There are no dues to creditors coming under the definition of Small Scale Industrial Undertakings as at March 31, 2007 and March 31, 2006.

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-9 OTHER INCOME Interest - Loan 5,651,074 2,486,813 - Others 150,605 21,261 Liabilities No Longer Required Written Back 10,330 441,366 Profit on Foreign Exchange Fluctuation 28,707 - 5,840,716 2,949,440

272 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL N.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-10 ADMINISTRATION AND OTHER EXPENSES Travelling Expenses - 4,507,562 Communication Expenses - 346,813 Legal and Professional 58,962,422 30,093,432 Auditors' Remuneration 50,763 48,861 Loss on Foreign Exchange Fluctuation - 729,902 59,013,185 35,726,570

SCHEDULE-11 FINANCE CHARGES Interest on: - Acceptances - 1,981,067 - Others 406 532 Bank Charges 54,486 1,120,879 54,892 3,102,478

SCHEDULE-12

A SIGNIFICANT ACCOUNTING POLICIES

1 The Financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, accounting standards issued by the Institute of Chartered Accountants of India ('ICAI’) and the provisions of Companies Act, 1956 as adopted consistently by the Company.

2 Revenue Recognition (i) Revenue represents amounts invoiced during the year, exclusive of value added tax. (ii) Dividend is recognized as income as and when the right to receive such payment is established.

3 Expenditure Expenses are accounted for on the accrual basis and provisions are made for all known losses and liabilities.

4 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset in accordance with Accounting Standard 16 issued by ICAI on "Borrowing Costs". Other borrowing costs are recognized as an expense in the year in which they are incurred. Capitalization of borrowing costs ceases when substantially all activities necessary to prepare the qualifying asset for its intended use or sale are complete.

5 Investments (i) Investments are either classified as current investments or long-term investments. The cost of investments includes acquisition charges such as brokerage, fee and duties. Current investments are carried at lower of cost and fair value. (ii) Long-term investments are carried out at cost and provisions are recorded to recognize any decline, other than temporary, in the carrying value of each investment.

6 Taxation Provision for tax consists of current tax and deferred tax. Current tax provision is computed on current income based on the tax liability after considering allowances and exemptions. Deferred tax assets and liabilities are computed on the timing differences at the balance sheet date between the carrying amount of assets and liabilities and their respective tax bases. Deferred tax assets are recognized based on management estimates of available future taxable income and assessing its certainty.

7 Foreign Exchange Transactions (i) Monetary assets and liabilities related to foreign transactions remaining unsettled at the end of the year are translated at year-end rates. (ii) The difference in translation of monetary assets and liabilities and realized gains and losses on foreign exchange transactions, are recognized in the profit and loss account.

MAX INDIA ANNUAL REPORT 2006-07 273 NEEMAN MEDICAL INTERNATIONAL N.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

B NOTES TO THE ACCOUNTS

1 Country of Incorporation Neeman Medical International NV is incorporated and operates under the applicable laws of The Netherlands.

2 Basis of Preparation and Translation into Indian Rupees (i) These financial statements have been prepared for the purpose of compliance with the provisions of Section 211 and Section 212 of the Indian Companies Act, 1956 and have been translated to Indian Rupees (Rs.) in accordance with Accounting Standard-11 issued by ICAI on ‘The Effects of Changes in Foreign Exchange Rates’. The functional currency of the Company is United States Dollar (US$). (ii) The translation of foreign currency into Rs. has been carried out: a) For assets and liabilities (both monetary and non-monetary items) using the rate of exchange prevailing on the balance sheet date (1US$ = Rs. 43.4417 as at March 31, 2007 and 1US$ = Rs. 44.6176 as at March 31, 2006). b) For revenues and expenses using average exchange rates prevailing during the reporting period (1US$ = Rs. 45.1627 for the period April 1, 2006 to March 31, 2007 and 1US$ =Rs. 44.3385 for the period April 1, 2005 to March 31, 2006). c) Resulting exchange differences are taken into foreign currency translation reserve as required under Accounting Standard-11.

3 Contingent Liabilities - Nil

4 Segment Reporting

Business Segments (Primary) The Company operates only in one business segment viz. Clinical Trial Services. Accordingly there are no reportable business segments.

Geographical Segments (Secondary) RUPEES Netherlands North America Costa Rica Others Total (i) Revenue from - - - - - external customers (-) (-) (-) (-) (-)

(ii) Carrying amount of segment 3,759,635 277,962,766 100,042,533 - 381,764,934 assets by location of assets (608,534) (249,526,630) (82,979,088) (6,089,796) (339,204,048)

(iii) Cost to acquire tangible and - - - - - intangible fixed assets by (-) (-) (-) (-) (-) location of assets Figures in bracket are for previous year

5 Deferred Tax: Deferred tax liability/asset is not recognized since there are no timing differences between the carrying amount of assets and liabilities and their respective tax bases.

6 Related Parties (as identified by the management) are classified as:

(i) Holding Company Neeman Medical International BV, Netherlands (ii) Ultimate Holding Company Max India Limited, India (iii) Subsidiaries Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A. (iv) Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Healthcare Institute Ltd., Max Medical Services Ltd., Alps Hospital Pvt. Ltd.(w.e.f. April 06, 2006), Neeman Medical International (Asia) Ltd., Pharmax Corporation Ltd., Max Ateev Ltd., Max UK Ltd., Max HealthStaff International Ltd.(w.e.f. June 30, 2005), Max Estates Ltd*, Malsi Estates Ltd.*, Max Telecom Ventures Ltd.**, Max Asia Pac Ltd.**

* Fellow subsidiaries till May 31, 2006. ** Fellow subsidiaries till November 30, 2005

274 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL N.V.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business are as follows: RUPEES Holding Ultimate Holding Subsidiaries Fellow Company Company Subsidiaries (i) Interest Income - - 5,651,074 - (-) (-) (2,486,813) (-) (ii) Services Received - - - - (-) (-) (-) (47,448) (iii) Reimbursement of Expenses - 554,004 - - (-) (8,198,986) (354,872) (-) (iv) Equity Share Capital Issued 1,097,601,226 - - - (-) (-) (-) (-) (v) Share Application Money Received 71,814,547 - - - (-) (-) (-) (-) (vi) Loans Taken - - - - (197,633,798) (-) (-) (-) vii) Advances Given - - - - (-) (-) (104,406,822) (-) viii) Amount Outstanding - Other Receivables - - 386,807,392 - (-) (-) (341,546,070) (-) - Other Payables - 8,752,990 345,520 4,365,120 (-) (8,198,986) (354,872) (3,974,485) - Against Share Application Money Received 71,814,547 - - - (-) (-) (-) (-) - Against Loan Taken - - - - (793,753,050) (-) (-) (-) Figures in bracket are for previous year 7 Earnings per Share Calculation of EPS (Basic and Diluted) For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Basic and Diluted (Loss) after tax (53,227,361) (369,868,339) Weighted average number of Equity Shares 124 123 EPS (Rupees) (429,253) (3,007,060)

Equity Share Details (Nos) Outstanding as at the beginning of the year 123 123 Issued on August 31, 2006 1 - Issued on October 31, 2006 1 - Outstanding as at the end of the year 125 123

8 The Company does not have any Finance/Operating Lease arrangement.

9 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

10 Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year's classification.

For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH Director APRIL 30, 2007 B. ANANTHARAMAN Director

MAX INDIA ANNUAL REPORT 2006-07 275 NEEMAN MEDICAL INTERNATIONAL N.V.

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS :

Registration No. 1 . 1 8 4 . 3 6 3

State Code N A

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placement / Others N I L 5 9

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 1 1 4 0 6 8 0 1 1 4 0 6 8 0 SOURCES OF FUND Paid-up Capital Share Application Money 2 6 8 1 7 1 8 1 4 Reserves and Surplus Unsecured Loans 1 0 6 6 1 8 5 N I L APPLICATION OF FUNDS Net Fixed Assets Investments N I L 6 5 8 0 5 Net Current Assets Misc. Expenditure 3 0 1 8 8 3 N I L Accumulated Losses 7 7 2 9 9 2

IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand)

Turnover (Total Income) Total Expenditure 5 8 4 0 5 9 0 6 8 Profit/Loss before +- Exceptional Items Exceptional Items 5 3 2 2 8 N I L Profit/Loss after +- exceptional items 5 3 2 2 8 +- Earning per share in Rs. Dividend Rate (%) Basic 4 2 9 2 5 3 N I L Diluted 4 2 9 2 5 3

V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description C L I N I C A L R E S E A R C H

276 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL INC. NEEMAN MEDICAL INTERNATIONAL INC.

DIRECTORS’ REPORT

Your Directors have pleasure in presenting their Annual Report along (i) in the preparation of annual accounts, the applicable accounting with the Audited Accounts for the financial year ended March 31, 2007. standards have been followed along with proper explanation relating to material departures; PRINCIPAL ACTIVITY /OPERATIONS (ii) the Directors had selected such accounting policies and applied The Principal activity of your Company is to provide marketing, technical them consistently and made judgments and estimates that are assistance, training, quality assurance and administrative functions with reasonable and prudent so as to give a true and fair view of the respect to the conduct of multinational clinical research studies for the state of affairs of the Company at the end of the financial year and pharmaceutical, biotech and Contract Research companies. Your of the profit or loss of the Company for that period; Company’s main focus area is to develop new business opportunities (iii) the Directors had taken proper and sufficient care for the in the field of Clinical Trials for CROs in US, Europe and Asia, including maintenance of adequate accounting records in accordance with for Neeman Medical International (Asia) Limited, a group company the provisions of the Companies Act, 1956 for safeguarding the which has added new service offerings in India. During the year under assets of the Company and for preventing and detecting fraud and review, your Company incurred a net loss of Rs. 420.67 lacs as against other irregularities; and previous year loss of Rs. 937.99 lacs. (iv) the Directors had prepared the annual accounts, on a going concern basis. DIVIDEND In view of the losses, your Directors do not recommend any dividend OTHER PARTICULARS for the year under review. Information pertaining to Section 217 (1) (e) and 217 (2A) of the Indian Companies Act, 1956 are not applicable. DIRECTORS The Board currently comprises of Mr. Analjit Singh and Mr. B. AUDITORS Anantharaman. M/s Price Waterhouse, Chartered Accountants, Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and are PARTICULARS OF DEPOSITS eligible for re-appointment. Your Company has not accepted any deposits from the public during the year under review. ACKNOWLEDGEMENTS Your Directors would like to place on record their gratitude for the co- DIRECTORS’ RESPONSIBILITY STATEMENT operation and support extended to the Company by its employees, As per the provisions of Section 217(2AA) of the Indian Companies customers and the Government. Act,1956, the Directors confirm that: For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH Director APRIL 30, 2007 B. ANANTHARAMAN Director

MAX INDIA ANNUAL REPORT 2006-07 279 NEEMAN MEDICAL INTERNATIONAL INC.

AUDITORS’ REPORT

TO THE MEMBERS OF NEEMAN MEDICAL INTERNATIONAL Inc. of its business for the purchase of fixed assets and for the sale 1. We have audited the attached Balance Sheet of Neeman Medical and services. Further, on the basis of our examination of the International Inc. as at March 31, 2007, and the related Profit and books and records of the Company, and according to the Loss Account and Cash Flow Statement for the year ended on that information and explanations given to us, we have neither date annexed thereto, which we have signed under reference to come across nor have been informed of any continuing failure this report. These financial statements are the responsibility of the to correct major weaknesses in the aforesaid internal control Company’s management. Our responsibility is to express an opinion system. on these financial statements based on our audit. v. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or 2. We conducted our audit in accordance with the auditing standards arrangements referred to in Section 301 of the Act have generally accepted in India. Those standards require that we plan been entered in the register required to be maintained and perform the audit to obtain reasonable assurance about whether under that section. the financial statements are free of material misstatement. An audit (b) In our opinion and according to the information and includes examining, on a test basis, evidence supporting the amounts explanations given to us, there are no transactions made and disclosures in the financial statements. An audit also includes in pursuance of such contracts or arrangements and assessing the accounting principles used and significant estimates exceeding the value of Rupees Five Lakhs in respect of any made by management, as well as evaluating the overall financial party during the year, which have been made at prices statement presentation. We believe that our audit provides a which are not reasonable having regard to the prevailing reasonable basis for our opinion. market prices at the relevant time. vi. The Company has not accepted any deposits from the public 3. As required by the Companies (Auditor’s Report) Order, 2003, as within the meaning of Sections 58A and 58AA of the Act and amended by the Companies (Auditor’s Report) (Amendment) Order, the rules framed there under. 2004, issued by the Central Government of India in terms of sub- vii. The Company did not have an internal audit system during the section (4A) of Section 227 of `The Companies Act, 1956’ of India year. (the ‘Act’) and on the basis of such checks of the books and records viii. The Central Government of India has not prescribed the of the Company as we considered appropriate and according to maintenance of cost records under clause (d) of sub-section the information and explanations given to us, we further report (1) of Section 209 of the Act for any of the products of the that: Company. i. (a) The Company is maintaining proper records showing full ix. (a) According to the information and explanations given to particulars including quantitative details and situation of us and the records of the Company examined by us, in our fixed assets. opinion, the Company is generally regular in depositing (b) The fixed assets of the Company have been physically the undisputed statutory dues, investor education and verified by the management during the year and no protection fund, income-tax, sales-tax, wealth tax, service material discrepancies between the book records and the tax, customs duty, excise duty, cess and other material physical inventory have been noticed. In our opinion, the statutory dues as applicable with the appropriate authorities. frequency of verification is reasonable. As informed, the provisions relating to Employees Provident (c) In our opinion, the Company has disposed of a substantial Fund and Miscellaneous Provisions Act, 1952 and Employees part of fixed assets during the year. On the basis of our State Insurance are not applicable to the Company. examination of the books and records of the Company, (b) According to the information and explanations given to and according to the information and explanations given us and the records of the Company examined by us, there to us, in our opinion, the disposal of the said part of fixed are no dues of income-tax, sales tax, wealth tax, service assets has not affected the going concern status of the tax, customs duty, excise duty and cess which have not Company. been deposited on account of any dispute. ii. There are no stocks with the Company and third parties. x. The company has accumulated losses as at year-end and it has iii. (a) The Company has not granted any loans, secured or incurred cash losses in the financial year ended on that date unsecured, to companies, firms or other parties covered and in the immediately preceding financial year. in the register maintained under Section 301 of the Act. xi. According to the records of the Company examined by us and (b) The Company has not taken any loans, secured or unsecured, the information and explanation given to us, the Company has from companies, firms or other parties covered in the not defaulted in repayment of dues to any financial institution register maintained under Section 301 of the Act. or bank or debenture holders as at the balance sheet date. iv. In our opinion and according to the information and xii. The Company has not granted any loans and advances on the explanations given to us, having regard to the explanation that basis of security by way of pledge of shares, debentures and certain items purchased are of special nature for which suitable other securities. alternative sources do not exist for obtaining comparative xiii. The provisions of any special statute applicable to chit fund quotations, there is an adequate internal control system / nidhi / mutual benefit fund/societies are not applicable to commensurate with the size of the Company and the nature the Company.

280 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL INC.

AUDITORS’ REPORT

xiv. In our opinion, the Company is not a dealer or trader in shares, the purposes of our audit; securities, debentures and other investments. (b) In our opinion, proper books of account as required by law xv. In our opinion, and according to the information and have been kept by the Company so far as appears from our explanations given to us, the Company has not given any examination of those books; guarantee for loans taken by others from banks or financial (c) The Balance Sheet, Profit and Loss Account and Cash Flow institutions during the year. Statement dealt with by this report are in agreement with the xvi. The Company has not obtained any term loans. books of account; xvii. On the basis of an overall examination of the balance sheet (d) In our opinion, the Balance Sheet, Profit and Loss Account of the Company, in our opinion and according to the and Cash Flow Statement dealt with by this report comply information and explanations given to us, there are no funds with the accounting standards referred to in sub-section (3C) raised on a short-term basis which have been used for long- of Section 211 of the Act; term investment. (e) On the basis of written representations received from the xviii. The Company has not made any preferential allotment of directors, as on March 31, 2007 and taken on record by the shares to parties and companies covered in the register Board of Directors, none of the directors is disqualified as on maintained under Section 301 of the Act during the year. March 31, 2007 from being appointed as a director in terms xix. The Company has not issued any debentures during the year. of clause (g) of sub-section (1) of Section 274 of the Act; xx. The Company has not raised any money by public issues during (f) In our opinion and to the best of our information and according the year. to the explanations given to us, the said financial statements xxi. During the course of our examination of the books and records together with the notes thereon and attached thereto give in of the Company, carried out in accordance with the generally the prescribed manner the information required by the Act accepted auditing practices in India, and according to the and give a true and fair view in conformity with the accounting information and explanations given to us, we have neither principles generally accepted in India: come across any instance of fraud on or by the Company, (i) in the case of the Balance Sheet, of the state of affairs of noticed or reported during the year, nor have we been informed the Company as at March 31, 2007; of such case by the management. (ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date; and 4. Further to our comments in paragraph 3 above, we report that: (iii) in the case of the Cash Flow Statement, of the cash flows (a) We have obtained all the information and explanations, which for the year ended on that date. to the best of our knowledge and belief were necessary for

V. NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse APRIL 30, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 281 NEEMAN MEDICAL INTERNATIONAL INC.

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006

SOURCES OF FUNDS

SHAREHOLDERS' FUNDS Share Capital 1 36,607,500 36,607,500 Reserves and Surplus 2 10,496,771 1,160,000

LOAN FUNDS Unsecured Loans 3 319,988,775 292,690,219 367,093,046 330,457,719 APPLICATION OF FUNDS

FIXED ASSETS 4 Gross Block 4,103,123 12,495,736 Less: Depreciation 2,187,417 7,607,558 Net Block 1,915,706 4,888,178

CURRENT ASSETS, LOANS AND ADVANCES Sundry Debtors 5 1,593,553 5,958,369 Bank Balances 6 369,262 3,070,803 Other Current Assets 7 - 1,856,092 Loans and Advances 8 1,349,209 3,439,069 3,312,024 14,324,333

Less: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 9 11,413,247 19,965,949

NET CURRENT ASSETS (8,101,223) (5,641,616)

PROFIT AND LOSS ACCOUNT 373,278,563 331,211,157 367,093,046 330,457,719

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants New Delhi APRIL 30, 2007

282 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL INC.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

INCOME Clinical Trial Income 5,156,699 27,313,241 Other Income 10 526,601 305 5,683,300 27,313,546 EXPENDITURE Clinical Trial Expenses 13,507,447 42,953,669 Personnel, Operating and Administration Expenses 11 32,801,343 75,320,764 Depreciation 4 1,441,916 1,660,463 Financial Expenses 12 - 1,177,388 47,750,706 121,112,284

(LOSS) FOR THE YEAR (42,067,406) (93,798,738)

(LOSS) BROUGHT FORWARD (331,211,157) (237,412,419)

BALANCE CARRIED FORWARD TO THE BALANCE SHEET (373,278,563) (331,211,157)

Earnings Per Share (Rs. per Common Share) - Basic and Diluted (129,438) (288,612) (Refer Note B7 on Schedule 14)

Number of shares used in computing earning per share - Basic and Diluted 325 325

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

The Schedules referred to above form an integral part of the For and on behalf of the Board of Directors Profit and Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants New Delhi APRIL 30, 2007

MAX INDIA ANNUAL REPORT 2006-07 283 NEEMAN MEDICAL INTERNATIONAL INC.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

A. CASH FLOW FROM OPERATING ACTIVITIES NET PROFIT/(LOSS) BEFORE TAX AND EXTRAORDINARY ITEMS (42,067,406) (93,798,738)

Adjustments for: Depreciation 1,441,916 1,660,463 Interest Expense - 22,218 Net (Profit)/Loss on Fixed Assets Sold (162,439) - Provision for Doubtfull Advances 1,844,433 - Assets Written off 2,168,427 337,636 Operating Profit/(Loss) Before Working Capital Changes (36,775,069) (91,778,421)

Adjustments for: Trade Receivables 4,364,816 2,703,955 Other Receivables 1,856,092 3,425,593 Trade Payables (8,532,783) (7,805,886) Other Current Assets 245,428 944 Cash From/(Used in) Operating Activities (38,841,516) (93,453,815)

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (921,343) (735,700) Proceeds from Sale of Fixed Assets 409,027 - Cash From/(Used In) Investing Activities (512,316) (735,700)

C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Short Term Borrowings - (165,390) Advances from Group Companies 27,298,556 91,852,119 Interest Expense - (22,218) Cash From/(Used In) Financing Activities 27,298,556 91,664,511

Increase/(Decrease) in Cash and Cash Equivalents (12,055,276) (2,525,004) Impact of Foreign Exchange Fluctuations 9,353,735 (4,388,962) Net Increase/(Decrease) in Cash and Cash Equivalents (2,701,541) (6,913,966)

Cash and Cash Equivalents at the beginning of the year 3,070,803 9,984,769 Cash and Cash Equivalents at the closing of the year 369,262 3,070,803 Net Increase/(Decrease) in Cash and Cash Equivalents (2,701,541) (6,913,966) Notes: 1 The above Cash Flow Statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Balance with Bank: RUPEES As at As at March 31, 2007 March 31, 2006 Balance with Bank 369,262 3,070,803 369,262 3,070,803 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

The Schedules referred to above form an integral part of the Cash Flow Statement For and on behalf of the Board of Directors This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN ANALJIT SINGH Director Partner B. ANANTHARAMAN Director Membership No. F-87228 For and on behalf of Price Waterhouse Chartered Accountants New Delhi APRIL 30, 2007

284 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL INC.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL

Authorised Common Stock having no par value, 1,500 shares - -

Issued, Subscribed and Paid Up 325 (Previous year 325) shares having no par value 36,607,500 36,607,500 (Held by the Holding Company, Neeman Medical International, NV ) (Ultimate holding company, Max India Limited) 36,607,500 36,607,500

SCHEDULE-2 RESERVES AND SURPLUS Foreign Currency Translation Reserve (Refer Note B2(ii) on Schedule 13) Opening Balance 1,160,000 5,442,619 Adjustment during the year 9,336,771 (4,282,619) 10,496,771 1,160,000

SCHEDULE-3 UNSECURED LOANS Unsecured Loan from the Holding Company (Repayable on Demand) 319,988,775 292,690,219 319,988,775 292,690,219

SCHEDULE-4 FIXED ASSETS (Refer Notes A4, A5 and A6 on Schedule 13)

Particulars Gross Block Depreciation Net Block As at Additions Deletions Translation As at As at Additions Deletions Translation As at As at As at April 1, During During Reserve March 31, April 1, During During Reserve March 31, March 31, March 31, 2006 the Year the Year 2007 2006 the Year the Year 2007 2007 2006

Tangible Assets Plant and Machinery 458,158 - 463,755 5,597 - 103,306 46,667 151,235 1,262 - - 354,852 Computers 2,942,325 156,668 1,561,634 (24,007) 1,513,352 1,931,368 462,006 1,427,221 (14,120) 952,033 561,319 1,010,957 Furniture and Fittings 6,391,614 17,175 4,494,524 2,160 1,916,425 3,242,246 677,887 2,801,276 (4,528) 1,114,329 802,096 3,149,368 Vehicles 517,030 700,022 523,345 (20,361) 673,346 201,618 198,616 276,757 (2,422) 121,055 552,291 315,412

Intangible Assets Software 2,186,609 47,478 2,260,801 26,714 - 2,129,020 56,740 2,211,853 26,093 - - 57,589

Total 12,495,736 921,343 9,304,059 (9,897) 4,103,123 7,607,558 1,441,916 6,868,342 6,285 2,187,417 1,915,706 4,888,178 Previous year 12,052,860 735,700 521,960 229,136 12,495,736 6,008,626 1,660,463 184,312 122,781 7,607,558 4,888,178

As at As at March 31, 2007 March 31, 2006 SCHEDULE-5 SUNDRY DEBTORS (Unsecured, Considered Good) Debts exceeding six months 700,280 1,126,639 Other Debts 893,273 4,831,730 1,593,553 5,958,369

MAX INDIA ANNUAL REPORT 2006-07 285 NEEMAN MEDICAL INTERNATIONAL INC.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-6 BANK BALANCE With Non-Scheduled Bank in Current Account - Wachovia Bank, North Carolina, USA* 369,262 3,070,803 369,262 3,070,803 *Maximum balance during the year Rs. 10,085,936 (Previous year - Rs. 25,278,489)

SCHEDULE-7 OTHER CURRENT ASSETS Unbilled Income - 1,856,092 - 1,856,092

SCHEDULE-8 LOANS AND ADVANCES (Unsecured, Considered Good) Advances to Companies under the Same Management ** 1,774,148 912,779 Less: Provision for doubtful advances (1,774,148) - Advances Recoverable in Cash or in Kind or for Value to be Received 8,746 258,250 Security Deposits 584,311 574,585 Prepaid Expenses 756,152 1,693,455 1,349,209 3,439,069 **Amount recoverable from Neeman Medical International Latin America, S.A. Rs. 1,774,148 (Previous year - Rs. 822,960) and maximum amount outstanding during the year Rs. 1,774,148 (Previous year - Rs. 822,960). Amount recoverable from Neeman Medical International (Asia) Limited Nil (Previous year-Rs. 89,819) and maximum amount outstanding during the year Rs. 89,819 (Previous year - Rs. 404,218).

SCHEDULE-9 CURRENT LIABILITIES Sundry Creditors*** - Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 2,346,483 10,064,354 Advances From Customers 8,751,329 9,243,148 Other Liabilities 315,435 658,447 11,413,247 19,965,949 *** There are no dues to creditors coming under the definition of Small Scale Industrial Undertakings as at March 31, 2007 and March 31, 2006.

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-10 OTHER INCOME Miscellaneous Income 364,162 305 Profit on Sale of Fixed Assets 162,439 - 526,601 305

286 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL INC.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-11 PERSONNEL, OPERATING AND ADMINISTRATION EXPENSES

Personnel Salaries, Wages and Bonus 12,369,663 42,750,358 Employee Benefits and Taxes 931,679 2,268,735 Staff Welfare 186,355 190,371 Recruitment 200,137 6,446,083 13,687,834 51,655,547 Operating and Administration Rent 3,143,456 2,702,317 Repair and Maintenance-Others 1,010,540 2,349,168 Legal and Professional 352,091 1,518,935 Printing and Stationery 279,738 700,372 Advertisement and Publicity 1,549,327 2,768,232 Travelling and Conveyance 4,667,279 4,141,220 Communication 2,108,990 3,754,958 Insurance 898,572 1,685,377 Rates and Taxes 963,300 2,975,177 Bank Charges 79,080 87,169 Fixed Assets written off 2,168,427 337,636 Provision for doubtful advances 1,844,433 - Miscellaneous Expenses 48,276 644,656 19,113,509 23,665,217

32,801,343 75,320,764

SCHEDULE-12 FINANCIAL EXPENSES Interest Others - 22,218 Factoring Charges - 1,155,170 - 1,177,388

MAX INDIA ANNUAL REPORT 2006-07 287 NEEMAN MEDICAL INTERNATIONAL INC.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-13 A SIGNIFICANT ACCOUNTING POLICIES

1 Accounting Convention The Financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, accounting standards issued by the Institute of Chartered Accountants of India ('ICAI’) and the provisions of Companies Act, 1956 as adopted consistently by the Company.

2 Revenue Recognition Revenue from services is recognised by reference to the stage of completion of clinical study projects subscribed with pharmaceutical companies.

3 Expenditure Expenses are accounted for on the accrual basis and provisions are made for all known losses and liabilities.

4 Fixed Assets Fixed assets are stated at their original cost including freight, duties, taxes and other incidental expenses relating to acquisition and installation.

5 Depreciation Depreciation is charged on straight-line method over the estimated useful lives of the respective assets as follows:

Estimated Useful Lives in Years

Furniture and fixtures 10 Computer equipment 4-10 Computer software 3 Equipment 7-10 Vehicles 3

6 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset in accordance with Accounting Standard 16 issued by ICAI on "Borrowing Costs". Other borrowing costs are recognized as an expense in the year in which they are incurred. Capitalization of borrowing costs ceases when substantially all activities necessary to prepare the qualifying assets for its intended use or sale are complete.

7 Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. Provision for tax consists of current tax and deferred tax. A provision is made for income taxes annually based on the tax liability computed at rates as per local laws of United Sates of America after considering applicable tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.

The differences that result between the profit offered for income taxes and the profit as per financial statements are identified and, thereafter, a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. Deferred tax assets are recognised only if there is virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

8 Employee Benefits The Company provides a 401(k) retirement savings plan for substantially all employees. Participation is subject to the employee's age and length of employment with the Company. With effect from January 1, 2006, the Company has changed its 401k plan and no further contributions are being made by the Company from this date. The Company only maintains the plan and bears all the administrative expenses. The Company provides a comprehensive benefits package to all employees, which consist of health, life and disability insurance.

9 Foreign Exchange Transactions (i) Monetary assets and liabilities related to foreign transactions remaining unsettled at the end of the year are translated at year-end rates. (ii) The difference in translation of monetary assets and liabilities and realized gains and losses on foreign exchange transactions, are recognized in the profit and loss account.

288 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL INC.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

10 Leases Leases of assets under which the lessor effectively retains all the risks and benefits of ownership are classified as operating lease. Payments made under operating lease are charged to Profit and Loss Account on a straight-line basis over the period of the lease.

11 Miscellaneous Expenditure Preliminary expenses represent expenses in connection with incorporation of the Company and are written off over a period of 5 years.

B NOTES TO ACCOUNTS

1 Country of Incorporation Neeman Medical International Inc. is incorporated and operates under the applicable laws of The United States of America.

2 Basis of Preparation and Translation into Indian Rupees (i) These financial statements have been prepared for the purpose of compliance with the provisions of Section 211 and Section 212 of the Indian Companies Act, 1956 and have been translated to Indian Rupees (Rs.) in accordance with Accounting Standard-11 issued by ICAI on ‘The Effects of Changes in Foreign Exchange Rates’. The functional currency of the Company is United States Dollar (US$).

(ii) The translation of foreign currency into Rs. has been carried out: a) For assets and liabilities (both monetary and non-monetary items) using the rate of exchange prevailing on the balance sheet date (1US$ = Rs. 43.4417 as on March 31, 2007 and 1US$ = Rs. 44.6176 as on March 31, 2006). b) For revenues and expenses using average exchange rates prevailing during the reporting period (1US$ =Rs. 45.1627 for the year April 1, 2006 to March 31, 2007 and 1US$ =Rs. 44.3385 for the year April 1, 2005 to March 31, 2006). c) Resulting exchange differences are taken into foreign currency translation reserve as required under Accounting Standard-11.

3 Contingent liabilities: Nil

4 The Company leases office space and office equipments under various operating leases. (i) Lease rentals recognized in the Profit and Loss account for the year are Rs. 3,143,456 (Previous year – Rs. 2,702,317). (ii) The Company leases its corporate office under an operating lease which will be expiring on January 31, 2009. (iii) Minimum rental commitments payable in future years under operating leases having an initial or remaining non-cancellable terms of one year or more at March 31, 2007 are as follows: RUPEES March 31,2007 March 31,2006 Not later than one year 1,911,737 3,278,167 Later than one year and not later than five years 1,224,767 290,018 Total Minimum Rentals 3,136,504 3,568,185

5 Deferred Taxes: The Company has not recognized the deferred tax assets as it is not probable that immediate future taxable profits will be available against which the deductible temporary differences and unused tax losses can be utilized.

6 Related Parties (as identified by the management) are classified as:

(i) Ultimate Holding Company Max India Ltd. (ii) Holding Company Neeman Medical International NV (iii) Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Ateev Ltd., Neeman Medical International BV, Neeman Medical International (Asia) Limited, Neeman Medical International Latin America, S.A., Max Medical Services Ltd., Max Healthcare Institute Ltd., Max Estates Ltd.*, Malsi Estates Ltd.*, Max UK Ltd., Pharmax Corporation Ltd., Max HealthStaff International Ltd. (w.e.f. June 30, 2005), Max Asia Pac Ltd.**, Max Telecom Ventures Ltd.**, Alps Hospital Pvt. Ltd. (w.e.f. April 06, 2006) (iv) Key Management Personnel Ms. Cathy White (till May 18, 2005), Dr. Ram Rastogi (from May 18, 2005 to March 31, 2006). * Fellow Subsidiaries till May 31, 2006 ** Fellow Subsidiaries till November 30, 2005

MAX INDIA ANNUAL REPORT 2006-07 289 NEEMAN MEDICAL INTERNATIONAL INC.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business are as follows:

Particulars Holding Fellow Key Management Company Subsidiaries Personnel

Salaries and Wages - - - (-) (-) (23,042,164)

Retirement benefits - - - (-) (-) (673,251)

Reimbursement of expenses - 1,844,433 - (-) (912,779) (-)

Loans taken 27,298,556 - - (91,852,119) (-) (-) Amount outstanding - Other receivables - 1,774,148 - (-) (912,779) (-)

- Against loan taken 319,988,775 - - (292,690,219) (-) (-)

- Other payables - - 419,592 (-) (-) (661,680)

Figures in bracket are for previous year

7 Earnings per share (EPS) Calculation of EPS (Basic and Diluted) RUPEES Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 Basic and Diluted (Loss) for the year (42,067,406) (93,798,738) Common Stock Outstanding 325 325 EPS (Rs.) (129,438) (288,612)

Share Details (Nos.) Outstanding as at the beginning of the year 325 325 Outstanding as at the end of the year 325 325

8 Auditors’ Remuneration RUPEES Particulars Current Year Previous Year

- Audit Fee 45,163 443,385 - Out of pocket Expenses - 155,185 Total 45,163 598,570

290 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL INC.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

9 Segment Reporting Business Segements (Primary) The Company operates only in one business segment viz. Clinical Trial Services in United States of America. Accordingly there are no reportable business segments. Geographical Segments (Secondary) RUPEES North America Others Total (i) Revenue from external customers 5,156,699 - 5,156,659 (23,397,353) (3,915,888) (27,313,241) (ii) Carrying amount of segment assets by location of assets 5,227,730 - 5,227,730 (18,284,562) (912,779) (19,197,341) (iii) Cost to acquire tangible and intangible fixed assets by 922,269 - 922,269 location of assets (735,700) (-) (735,700)

Figures in bracket are for previous year

10 Director’s Remuneration Director’s Remuneration paid/provided in the accounts Current Year Previous Year

a. Salary and allowances - 23,042,164 b. 401(k) benefits - 673,251

11 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

12 Previous year figures have been regrouped/reclassified wherever necessary to conform to current year’s classification.

For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH Director APRIL 30, 2007 B. ANANTHARAMAN Director

MAX INDIA ANNUAL REPORT 2006-07 291 NEEMAN MEDICAL INTERNATIONAL INC.

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 0 5 6 5 2 5 5 State Code N A

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placements/Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 3 6 7 0 9 3 3 6 7 0 9 3 SOURCES OF FUND Paid-up Capital Reserves and Surplus 3 6 6 0 7 1 0 4 9 7 Secured Loans Unsecured Loans N I L 3 1 9 9 8 9 APPLICATION OF FUNDS Net Fixed Assets Investments 1 9 1 5 N I L +- Net Current Assets Misc. Expenditure 8 1 0 1 N I L Accumulated Losses 3 7 3 2 7 9 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 5 6 8 3 4 7 7 5 1 +- Profit/Loss before Tax +- Profit/Loss after Tax 4 2 0 6 8 4 2 0 6 8 +- Earning Per Share in Rupees Dividend Rate (%) Basic 1 2 9 4 3 8 N I L Diluted 1 2 9 4 3 8 V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description C L I N I C A L R E S E A R C H

292 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A. NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

DIRECTORS’ REPORT

Your Directors have pleasure in presenting their Annual Report along PARTICULARS OF DEPOSITS with the Audited Accounts for the financial year ended March 31, 2007. Your Company has not accepted any deposits from the public during the year under review. PRINCIPAL ACTIVITY Principal activity of your Company was to conduct Clinical Trials for DIRECTORS’ RESPONSIBILITY STATEMENT various pharmaceutical companies in Costa Rica during the year under As per the provisions of Section 217(2AA) of the Companies Act, 1956, review. Your Company was doing consistent efforts to develop new the Directors confirm that: business opportunities and secure additional business award from i in the preparation of annual accounts, the applicable accounting pharmaceutical companies. However, there were several challenges, standards have been followed along with proper explanation relating which hampered the Company to implement its plan effectively. One to material departures; challenge was related to inconsistent Government policies in Costa Rica ii the Directors had selected such accounting policies and applied where the Government banned conduct of clinical trials in state owned them consistently and made judgments and estimates that are hospitals, which were covered in government health scheme earlier. reasonable and prudent so as to give a true and fair view of the Undercutting of cost by smaller players adversely impacted margins of state of affairs of the Company at the end of the financial year and your Company. Due to the above adverse business conditions and of the profit or loss of the Company for that period; continued operating losses, your Company’s management decided to iii the Directors had taken proper and sufficient care for the cease its operations in Costa Rica w.e.f. October 31, 2006. maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the RESULTS AND DIVIDENDS assets of the Company and for preventing and detecting fraud and Revenue in FY 2006-07 was Rs. 102.78 lacs as compared with last year’s other irregularities; and revenue of Rs. 327.96 lacs. Your Company incurred a net loss of iv the Directors had prepared the annual accounts, on a going concern Rs. 175.63 lacs in the current year as compared to loss of Rs. 123.80 basis. lacs in the previous year. Since your Company has incurred losses, the directors have not recommended dividend. The majority shareholder, OTHER PARTICULARS Neeman Medical International NV continued to financially support your Information pertaining to Section 217 (1) (e) and 217 (2A) of the company enabling it to meet all its obligations. Companies Act, 1956 are not applicable.

DIRECTORS AUDITORS The current directors of the Company are Mr. Rajan Sharma, Dr. Ajoy M/s K.K. Mankeshwar & Co., Chartered Accountants, Auditors of the Kumar, Dr. Narottam Puri, Mr. Neeraj Basur, Mr. Prabhat Nagar and Mrs. Company retire at the conclusion of the ensuing Annual General Meeting Sujatha Ratnam. and are eligible for re-appointment.

For and on behalf of the Board of Directors

New Delhi SUJATHA RATNAM Director MAY 10, 2007 NEERAJ BASUR Director

MAX INDIA ANNUAL REPORT 2006-07 295 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

AUDITORS’ REPORT

TO THE MEMBERS OF NEEMAN MEDICAL INTERNATIONAL LATIN vi. In our opinion, the Company has an internal audit system AMERICA, S.A. commensurate with the size and nature of its business. 1. We have audited the attached Balance Sheet of NEEMAN MEDICAL vii. The Central Government of India has not prescribed the INTERNATIONAL LATIN AMERICA, S.A. as at March 31, 2007, and maintenance of cost records under clause (d) of sub-section the related Profit and Loss Account and Cash Flow Statement for (1) of Section 209 of the Act for any of the products of the the year ended on that date annexed thereto. These financial Company. statements are the responsibility of the Company’s management. viii. (a) According to the information and explanations given to Our responsibility is to express an opinion on these financial us and the records of the Company examined by us, in our statements based on our audit. opinion, the Company is generally regular in depositing the undisputed statutory dues, investor education and 2. We conducted our audit in accordance with the auditing standards protection fund, income tax, sales tax, wealth tax, service generally accepted in India. Those standards require that we plan tax, customs duty, excise duty, cess and other material and perform the audit to obtain reasonable assurance about whether statutory dues as applicable with the appropriate authorities. the financial statements are free of material misstatement. An audit As informed, the provisions relating to Employees Provident includes examining, on a test basis, evidence supporting the amounts Fund and Miscellaneous Provisions Act, 1952 and Employees and disclosures in the financial statements. An audit also includes State Insurance are not applicable to the Company. assessing the accounting principles used and significant estimates (b) According to the information and explanations given to made by management, as well as evaluating the overall financial us and the records of the Company examined by us, there statement presentation. We believe that our audit provides a are no dues of income tax, sales tax, wealth tax, service reasonable basis for our opinion. tax, customs duty, excise duty and cess which have not been deposited on account of any dispute. 3. As required by the Companies (Auditor’s Report) Order, 2003, as ix. The Company has accumulated losses, as at March 31, 2007 amended by the Companies (Auditor’s Report) (Amendment) Order, more than fifty percent of its net worth and has incurred cash 2004, issued by the Central Government of India in terms of sub losses during the financial year and the immediately preceding section (4A) of Section 227 of ‘The Companies Act, 1956’ of India financial year. (the ‘Act’) and on the basis of such checks of the books and records x. During the course of our examination of the books and records of the Company as we considered appropriate and according to of the Company, carried out in accordance with the generally the information and explanations given to us, we further report accepted auditing practices in India, and according to the that: information and explanations given to us, we have neither i. The Company has maintained proper records showing full come across any instance of fraud on or by the Company, particulars including quantitative details and situation of fixed noticed or reported during the year, nor have we been informed assets. ii. The fixed assets of the Company have been physically verified of such case by the management. by the management during the year and no material xi. The other clauses of paragraph 4 of the Companies (Auditor’s discrepancies between the book records and the physical Report) Order 2003, as amended by the Companies (Auditor’s inventory have been noticed. In our opinion, the frequency of Report) (Amendment) Order, 2004, are not applicable in the verification is reasonable. case of the Company for the current year, since in our opinion iii. During the year, the Company has not disposed off a major there is no matter which arises to be reported in the aforesaid part of the fixed assets. order. iv. The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties covered 4. Further to our comments in paragraph 3 above, we report that: in the register maintained under Section 301 of the Act. (a) We have obtained all the information and explanations, which v. In our opinion and according to the information and to the best of our knowledge and belief were necessary for the explanations given to us, having regard to the explanation that purposes of our audit; certain items purchased are of special nature for which suitable (b) In our opinion, proper books of account as required by law alternative sources do not exist for obtaining comparative have been kept by the Company so far as appears from our quotations, there is an adequate internal control system examination of those books; commensurate with the size of the Company and the nature (c) The Balance Sheet, Profit and Loss Account and Cash Flow of its business for the purchase of fixed assets and for sale of Statement dealt with by this report are in agreement with the services. Further, on the basis of our examination of the books books of account; and records of the Company, and according to the information (d) In our opinion, the Balance Sheet, Profit and Loss Account and and explanations given to us, we have neither come across nor Cash Flow Statement dealt with by this report comply with the have been informed of any continuing failure to correct major accounting standards referred to in sub-section (3C) of Section weaknesses in the aforesaid internal control system. 211 of the Act;

296 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

AUDITORS’ REPORT

(e) On the basis of written representations received from the give a true and fair view in conformity with the accounting directors, as on March 31, 2007 and taken on record by the principles generally accepted in India: Board of Directors, none of the directors is disqualified as on (i) in the case of the Balance Sheet, of the state of affairs of March 31, 2007 from being appointed as a director in terms of the Company as at March 31, 2007; clause (g) of sub-section (1) of Section 274 of the Act; (ii) in the case of the Profit and Loss Account, of the loss for (f) In our opinion and to the best of our information and according the year ended on that date; and to the explanations given to us, the said financial statements (iii) in the case of the Cash Flow Statement, of the cash flows together with the notes thereon and attached thereto give in for the year ended on that date. the prescribed manner the information required by the Act and

DINESH K. BACHCHAS Partner Membership No. 097820

For and on Behalf of New Delhi K. K. Mankeshwar & Co. MAY 10, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 297 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 31,141,039 31,141,039 Reserves and Surplus 2 11,727,704 11,227,288 42,868,743 42,368,327

LOAN FUNDS Secured Loans 3 36,116,561 22,905,783 78,985,304 65,274,110

APPLICATION OF FUNDS FIXED ASSETS 4 Gross Block 88,225,161 95,338,979 Less: Depreciation 34,073,154 36,172,618 Net Block 54,152,007 59,166,361

CURRENT ASSETS, LOANS AND ADVANCES Sundry Debtors 5 2,048,412 8,145,868 Cash and Bank Balances 6 31,048 1,530,033 Loans and Advances 7 1,163,782 2,172,614 3,243,242 11,848,515

LESS: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 8 43,921,344 51,196,481 Provisions 9 - 2,493,080 43,921,344 53,689,561

NET CURRENT ASSETS (40,678,102) (41,841,046)

PROFIT AND LOSS ACCOUNT 65,511,399 47,948,795 78,985,304 65,274,110

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors

This is the Balance Sheet referred to in our report of even date

DINESH K. BACHCHAS NEERAJ BASUR Director Partner SUJATHA RATNAM Director Membership No. 097820

For and on behalf of K.K. Mankeshwar & Co. Chartered Accountants

New Delhi MAY 10, 2007

298 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Clinical Trial Income 7,915,953 30,663,255 Other Income 10 2,362,399 2,132,306 TOTAL INCOME 10,278,352 32,795,561

EXPENDITURE Clinical Trial Expenses 6,116,133 17,863,145 Personnel, Operating and Administrative Expenses 11 13,553,725 20,691,133 Financial Expenses 12 5,791,673 2,835,837 Depreciation (Refer Note B9 on Schedule 13) 4 2,379,425 3,785,240 27,840,956 45,175,355

(LOSS) FOR THE YEAR (17,562,604) (12,379,794)

(LOSS) BROUGHT FORWARD (47,948,795) (35,569,001)

BALANCE CARRIED FORWARD TO THE BALANCE SHEET (65,511,399) (47,948,795)

Earnings Per Share (Rs. per equity share) (Refer Note B8 on Schedule 13) - Basic and Diluted (26.36) (18.58)

Number of Shares used in computing earnings per share - Basic and Diluted 666,261 666,261

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

The Schedules referred to above form an integral part of the Profit and Loss For and on behalf of the Board of Directors Account

This is the Profit and Loss Account referred to in our report of even date

DINESH K. BACHCHAS NEERAJ BASUR Director Partner SUJATHA RATNAM Director Membership No. 097820

For and on behalf of K.K. Mankeshwar & Co. Chartered Accountants

New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 299 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES (Loss) For The Year (17,562,604) (12,379,794)

Adjustments for: Depreciation 2,379,425 3,785,240 Interest Expense 5,657,992 2,624,455 Interest Income (2,784) (16,239) Provision No Longer Required Written Back (2,285,492) (1,632,768) Loss on Sale of Fixed Assets 639,795 - Provision for Doubtful debts 219,891 172,135 Operating (Loss) Before Working Capital Changes (10,953,777) (7,446,971)

Adjustments for: Trade and Other Receivables 7,587,617 (44,562) Trade and Other Payables (13,193,234) (8,811,515) Trade Payables / Receivable Group Companies 418,825 1,603,761 Cash Generated From / (Used in) Operations (16,140,569) (14,699,287)

Cash From / (Used in) Operating Activities (16,140,569) (14,699,287)

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (52,943) (87,080) Proceeds from Sale of Fixed Assets 297,194 2,771 Interest Income 2,784 16,239 Cash From / (Used in) Investing Activities 247,035 (68,070)

C. CASH FLOW FROM FINANCING ACTIVITIES Interest Paid (6,783) (107,259) Proceeds From Loans From the Holding Company 13,210,778 12,554,703 Cash From / (Used in) Financing Activities 13,203,995 12,447,444

Net Increase / (Decrease) in Cash and Cash Equivalents (2,689,539) (2,319,913)

Impact of Foreign Currency Translation Reserve 1,190,554 (1,061,936) (1,498,985) (3,381,849)

Cash and Cash Equivalents as at beginning of the year 1,530,033 4,911,882 Cash and Cash Equivalents as at closing of the year 31,048 1,530,033 Net Increase / (Decrease) in Cash and Cash Equivalents (1,498,985) (3,381,849)

300 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

Notes: 1 The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on 'Cash Flow Statements' issued by The Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Cash in Hand and Balances with Banks: RUPEES Schedule As at As at March 31, 2007 March 31, 2006 - Cash in Hand - 54,563 - Balances with Banks 31,048 1,475,470 31,048 1,530,033

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 13

The Schedules referred to above form an integral part of the Cash Flow Statement For and on behalf of the Board of Directors

This is the Cash Flow Statement referred to in our report of even date

DINESH K. BACHCHAS NEERAJ BASUR Director Partner SUJATHA RATNAM Director Membership No. 097820

For and on behalf of K.K. Mankeshwar & Co. Chartered Accountants

New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 301 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL Authorised 666,261 Equity Shares of US$1 each (Previous year 666,261 Equity Shares of US$1 each) 31,141,039 31,141,039

Issued, Subscribed and Paid Up 666,261 Equity Shares (Previous Year 666,261) of US$1 each fully paid up [494,699 Shares (Previous year 494,699) held by Neeman Medical 31,141,039 31,141,039 International N.V., the Holding Company] 31,141,039 31,141,039 (Ultimate Holding Company, Max India Limited)

SCHEDULE-2 RESERVES AND SURPLUS As at Addition Utilisation/ As at April 1, 2006 Adjustment March 31, 2007 Revaluation Reserve 10,142,555 - 328,423 9,814,132 (Refer Note B9 on Schedule 13) Legal Reserve 3,010 - - 3,010 Foreign Currency Translation Reserve 1,081,723 828,839 - 1,910,562 (Refer Note B2 on Schedule 13) 11,227,288 828,839 328,423 11,727,704

As at As at March 31, 2007 March 31, 2006 SCHEDULE-3 SECURED LOANS Loan From Neeman Medical International N.V. 36,116,561 22,905,783 [(the Holding Company) (Repayable on Demand)]* 36,116,561 22,905,783

*Secured by mortgage of Land and Building

SCHEDULE-4 FIXED ASSETS (Refer Notes A4, A5 and A6 on Schedule 13)

Particulars Gross Block Depreciation Net Block As at Additions Deletions/ Translation As at As at During Deletions/ Translation As at As at As at April 1, Adjustments Reserve March 31, April 1, the Year* Adjustments Reserve March 31, March 31, March 31, 2006 2007 2006 2007 2007 2006

Tangible Assets Land (Freehold) 31,595,539 - - (832,703) 30,762,836 - - - - - 30,762,836 31,595,539 Building 27,596,923 - - (727,319) 26,869,604 7,453,721 919,552 - (231,484) 8,141,789 18,727,815 20,143,202 Plant and Machinery 3,109,840 - - (81,960) 3,027,880 1,607,196 277,442 - (52,930) 1,831,708 1,196,172 1,502,644 Furniture, Fittings and Equipments 22,187,107 52,942 4,836,375 (402,462) 17,001,212 18,985,371 709,118 3,899,386 (378,791) 15,416,312 1,584,900 3,201,736 Vehicles 5,158,285 - - (135,947) 5,022,338 3,034,360 399,660 - (95,200) 3,338,820 1,683,518 2,123,925

Intangible Assets Software 5,691,285 - - (149,994) 5,541,291 5,091,970 402,076 - (149,521) 5,344,525 196,766 599,315

Total 95,338,979 52,942 4,836,375 (2,330,385) 88,225,161 36,172,618 2,707,848 3,899,386 (907,926) 34,073,154 54,152,007 59,166,361 Previous Year 93,487,298 87,080 2,771 1,767,372 95,338,979 31,444,806 4,107,670 - 620,142 36,172,618 * Refer Note B9 on Schedule 13

302 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-5 SUNDRY DEBTORS (Unsecured) Debts exceeding six months Considered Good* 2,048,412 644,546 Considered Doubtful - 758,528 Less: Provision for Doubtful Debts - (758,528) 2,048,412 644,546 Other Debts Considered Good - 7,501,322 2,048,412 8,145,868 * Amount due from company under the same management Neeman Medical International Inc. during the year Rs. 419,592 (Previous year Rs. 467,559) Maximum amount outstanding during the year from company under the same management Neeman Medical International Inc. during the year Rs. 467,559 (Previous year Rs. 467,559)

SCHEDULE-6 CASH AND BANK BALANCES Cash in Hand - 54,563 Balances with Non-Scheduled Banks:** In Current Accounts - Wachovia Bank 17,023 837,148 In Escrow Accounts - Banco Nacional de Costa Rica 4,828 5,031 - Banco de San Jose 9,197 633,291 31,048 1,530,033 ** Maximum balance outstanding during the year: Wachovia Bank Rs. 6,753,683 (Previous year Rs. 6,028,060) Banco Nacional de Costa Rica Rs. 26,104 (Previous year Rs. 25,602) Banco de San Jose Rs. 1,988,880 (Previous year Rs. 4,155,819)

SCHEDULE-7 LOANS AND ADVANCES (Considered Good) Secured Housing Loans - 28,159 Unsecured Advances Recoverable in Cash or in Kind or for Value to be Received*** 894,758 1,579,629 Security Deposits 269,024 564,826 1,163,782 2,172,614 *** Amount due from company under the same management: Neeman Medical International NV during the year Rs. 345,520 (Previous year Rs. 354,861) Maximum amount outstanding during the year from company under the same management: Neeman Medical International NV during the year Rs. 345,520 (Previous year Rs. 354,861)

SCHEDULE-8 CURRENT LIABILITIES Sundry Creditors* Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 26,934,160 31,465,522 Advances From Customers 8,341,665 16,434,432 Interest Accrued But Not Due 8,645,519 3,296,527 43,921,344 51,196,481 * There are no dues to creditors coming under the definition of Small Scale Industrial Undertaking as at March 31, 2007 and March 31, 2006

MAX INDIA ANNUAL REPORT 2006-07 303 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-9 PROVISIONS (Refer Note A9 on Schedule 13) Leave Encashment - 1,286,494 Other Employee Benefits - 1,206,586 - 2,493,080

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

SCHEDULE-10 OTHER INCOME Interest Received - Others 2,784 16,239 Provision No Longer Required Written Back 2,285,492 1,632,768 Gain on Foreign Exchange Fluctuation 43,553 273,644 Miscellaneous Income 30,570 209,655 2,362,399 2,132,306

SCHEDULE-11 PERSONNEL, OPERATING AND ADMINISTRATIVE EXPENSES Personnel Salaries and Wages (including benefits) 3,262,841 8,444,717 Staff Welfare 57,611 190,165 3,320,452 8,634,882 Operating and Administrative Rent 989,994 1,997,124 Insurance 856,133 802,787 Repairs and Maintenance: - Building 107,202 321,579 - Others 1,495,499 786,896 Rates and Taxes 82,308 13,591 Electricity and Water 547,392 642,974 Printing and Stationery 81,398 171,279 Travelling and Conveyance 1,310,277 842,604 Communication 619,191 1,273,059 Legal and Professional 3,053,662 3,844,058 Advertisement and Publicity 8,387 118,493 Provision for Doubtful Debts and Advances 219,891 172,135 Loss on Sale of Fixed Assets 639,795 - Miscellaneous Expenses 222,144 1,069,672 10,233,273 12,056,251

13,553,725 20,691,133

SCHEDULE-12 FINANCIAL EXPENSES Interest on: - Cash Credit 6,783 137,638 - Loans 5,651,209 2,486,817 Bank Charges 133,681 211,382 5,791,673 2,835,837

304 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-13

A SIGNIFICANT ACCOUNTING POLICIES

1 Basis of Preparation The Financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, accounting standards issued by the Institute of Chartered Accountants of India ('ICAI’) and the provisions of Companies Act, 1956 as adopted consistently by the Company.

2 Revenue Recognition Revenue from services is recognized by reference to the stage of completion of clinical study projects subscribed with pharmaceutical companies.

3 Expenditure Expenses are accounted for on the accrual basis and provisions are made for all known losses and liabilities.

4 Fixed Assets Fixed assets are stated at their original cost including freight, duties, taxes and other incidental expenses relating to acquisition and installation. Fixed Assets which are revalued, are stated at revalued amounts. The resultant increase in the carrying amounts is credited to the revaluation surplus. Depreciation related to the revalued amounts is adjusted against the revalued surplus.

5 Depreciation Depreciation is charged on straight-line method over the estimated useful lives of the respective assets as follows:

Estimated Useful Lives in Years Estimated Useful Lives in Years Furniture, fittings and equipments 15 Computer software 5 R&D Equipment 5 Plant and Machinery other than R&D Equipments 13 Vehicles 10 Building 50 6 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of that asset in accordance with Accounting Standard 16 issued by ICAI on "Borrowing Costs". Other borrowing costs are recognized as an expense in the year in which they are incurred. Capitalization of borrowing costs ceases when substantially all activities necessary to prepare the qualifying assets for its intended use or sale are complete.

7 Foreign Exchange Transactions (i) Monetary assets and liabilities related to foreign transactions remaining unsettled at the end of the year are translated at year-end rates. (ii) The difference in translation of monetary assets and liabilities and realized gains and losses on foreign exchange transactions, are recognized in the profit and loss account.

8 Taxation According to the Income Tax Law of Costa Rica, the Company is exempted of tax payment as it is regulated by the Free Zone Law.

9 Employee Benefits a) Social Security The Company makes a provision of 22% of the salary to be paid to the Social Security as per Costa Rican regulations. b) Disability In respect of disability due to sickness the Company pays 100% of the salary for first three days of sickness and pays 50% of the salary on maternity leave. The Company makes a provision of 8.33% of the monthly payroll according to the Labour Law for the 13th month salary. c) Leave Encashment The Company makes a provision for 4.16% of the monthly payroll for leave encashment. d) Provision for severance compensation According to the Costa Rican labour code, all employers have to establish a severance payment to employees in case of death, retirement or dismissal without fair cause. This compensation is determined according to the length of service and varies between 19.5 days and 22 days per working year, without limit of years. It is the policy of the company to record a provision on the basis of 5.33% of the salaries paid to employees monthly. 10 Leases Leases of assets under which the lessor effectively retains all the risk and benefits of the ownership are classified as operating lease. Payments made under operating lease are charged to the Profit and Loss Account on a straight-line basis over the period of the lease.

MAX INDIA ANNUAL REPORT 2006-07 305 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

B NOTES TO THE ACCOUNTS

1 Country of Incorporation Neeman Medical International Latin America S.A. is incorporated and operates under the applicable laws of Costa Rica.

2 Basis of Preparation and Translation into Indian Rupees (i) These financial statements have been prepared for the purpose of compliance with the provisions of Section 211 and Section 212 of the Indian Companies Act, 1956 and have been translated to Indian Rupees (Rs.) in accordance with Accounting Standard-11 issued by ICAI on ‘The Effects of Changes in Foreign Exchange Rates’. The functional currency of the Company is Costa Rican Colones (CRC) and the reporting currency is US Dollars (US$).

(ii) The translation of foreign currency into Rs. has been carried out: a) For assets and liabilities (both monetary and non-monetary items) using the rate of exchange prevailing on the balance sheet date (1US$ = Rs. 43.4417 as on March 31, 2007 and 1US$=Rs. 44.6176 as on March 31, 2006). b) For revenues and expenses using average exchange rates prevailing during the reporting period (1US$=Rs. 45.1627 for the year April 1, 2006 to March 31, 2007 and 1US$=Rs. 44.3385 for the year April 1, 2005 to March 31, 2006). c) Resulting exchange differences are taken into foreign currency translation reserve as required under Accounting Standard-11.

3 Contingent Liabilities: Claims against the Company not acknowledged as debts are Rs. 21,351,596 (US$ 491,500) [Previous Year Rs. 21,929,550 (US$ 491,500)].

4 Leases a) Finance Lease The Company does not have any finance lease arrangement.

b) Operating Lease (i) Lease rentals recognized in profit and loss account during the current year are Rs. 989,994 (Previous year Rs. 1,997,124) (ii) The Company does not have any non-cancelable lease.

5 Segment Reporting: Business Segments (Primary) The Company operated only in a single business segment viz. Clinical Trial Services. Accordingly there are no reportable business segments. Geographical Segments (Secondary) RUPEES USA Netherlands Mexico Costa Rica Others Total Revenue from external 1,272,594 1,851,671 4,791,688 - - 7,915,953 customers (5,751,785) (13,804,854) (10,542,365) (-) (564,251) (30,663,255)

Carrying amount of 1,456,161 702,050 252,723 54,984,315 - 57,395,249 segment assets (3,705,806) (4,318,766) (631,398) (62,132,409) (226,497) (71,014,876) by location of assets

Cost to acquire tangible and - - - 52,996 - 52,996 intangible fixed assets (-) (-) (-) (87,080) (-) (87,080) by location of assets 6 Provision for Taxation As the Company operates in a Free Zone, there is no provision for current income tax and deferred tax.

7 Related Parties (as identified by the management) are classified as: (i) Holding Company Neeman Medical International NV

(ii) Ultimate Holding Company Max India Limited, India

(iii) Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Ateev Limited, Neeman Medical International BV, Neeman Medical International (Asia) Limited, Neeman Medical International Inc., Max Medical Services Pvt. Ltd., Alps Hospital Pvt. Ltd. (w.e.f. April 6, 2006), Max Healthcare Institute Ltd., Max UK Ltd., Pharmax Corporation Ltd., Max HealthStaff International Ltd. (w.e.f. June 30, 2005), Max Asia Pac Ltd.*, Max Telecom Ventures Ltd.*, Max Estates Ltd.**, Malsi Estates Ltd.**. * Fellow subsidiaries till November 30, 2005 ** Fellow subsidiaries till May 31, 2006

306 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business are as follows: RUPEES Holding Company Fellow Subsidiaries (i) Income and Reimbursement: Service Revenue - 1,193,199 (-) (3,501,145)

(ii) Expenses: Reimbursement of Expenses - 1,844,434 (-) (1,154,223) Interest Expense 5,651,209 - (2,486,813) (-)

(iii) Loans Taken 13,210,778 - (12,554,703) (-) (iv) Amount Outstanding: Against Loan Taken 36,116,561 - (22,905,783) (-) Interest Payable 8,645,519 - (3,296,527) (-) Other Receivable 345,520 419,592 (354,861) (467,559) Other Payable 22,056,524 3,310,301 (22,653,541) (2,351,738) 8 Earnings Per Share Calculation of EPS (Basic and Diluted) RUPEES Current Year Previous Year

Basic and Diluted (Loss) after tax (Rs.) (17,562,604) (12,379,794) Weighted Average Number of Equity Shares 666,261 666,261 EPS (Rs.) (26.36) (18.58)

Share Details (Nos.) Outstanding as at the beginning of the year 666,261 666,261 Outstanding as at the end of the year 666,261 666,261

9 Gross Depreciation for the year amounts to Rs. 2,707,848 (Previous year Rs. 4,107,670), of which a sum of Rs. 328,423 (Previous year Rs. 322,430) being the depreciation on revalued amounts has been deducted from Revaluation Reserve.

10 Pursuant to the decision of the Board of Directors, Neeman Medical International Latin America, S.A. decided to close its operations effective October 31, 2006.

11 Auditors’ Remuneration RUPEES Current Year Previous Year Audit Fees 180,650 133,016 12 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

13 Previous year figures have been regrouped / reclassified wherever necessary to conform to current year's classification.

For and on behalf of the Board of Directors

New Delhi NEERAJ BASUR Director MAY 10, 2007 SUJATHA RATNAM Director

MAX INDIA ANNUAL REPORT 2006-07 307 NEEMAN MEDICAL INTERNATIONAL LATIN AMERICA, S.A.

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 3 - 1 0 1 - 1 2 2 8 2 7 State Code N A

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placements/Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 7 8 9 8 5 7 8 9 8 5 SOURCES OF FUND Paid-up Capital Reserves and Surplus 3 1 1 4 1 1 1 7 2 8 Secured Loans Unsecured Loans 3 6 1 1 6 N I L APPLICATION OF FUNDS Net Fixed Assets Investments 5 4 1 5 2 N I L +- Net Current Assets Misc. Expenditure 4 0 6 7 8 N I L Accumulated Losses 6 5 5 1 1 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 1 0 2 7 8 2 7 8 4 1 +- Profit/Loss before Tax +- Profit/Loss after Tax 1 7 5 6 3 1 7 5 6 3 +- Earning Per Share in Rupees Dividend Rate (%) Basic 2 6 . 3 6 N I L Diluted 2 6 . 3 6 V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description C L I N I C A L R E S E A R C H

308 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

DIRECTORS’ REPORT

Your Directors are pleased to present their Eighth Annual Report, along with DIVIDEND the Audited Accounts for the financial year ended March 31, 2007. In view of the accumulated losses, your Directors do not recommend any dividend for the year under review. FINANCIAL RESULTS During the year under review, the Company achieved Gross revenue of PARTICULARS OF DEPOSITS Rs. 308.35 lacs (Previous year Rs. 230.42 lacs) and incurred a net loss of Your Company has not accepted any deposits from the public during the year Rs. 270.98 lacs (previous year net loss Rs.128.53 lacs). under review. There were no unclaimed/overdue deposits as at March 31, 2007.

BUSINESS PERFORMANCE ADDITIONAL INFORMATION The Company has established presence in 12 major cities in India and has As your Company does not carry on any manufacturing activity, information managed over 200 clinical sites. The Company has been awarded 58 trials in accordance with the provisions of Section 217(1)(e) of the Companies since inception and enrolled over 3,200 patients. Order Book for Indian Act, 1956 read with the Companies (Disclosure of Particulars in the Report operations has increased from US$ 1.3 million as at March 31, 2006 to US$ of Board of Directors) Rules, 1988 is not furnished herewith. 2.3 million as at March 31, 2007. The Company has 5 out of 10 top pharma companies in the world as its clients. During the year, your Company doubled DIRECTORS’ RESPONSIBILITY STATEMENT its customer base to 29 as on March 31, 2007 from 14 as on March 31, 2006. As per the provisions of Section 217(2AA) of the Companies Act, 1956, the It has access to more than 600 GCP/ICH trained principal investigators in Directors confirm that: India and has also entered into alliances with 4 major tertiary care hospitals (i) In the preparation of annual accounts, the applicable accounting in the country in order to expand its patient base. The Company is the standards have been followed, along with proper explanation relating preferred provider with pharma majors, viz., Glaxo SmithKline, Merck, Bristol- to material departures; Myers Squibb, Capnia, Sanofi- Aventis, Johnson & Johnson and Wyeth. Your (ii) The Directors had selected such accounting policies and applied them Company has also entered into strategic alliance with a CRO (Contract consistently and made judgments and estimates that are reasonable Research Organisation) in USA to expand its customer base. and prudent, so as to give a true and fair view of the state of affairs With stringent standard operating procedures in place, the Company has of the Company at the end of the financial year and of the profit or earned a reputation for high quality delivery, further reinforced by successful loss of the Company for that period; US FDA audits at its 4 sites and is recognized as a benchmark on patient (iii) The Directors had taken proper and sufficient care for the maintenance retention for clinical studies with a retention rate of 98.1% as against an of adequate accounting records in accordance with the provisions of industry average of 65-70%. the Companies Act, 1956 for safeguarding the assets of the Company Your Company is the first full-fledged CRO in India to obtain the quality ISO and for preventing and detecting fraud and other irregularities; and 9001:2000 certification. (iv) The Directors had prepared the annual accounts on a going concern basis. Your Company has embarked upon a long-term strategy to move up the DIRECTORS value chain and enhance its service offerings. Towards that initiative, it has In accordance with the provisions of the Companies Act, 1956, Mr. Analjit further expanded into Clinical Data Management Service to cater to mid- Singh is liable to retire by rotation at the ensuing Annual General Meeting sized pharma and biotech companies. During 2006-07, Clinical Data and being eligible offers himself for re-appointment. Management Centre and Clinical Trial Monitoring unit started full-fledged functioning. Thus, the Company’s offerings now include phase-II, phase-III Mr. B. Anantharaman was appointed as the Managing Director of the and phase-IV clinical trial design and management, site management services, Company for a three-year period effective January 3, 2007. monitoring of clinical trials, clinical data management, bio-statistical analysis and medical report writing and supply chain management of clinical trial AUDITORS material. M/s Price Waterhouse, Chartered Accountants, the Statutory Auditors of the The breadth of all its service offerings enables the Company to access a Company, retire at the conclusion of the ensuing Annual General Meeting and larger segment of customers and offer them a bouquet of clinical trial are eligible for re-appointment. The Company has obtained from them a services under one roof thereby synergizing the domain knowledge and Certificate to the effect, that their re-appointment, if made, will be in conformity expertise across all the service lines to fullest extent. with the limits specified under Section 224 (1B) of the Companies Act, 1956.

PARTICULARS OF EMPLOYEES Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is furnished hereunder: Name Age Designation Nature Remuneration Qualifications Date of Experience Last Designation (Yrs) of duties (Rs.) commencement Employment of employment held (a) Employed throughout the year and was in receipt of remuneration of not less than Rs.24, 00,000/- per annum Dr. Ajoy Kumar 44 Chief Executive Operations 4608073 MBBS, DIP IN BUS 16.05.2005 20 Apollo Hospital President - Operations Officer ADMN AND HOSP. ADMN. (b) Employed for part of the year and was in receipt of remuneration of not less than Rs.2,00,000/- per month. NIL Notes: 1. Remuneration includes salary, allowances, bonus, medical reimbursement, leave travel assistance, personal accident and health insurance, Company’s contribution to Provident, Pension and Superannuation Funds, leave encashment and monetary value of perquisites. 2. The above employee does not hold by himself or along with his spouse and dependent children 2% or more of Equity Shares of the Company. 3. The above employee is not a relative of any Director of the Company. For and on behalf of the Board of Directors

New Delhi ANALJIT SINGH JULY 20, 2007 Chairman

MAX INDIA ANNUAL REPORT 2006-07 311 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

AUDITORS’ REPORT

TO THE MEMBERS OF NEEMAN MEDICAL INTERNATIONAL (ASIA) basis of our examination of the books and records of the LIMITED Company, and according to the information and explanations 1. We have audited the attached Balance Sheet of Neeman Medical given to us, we have neither come across nor have been International ( Asia) Limited, as at March 31, 2007, and the related informed of any continuing failure to correct major weaknesses Profit and Loss Account and Cash Flow Statement for the year in the aforesaid internal control system. ended on that date annexed thereto, which we have signed under (v) (a) In our opinion and according to the information and reference to this report. These financial statements are the explanations given to us, the particulars of contracts or responsibility of the Company’s management. Our responsibility arrangements referred to in Section 301 of the Act have is to express an opinion on these financial statements based on been entered in the register required to be maintained our audit. under that section. (b) In our opinion and according to the information and 2. We conducted our audit in accordance with the auditing standards explanations given to us, the transactions made in generally accepted in India. Those standards require that we plan pursuance of such contracts or arrangements and and perform the audit to obtain reasonable assurance about exceeding the value of Rupees Five Lakhs in respect of whether the financial statements are free of material misstatement. any party during the year have been made at prices An audit includes examining, on a test basis, evidence supporting which are reasonable having regard to the prevailing the amounts and disclosures in the financial statements. An audit market prices at the relevant time. also includes assessing the accounting principles used and significant (vi) The Company has not accepted any deposits from the public estimates made by management, as well as evaluating the overall within the meaning of Sections 58A and 58AA of the Act and financial statement presentation. We believe that our audit provides the rules framed there under. a reasonable basis for our opinion. (vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. 3. As required by the Companies (Auditor’s Report) Order, 2003, as (viii) The Central Government of India has not prescribed the amended by the Companies (Auditor’s Report) (Amendment) Order, maintenance of cost records under clause (d) of sub-section 2004, issued by the Central Government of India in terms of sub- (1) of Section 209 of the Act for any of the products of the section (4A) of Section 227 of ‘The Companies Act, 1956’ of India Company. (the ‘Act’) and on the basis of such checks of the books and records (ix) (a) According to the information and explanations given to of the Company as we considered appropriate and according to us and the records of the Company examined by us, in the information and explanations given to us, we further report our opinion, the Company is regular in depositing the that: undisputed statutory dues including provident fund, (i) (a) The Company is maintaining proper records showing full investor education and protection fund, employees’ state particulars including quantitative details and situation insurance, income tax, sales tax, wealth tax, service tax, of fixed assets. customs duty, excise duty, cess and other material (b) The fixed assets are physically verified by the management according to a phased programme designed to cover all statutory dues as applicable with the appropriate the items over a period of three years, which in our authorities. opinion, is reasonable having regard to the size of the (b) According to the information and explanations given to Company and the nature of its assets. Pursuant to the us and the records of the Company examined by us, programme, a portion of the fixed assets has been there are no dues of income tax, sales tax, wealth tax, physically verified by the management during the year service tax, customs duty, excise duty and cess as at and no material discrepancies between the book records March 31, 2007 which have not been deposited on and the physical inventory have been noticed. account of a dispute. (c) In our opinion and according to the information and (x) The Company has accumulated losses as at March 31, 2007 explanations given to us, a substantial part of fixed assets more than fifty percent of its net worth and has incurred has not been disposed of by the Company during the cash losses in the financial year ended on that date and also year. in the immediately preceding financial year. (ii) There are no stocks with the Company or with the third parties. (xi) According to the records of the Company examined by us (iii) (a) The Company has not granted any loans, secured or and the information and explanation given to us, the Company unsecured, to companies, firms or other parties covered has not defaulted in repayment of dues to any financial in the register maintained under Section 301 of the Act. institution or bank or debenture holders as at the balance (b) The Company has not taken any loans, secured or sheet date. unsecured, from companies, firms or other parties covered (xii) The Company has not granted any loans and advances on in the register maintained under Section 301 of the Act. the basis of security by way of pledge of shares, debentures (iv) In our opinion and according to the information and and other securities. explanations given to us, having regard to the explanation (xiii) The provisions of any special statute applicable to chit fund/ that certain items purchased are of special nature for which nidhi / mutual benefit fund/societies are not applicable to suitable alternative sources do not exist for obtaining the Company. comparative quotations, there is an adequate internal control (xiv) In our opinion, the Company has maintained proper records system commensurate with the size of the Company and the of transactions and contracts relating to dealing or trading nature of its business for the purchase of inventory, fixed in shares, securities, debentures and other investments during assets and for the sale of goods and services. Further, on the the year and timely entries have been made therein. Further,

312 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

AUDITORS’ REPORT

such securities have been held by the Company in its own for the purposes of our audit; name. (b) In our opinion, proper books of account as required by law (xv) In our opinion and according to the information and have been kept by the Company so far as appears from our explanations given to us, the terms and conditions of the examination of those books; guarantees given by the Company, for loans taken by others (c) The Balance Sheet, Profit and Loss Account and Cash Flow from banks or financial institutions during the year, are not Statement dealt with by this report are in agreement with prejudicial to the interest of the Company. the books of account; (xvi) The Company has not obtained any term loans. (d) In our opinion, the Balance Sheet, Profit and Loss Account (xvii) On the basis of an overall examination of the balance sheet and Cash Flow Statement dealt with by this report comply of the Company, in our opinion and according to the with the accounting standards referred to in sub-section information and explanations given to us, there are no funds (3C) of Section 211 of the Act; raised on a short-term basis which have been used for long- (e) On the basis of written representations received from the term investment. directors, as on March 31, 2007 and taken on record by the (xviii) The Company has not made any preferential allotment of Board of Directors, none of the directors is disqualified as shares to parties and companies covered in the register on March 31, 2007 from being appointed as a director in maintained under Section 301 of the Act during the year. terms of clause (g) of sub-section (1) of Section 274 of the (xix) There are no debentures outstanding as at the year end. Act; (xx) The Company has not raised any money by public issues (f) In our opinion and to the best of our information and during the year. according to the explanations given to us, the said financial (xxi) During the course of our examination of the books and statements together with the notes thereon and attached records of the Company, carried out in accordance with the thereto give in the prescribed manner the information generally accepted auditing practices in India, and according required by the Act and give a true and fair view in conformity to the information and explanations given to us, we have with the accounting principles generally accepted in India: neither come across any instance of fraud on or by the (i) in the case of the Balance Sheet, of the state of affairs Company, noticed or reported during the year, nor have we of the Company as at March 31, 2007; been informed of such case by the management. (ii) in the case of the Profit and Loss Account, of the Loss for the year ended on that date; and 4. Further to our comments in paragraph 3 above, we report that: (iii) in the case of the Cash Flow Statement, of the cash (a) We have obtained all the information and explanations, flows for the year ended on that date. which to the best of our knowledge and belief were necessary

V. NIJHAWAN Partner Membership No. F-87228 For and on behalf of New Delhi Price Waterhouse MAY 11, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 313 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 42,168,130 42,168,130

LOAN FUNDS Unsecured Loans 2 36,734,236 22,168,968 78,902,366 64,337,098 APPLICATION OF FUNDS FIXED ASSETS 3 Gross Block 26,229,284 5,793,205 Less: Depreciation 4,315,430 2,061,276 Net Block 21,913,854 3,731,929 Capital Work in Progress - 12,437,731 21,913,854 16,169,660 INVESTMENTS 4 1,960,090 11,948,323 Deferred Tax Asset (Net) 5 - 379,222

CURRENT ASSETS, LOANS AND ADVANCES Sundry Debtors 6 7,143,768 1,713,517 Cash and Bank Balances 7 2,703,134 1,508,897 Other Current Assets 8 5,642,687 2,025,736 Loans and Advances 9 4,033,527 4,298,801 19,523,116 9,546,951 Less: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 10 37,560,512 19,943,480 Provisions 11 718,140 449,214 38,278,652 20,392,694 NET CURRENT ASSETS (18,755,536) (10,845,743)

PROFIT AND LOSS ACCOUNT 73,783,958 46,685,636 78,902,366 64,337,098 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 15

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Managing Director Partner NEERAJ BASUR Director Membership No. F-87228 For and on behalf of REENA ANEJA Company Secretary Price Waterhouse Chartered Accountants New Delhi MAY 11, 2007

314 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Income from Operations 12 30,834,886 23,041,810 Other Income 13 822,215 706,215 31,657,101 23,748,025 EXPENDITURE Personnel, Operating and Administrative Expenses 14 55,677,555 35,312,973 Depreciation 3 2,258,146 662,450 57,935,701 35,975,423

(LOSS) BEFORE TAX (26,278,600) (12,227,398) Tax Expense - Fringe Benefit Tax 440,500 506,057 - Deferred Tax 379,222 119,203 (LOSS) AFTER TAX (27,098,322) (12,852,658)

(LOSS) BROUGHT FORWARD (46,685,636) (33,832,978)

BALANCE CARRIED FORWARD TO BALANCE SHEET (73,783,958) (46,685,636)

Earning Per Share (Rs. per equity share of Rs. 10/- each) - Basic and Diluted (6.50) (3.08) (Refer Note B(6) on Schedule 15)

Number of shares used in computing earning per share - Basic and Diluted 4,166,813 4,166,813

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 15

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Managing Director Partner NEERAJ BASUR Director Membership No. F-87228 For and on behalf of REENA ANEJA Company Secretary Price Waterhouse Chartered Accountants New Delhi MAY 11, 2007

MAX INDIA ANNUAL REPORT 2006-07 315 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES (LOSS) BEFORE TAX (26,278,600) (12,227,398)

Adjustments for: Depreciation 2,258,146 662,450 Interest Expense - 4,678 Interest Income (102,640) (43,782) Income from Investment - Dividends (298,588) (315,809) Net (Profit)/Loss on Fixed Assets Sold 7,458 224,783 Net (Profit)/Loss on Sale of Investments (13,179) 1,404 Provision for Bad and Doubtful Debts 550,000 70,000 Provision for Doubtful Adances 1,524,064 - Liability no Longer Required Written Back (407,808) (336,198) Unrealised Foreign Exchange (Gain) /Loss 42,100 48,577 Other Provisions 268,926 (59,688) Operating (Loss) Before Working Capital Changes (22,450,121) (11,970,983)

Adjustments for: Trade Receivables (6,022,351) 1,202,552 Other Receivables (5,141,015) (1,095,171) Trade Payables 18,024,841 14,584,974 Other Current Assets 265,274 (156,167) Cash Generated From Operations (15,323,372) 2,565,205 Direct taxes refunded/(paid) (440,500) (1,773,554) Cash From / (Used in) Operating Activities (15,763,872) 791,651

B. CASH FLOW FROM INVESTING ACTIVITIES Change in Trade Payables Related to Capital Items - (72,607) Purchase of Fixed Assets (8,027,649) (1,364,866) Capital Work in Progress - (12,437,731) Proceeds from Sale of Fixed Assets 17,850 427,800 Proceeds from Sale of Investments 40,500,000 26,200,000 Purchase of Investments (30,498,588) (23,815,809) Interest Received 102,640 43,782 Dividend Received 298,588 296,748 Cash From/ (Used In) Investing Activities 2,392,841 (10,722,683)

C. CASH FLOW FROM FINANCING ACTIVITIES Unsecured loans 14,565,268 10,100,000 Repayment of Short Term Loans - (573,136) Interest Paid - (4,678) Cash From/ (Used In) Financing Activities 14,565,268 9,522,186 Net Increase/(Decrease) in Cash and Cash Equivalents 1,194,237 (408,846)

Cash and Cash Equivalents - As At March 31,2006 1,508,897 1,917,743 Cash and Cash Equivalents - As At March 31,2007 2,703,134 1,508,897 Net Increase/(Decrease) in Cash and Cash Equivalents 1,194,237 (408,846)

316 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

Notes: 1 The above Cash Flow Statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consists of cash and balances with banks: RUPEES Schedule As at As at March 31, 2007 March 31, 2006 Cash 19,684 3,091 Balances with Banks 2,683,450 1,505,806 2,703,134 1,508,897

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 15

The Schedules referred to above form an integral part of the Cash Flow For and on behalf of the Board of Directors Statement This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN B. ANANTHARAMAN Managing Director Partner NEERAJ BASUR Director Membership No. F-87228 For and on behalf of REENA ANEJA Company Secretary Price Waterhouse Chartered Accountants New Delhi MAY 11, 2007

MAX INDIA ANNUAL REPORT 2006-07 317 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-1 SHARE CAPITAL Authorised 4,250,000 (Previous year 4,250,000) Equity Shares of Rs. 10/- each 42,500,000 42,500,000 1,00,000 (Previous year 100,000) 13% Non-Cumulative Redeemable Preference Shares of Rs. 10/- each 1,000,000 1,000,000

Issued, Subscribed and Paid Up 4,166,813 (Previous year 4,166,813) Equity Shares of Rs. 10/- each 41,668,130 41,668,130 (held by Max India Limited, the holding company)

50,000 (Previous year 50,000) 13% Non-cumulative 500,000 500,000 Redeemable Preference Shares of Rs. 10/- each (held by Max India Limited, the holding company) (Refer Note B2 on Schedule 15) 42,168,130 42,168,130

SCHEDULE-2 UNSECURED LOAN Unsecured Loan -From Max India Limited [(the Holding Company) (repayable on demand)] 36,734,236 22,168,968 36,734,236 22,168,968

SCHEDULE-3 FIXED ASSETS (Refer Notes A3 and A4 on Schedule 15) RUPEES Gross Block Depreciation Net Block Particulars As at Additions Deletions As at As at For the Deletions/ As at As at As at April 1,2006 During the During the March 31, April 1,2006 Year Adjustments March 31, March 31, March 31, Year Year 2007 2007 2007 2006 Tangible Assets Leasehold Improvements 2,982,060 13,700 - 2,995,760 1,223,748 407,429 - 1,631,177 1,364,583 1,758,312 Plant and Machinery 19,823 55,000 - 74,823 6,603 2,382 - 8,985 65,838 13,220 Furniture and Fixtures 447,969 493,050 - 941,019 136,895 82,419 - 219,314 721,705 311,074 Office Equipment 1,156,054 304,076 29,300 1,430,830 225,316 70,276 3,992 291,600 1,139,230 930,738 Computers 913,299 3,566,133 - 4,479,432 453,850 327,482 - 781,332 3,698,100 459,449

Intangible Assets Software 274,000 10,304,576 - 10,578,576 14,864 894,155 - 909,019 9,669,557 259,136 Technical Know-How - 5,728,844 - 5,728,844 - 474,003 - 474,003 5,254,841 - Total 5,793,205 20,465,379 29,300 26,229,284 2,061,276 2,258,146 3,992 4,315,430 21,913,854 3,731,929 Previous year 5,344,208 1,364,866 915,869 5,793,205 1,662,112 662,450 263,286 2,061,276 Capital Work in Progress - 12,437,731 21,913,854 16,169,660 Note: 1. Leasehold improvements include civil and other improvements at Company's Office. 2. Capital Work In Progress includes an amount of Current Year Nil (Previous Year Rs 2,719,743) relating to expenses pending capitalization.

318 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-4 INVESTMENTS (Refer Notes A5 and B9 on Schedule 15) Current Non Trade (Unquoted), at Cost Units in Mutual Fund 1,960,090 11,948,323 1,960,090 11,948,323 Aggregate value of unquoted investments 1,960,090 11,948,323

SCHEDULE-5 DEFERRED TAX ASSET (NET) (Refer Notes A6 and B3 on Schedule 15) Deferred Tax Asset Opening Balance 492,029 611,232 Movement during the year 941,498 (119,203) Closing Balance 1,433,527 492,029

Deferred Tax Liability Opening Balance (112,807) (112,807) Movement during the year (1,320,720) - Closing Balance (1,433,527) (112,807)

Net Deferred Tax (Liability)/Asset - 379,222

SCHEDULE-6 SUNDRY DEBTORS (Unsecured) Debts exceeding six months - Considered good 698,533 - - Considered doubtful 673,600 123,600 Less: Provision for doubtful debts (673,600) (123,600) 698,533 - Other Debts - Considered good 6,445,235 1,713,517 7,143,768 1,713,517

SCHEDULE-7 CASH AND BANK BALANCES Cash in Hand 19,684 3,091 Balance with Scheduled Banks - In Current Accounts 1,183,450 5,806 - In Fixed Deposit Accounts* 1,500,000 1,500,000 2,703,134 1,508,897 *held by Yes Bank Limited in lien of Bank Guarantee (Refer Note B1 on Schedule15)

SCHEDULE-8 OTHER CURRENT ASSETS Unbilled Income 5,529,922 1,991,778 Interest Receivable 112,765 33,958 5,642,687 2,025,736

MAX INDIA ANNUAL REPORT 2006-07 319 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-9 LOANS AND ADVANCES (considered good)

Unsecured Advances to companies under the same management * 1,524,064 Less: Provision made for doubtful advances (1,524,064) - 1,524,064 Advances recoverable in cash or in kind or for value to be received 1,259,235 897,672 Advance Income Tax [net of provision for tax of Rs 130,565 (Previous Year Rs 130,565)] 1,992,030 1,792,154 Prepaid Expenses 680,880 61,729 Security Deposits 101,382 23,182 4,033,527 4,298,801 * Amount recoverable from Neeman Medical International, Latin America; maximum amount outstanding during the year being Rs. 1,524,064 (Previous year Rs. 1,524,064)

SCHEDULE-10 CURRENT LIABILITIES Sundry Creditors - Total Outstanding Dues of small scale industrial undertakings - - - Total Outstanding Dues of creditors other than small scale industrial undertakings 17,913,423 7,480,995

Advances From Customers 17,900,950 11,841,487 Other Liabilities 1,746,139 620,998 37,560,512 19,943,480

SCHEDULE-11 PROVISIONS (Refer Note A7 on Schedule 15) Gratuity 293,856 179,156 Leave Encashment 424,284 270,058 718,140 449,214

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-12 INCOME FROM OPERATIONS (Refer Notes A2 and B7 on Schedule 15) Clinical Trial Services * 28,403,425 22,621,394 Clinical Data Management Services 460,200 - Others 1,971,261 420,416 30,834,886 23,041,810 *Tax deducted at source of Rs. 636,123 (Previous year Rs. 1,398,298)

320 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

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RUPEES

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-13 OTHER INCOME Interest on Loans and Non Trade Investments (Gross) -Fixed Deposits* 101,608 43,782 -Others 1,032 10,426 Dividend income from Non Trade Investments-Current 298,588 315,809 Profit on sale of Non Trade Investments-Current 13,179 - Liabilities no longer required written back 407,808 336,198 822,215 706,215 *Tax deducted at source of Rs. 22,800 (Previous year Rs. 9,825)

SCHEDULE-14 PERSONNEL, OPERATING AND ADMINISTRATIVE EXPENSES Personnel Expenses Salaries, Wages and Bonus 30,921,401 16,637,976 Contribution to Provident and Other Funds 1,016,511 723,917 Staff Welfare 466,440 273,093 Recruitment 1,509,908 1,215,579 33,914,260 18,850,565

Operating and Administrative Expenses Clinical Trial Expenses 743,438 676,498 Rent 3,409,430 1,448,064 Electricity and Water 789,635 311,499 Repair and Maintenance-Others 3,239,909 2,616,347 Legal and Professional 4,695,373 2,624,292 Printing and Stationery 736,800 807,138 Business Promotion 109,135 805,239 Travelling and Conveyance 2,963,874 5,225,290 Communication Expenses 1,853,281 1,031,012 Training and Seminar Expenses 159,604 117,310 Insurance 529,876 186,293 Rates and Taxes 7,707 11,882 Charity and Donation 2,200 1,100 Bank Charges 24,276 35,765 Loss on Sale of Fixed Assets 7,458 224,783 Loss on sale of Non Trade Investments-Current - 1,404 Provision for Doubtful Advances 1,524,064 - Provision for Doubtful Debts 550,000 70,000 Loss on Foreign Exchange Fluctuation (Refer Note A8 on Schedule 16) 42,100 22,842 Membership and Subscription 372,258 220,964 Miscellaneous Expenses 2,877 24,686 21,763,295 16,462,408 55,677,555 35,312,973

MAX INDIA ANNUAL REPORT 2006-07 321 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

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SCHEDULE-15

A SIGNIFICANT ACCOUNTING POLICIES

1 The accompanying financial statements are prepared in accordance with Generally Accepted Accounting Principles in India (“GAAP”), under the historical cost convention, on accrual basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956, as adopted consistently by the Company.

2 Revenue Recognition Revenue from services is recognised with reference to the stage of completion of clinical study projects subscribed with pharmaceutical companies. Revenue from services is recognised with reference to the stage of completion of clinical data management service projects subscribed with pharmaceutical companies.

3 Fixed Assets (a) Fixed assets are stated at their original cost of acquisition including freight, duties, taxes and other incidental expenses relating to acquisition and installation. (b) Expenses of revenue nature, which are related to project set-up, are transferred to “Pre operative expenses pending capitalisation”. These expenses are allocated to fixed assets in the year of commencement of the related project. (c) Intangible assets are recognised if they are separately identifiable and the company controls the future economic benefits arising out of them. All other expenses on intangible items are charged to the Profit & Loss account. Intangible assets are stated at cost less accumulated amortisation and impairment.

4 Depreciation / Amortisation (i) Depreciation on fixed assets is provided on Straight-line method on a pro-rata basis as per rates prescribed under Schedule XIV to the Companies Act, 1956. (ii) Leasehold improvements are amortised over the respective periods of lease. (iii) Assets costing not more than Rs. 5,000 each individually are depreciated at 100% in the year of addition. (iv) Software/Technical Know-how in the nature of intangible assets are depreciated over a period of five years.

5 Investments Investments are either classified as current investments or long term investments. The cost of investments includes acquisition charges such as brokerage, fees and duties. Current investments are carried at lower of cost and fair value.

6 Taxation Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expense arise. Provision for tax consists of current tax and deferred tax. A provision is made for the income tax annually based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. The differences that result between the profit offered for income tax and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences namely the differences that originate in one accounting period and reversed in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on the prevailing enacted or substantially enacted regulations. Deferred tax assets are recognised only if there is virtual certainty that they will be realised and reviewed for the appropriateness of their carrying values at each balance sheet date.

7 Employee Benefits (i) Gratuity In accordance with the Payment of Gratuity Act, 1972, the Company provides gratuity, a benefit plan (the “Gratuity Plan”) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, based upon which, the Company contributes to a Master policy with the Life insurance Corporation of India. (ii) Provident Fund Eligible employees receive benefits from a provident fund, which is a defined contribution plan. The Company makes contributions under Provident Fund to “Regional Provident Fund Commissioner”. Both the employee and the Company make monthly contributions to the above said office equal to a specific percentage of the covered employee’s salary. (iii) Leave Encashment Accrual for Leave encashment is made on the basis of actuarial valuation done at the year-end.

8 Foreign Exchange Transactions (i) Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at year-end rates. (ii) The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions, other than relating to Fixed Assets, are recognised in the profit and loss account.

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(iii) Exchange difference in respect of liabilities incurred to acquire fixed assets is adjusted to the carrying amount of fixed assets.

9 Leases Leases of assets under which the lessor effectively retains all the risks and benefits of ownership are classified as operating lease. Payments made under operating lease are charged to Profit and Loss Account on a straight-line basis over the period of the lease.

B NOTES TO ACCOUNTS

1 Contingent Liabilities RUPEES Particulars Current Year Previous Year Bank Guarantees 1,500,000 1,500,000

2 The Company had issued 50,000 13% Non Cumulative Redeemable Preference shares of Rs. 10 each amounting to Rs. 500,000 on December 9, 2002, which were due for redemption on December 09, 2006. With the consent of the Preference Shareholder and the holding company i.e. Max India Limited; the Company had extended the date of redemption to December 09, 2009. Also, the Company has not provided for any dividend on the above said Redeemable Preference Shares. 3 Deferred Tax The break up and movement of deferred tax assets and deferred tax liabilities into major components is given below: RUPEES Particulars Opening as at Movement Closing as at April 1, 2006 during the March 31, 2007 period Deferred Tax Asset Deduction u/s 43B 92,568 149,158 241,726 Provision for Doubtful Debts/Advances 41,604 (3,562) 38,042 Bonus 134,640 795,902 930,542 Sub Total 268,812 941,498 1,210,310

Deferred Tax (Liability) Depreciation 110,410 (1,320,720) (1,210,310) Sub Total 110,410 (1,320,720) (1,210,310) Net Deferred Tax (Liability)/Asset* 379,222 (379,222) -Nil * Deferred Tax Assets are recognized to the extent of their realisability in future.

4 Accounting for leases has been done in accordance with Accounting Standard-19 issued by the Institute of Chartered Accountants of India.

Following are the details of lease transactions for the year: (a) Finance Lease The Company does not have any finance lease arrangement. (b) Operating Lease (i) Lease rentals recognized in the Profit and Loss account for the year are Rs. 3,409,430 (Previous year Rs. 1,241,064). (ii) The company has entered into operating leases for its office and for employees’ residence that are renewable on a periodic basis and cancelable at Company’s option. The company has not entered into sublease agreements in respect of these leases. (iii) There are no future commitments for lease payments for any of the above mentioned lease agreements.

5 Related Parties (as identified by the management) are classified as:

(i) Holding Company Max India Limited (ii) Fellow Subsidiaries Max New York Life Insurance Company Ltd., Neeman Medical International BV, Neeman Medical International NV, Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A., Pharmax Corporation Ltd., Max Estates Ltd.*, Malsi Estates Ltd.*, Max Ateev Ltd., Max UK Ltd., Max HealthStaff International Ltd. (w.e.f June 30, 2005), Max Healthcare Institute Ltd., Max Medical Services Ltd., Alps Hospital Pvt. Ltd. (w.e.f. April 6, 2006), Max Telecom Ventures Ltd.**, Max Asia Pac Ltd.**. (iii) Key Management Personnel Mr. B. Anantharaman * Fellow subsidiaries till May 31, 2006. ** Fellow subsidiaries till November 30, 2005.

MAX INDIA ANNUAL REPORT 2006-07 323 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

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Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business are as follows: RUPEES Particulars Holding Fellow Company Subsidiaries Income and Reimbursements -Reimbursement of Expenses - - (-) (762,146) Expenses -Rent Expense - 2,189,730 (-) (1,207,064)

-Other Expenses - 137,931 (-) (1,100)

-Expenses Reimbursed 1,355,268 3,521,167 (1,938,858) (210,336)

Purchase of Fixed Assets 10,000 12,263 (20,251) (220,449)

Purchase of Fixed Assets Transferred to CWIP - - (-) (314,550)

Expenditure Incurred Transferred to Preoperative Expenditure Pending Capitalisation - - (-) (238,550)

Loans Taken 13,200,000 - (10,100,000) (-) Amount Outstanding -Against Loan Taken 36,734,236 - (22,168,968) (-) -Other Receivables - 1,524,064 (-) (1,524,064) -Other Payables - 1,022,409 (-) (550,123)

Figures in brackets are for previous year

6 Earnings per share (EPS) Calculation of EPS (Basic and Diluted) Particulars For the year ended For the year ended March 31, 2007 March 31, 2006 Basic and Diluted (Loss) after Tax (Rs.) (27,098,322) (12,852,658) Weighted average number of Equity Shares 4,166,813 4,166,813 EPS (Rs.) (6.50) (3.08)

Share Details (Nos) Outstanding as at the beginning of the year 4,166,813 4,166,813 Issued during the year - - Outstanding as at the end of the year 4,166,813 4,166,813

7 During the year, the Company started netting off pass through expenses with relevant expense head as against gross income and expense shown in earlier years.

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8 Auditors’ Remuneration RUPEES Particulars Current Year Previous Year - Audit Fee (including service tax) 44,944 39,284

9 Investments The details of Investments are given below: RUPEES Current Year Previous Year Face Value Numbers as at Value as at Numbers as at Value as at March 31, March 31, March 31, March 31, 2007 2007 2006 2006 CURRENT NON TRADE (UNQUOTED), AT COST Units in Mutual Fund Kotak Liquid Fund – Dividend Scheme 10 194,677 1,960,090 1,191,894 11,948,323

MOVEMENT IN CURRENT NON TRADE INVESTMENTS (UNQUOTED) Purchase Sales Name of Investment Face Value Unit (Numbers) Value Unit (Numbers) Value Kotak Liquid Fund – Dividend Scheme 10 3,042,029 30,498,588 4,039,246 40,500,000

10 During the year, the Company has started its Clinical Data Management Services Centre for which assets of Rs. 19,644,558 are capitalised on starting-up commercial operations w.e.f. November 1, 2006.

11 Expenditure/Earning in Foreign Currency RUPEES Particulars Current Year Previous Year (a) Expenditure in Foreign Currency -Professional and Consultancy 2,760,260 44,440 -Travelling 474,106 1,427,625 -Capital Expenditure 1,088,840 - (b) Earning in Foreign Currency -Service Income 17,204,344 12,027,944

12 Segment Reporting a) Business Segment The Company has considered business segment as the primary segment for disclosure. The services considered are Clinical Research and Clinical Data Management Services. b) Geographical Segment The Company has considered geographical segment as secondary reporting segment for disclosure. For this purpose, the revenues are bifurcated based on location of customers in India and outside India.

MAX INDIA ANNUAL REPORT 2006-07 325 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

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SEGMENT INFORMATION

Primary Segment RUPEES Particulars Clinical Research Clinical Data Total Management Services

a) Segment Revenue from - Service Income from External Customers 30,374,686 460,200 30,834,886 (23,041,810) - (23,041,810) -Other Income 407,808 - 407,808 (390,406) (-) (390,406) Total Segment Revenue 30,782,494 460,200 31,242,694 (23,432,216) (-) (23,432,216) Add : Unallocated Income Dividend and Interest Income 414,407 (315,809)

Total Revenue 31,657,101 (23,748,025) b) Segment Results (19,034,897) (7,658,110) (26,693,007) (11,737,180) (806,027) (12,543,207)

Add : Unallocated Income Dividend and Interest Income 414,407 (315,809) (Loss) Before Tax (26,278,600) (12,227,398) Tax Expense (Including Provision for Deferred Tax Liabilities) (819,722) (625,260) Net Profit/(Loss) After Tax (27,098,322) (12,852,658)

c) Carrying Amount of Segment Assets 19,906,780 18,714,291 38,621,071 (11,727,647) (12,446,110) (24,173,757) Add: Unallocated Assets 4,775,990 (13,870,399) Total Assets 43,397,061 (38,044,156)

d) Segment Liabilities 34,379,531 3,899,121 38,278,652 (16,595,713) (3,796,981) (20,392,694) Add: Unallocated Liabilities 36,734,236 (22,168,968) Total Liabilities 75,012,888 (42,561,662)

e) Cost to Acquire Tangible and Intangible Fixed Assets 820,821 19,644,558 20,465,379 (1,364,866) (-) (1,364,866) Total Addition 20,465,379 (1,364,866)

f) Depreciation and Amortisation Expense 749,181 1,508,965 2,258,146 (662,450) (-) (662,450) Total Depreciation and Amortisation 2,258,146 (662,450)

g) Non-Cash Expenses Other than Depreciation and Amortisation 2,074,064 (-) 2,074,064 (70,000) (-) (70,000) Total 2,074,064 (70,000)

326 MAX INDIA ANNUAL REPORT 2006-07 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

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Secondary Segment

RUPEES Particulars India Europe and Total North America A Revenue from external customers 13,456,599 17,378,267 30,834,866 (16,201,524) (12,366,326) (28,567,850)

B Carrying amount of segment assets by location of assets 33,993,287 4,627,784 38,621,071 (23,455,979) (717,778) (24,173,757)

C Cost to acquire tangible and intangible fixed assets 20,465,379 - 20,465,379 by location of assets (1,364,866) (-) (1,364,866)

Figures in bracket are for previous year

13 Previous year’s figures have been regrouped / reclassified wherever necessary to conform to current year’s classification.

For and on behalf of the Board of Directors

B. ANANTHARAMAN Managing Director NEERAJ BASUR Director New Delhi MAY 11, 2007 REENA ANEJA Company Secretary

MAX INDIA ANNUAL REPORT 2006-07 327 NEEMAN MEDICAL INTERNATIONAL (ASIA) LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 1 0 2 1 4 9 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placements N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand)

Total Liabilities Total Assets 7 8 9 0 2 7 8 9 0 2 SOURCES OF FUND Paid-up Capital Reserves and Surplus 4 2 1 6 8 N I L Secured Loans Unsecured Loans N I L 3 6 7 3 4

Share Application Money N I L APPLICATION OF FUNDS Net Fixed Assets Investments 2 1 9 1 4 1 9 6 0 +- Net Current Assets Misc. Expenditure 1 8 7 5 6 N I L Accumulated Losses Deferred Tax Assets 7 3 7 8 4 N I L IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover/ Total Income Total Expenditure 3 1 6 5 7 5 7 9 3 6 +- Profit/Loss before Tax +- Profit/Loss after Tax 2 6 2 7 9 2 7 0 9 8 +- Earning Per Share in Rs. Dividend Rate (%) 6 . 5 0 N I L

V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description C L I N I C A L T R I A L S E R V I C E S C L I N I C A L D A T A M A N A G E M E N T

328 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED PHARMAX CORPORATION LIMITED

DIRECTORS’ REPORT

Your Directors have pleasure in presenting the Eighteenth Annual Report ADDITIONAL INFORMATION of the Company together with the Audited Annual Accounts for the Disclosure of information in accordance with the provisions of year ended March 31, 2007. Section 217(1)(e) of the Companies Act, 1956 is not applicable to your Company. FINANCIAL RESULTS During the year under review, your Company earned a total income PARTICULARS OF DEPOSITS amounting to Rs. 545.04 lacs against Rs. 580.52 lacs in previous year. The Company has not accepted any deposits under Section 58A of the Key highlights of the financial results for the year under review are as Companies Act, 1956. follows : PARTICULARS OF EMPLOYEES Current Year Previous Year As the Company had no employee on its roll, the particulars under (Rs. lacs) (Rs. lacs) Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees Rules) 1975 are not applicable. Lease Rentals 514.66 457.86 Other Income 30.38 122.66 DIRECTORS’ RESPONSIBILITY STATEMENT Total Income 545.04 580.52 As per the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors confirm that: Total Expenditure 217.73 294.44 (i) in the preparation of annual accounts, the applicable accounting Profit / (Loss) before tax 327.31 286.08 standards have been followed along with proper explanation relating to material departures; Provision for Taxation 98.28 98.20 (ii) the Directors had selected such accounting policies and applied Profit / (Loss) after tax 229.03 187.88 them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the ALLOTMENT OF EQUITY SHARES state of affairs of the Company at the end of the financial year and During the year under review, the Company allotted 1000 Equity Shares of the profit or loss of the Company for that period; of Re. 1 each aggregating to Rs. 1000 arising from exercise of option (iii) the Directors had taken proper and sufficient care for the for conversion of the Cumulative Convertible Preference Shares. maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the DIVIDEND assets of the Company and for preventing and detecting fraud and In view of carry forward losses, your Directors do not recommend any other irregularities; and dividend either on Equity Shares or on Preference Shares. (iv) the Directors had prepared the annual accounts, on a going concern basis. DIRECTORS In accordance with the provisions of Section 256 of the Companies AUDITORS Act, 1956 and Article 143 of the Articles of Association of the Company, Nangia & Company, Chartered Accountants, the Statutory Auditors of Mr. B. Anantharaman retires by rotation at the ensuing Annual General the Company, cease to hold office at the conclusion of the ensuing Meeting, and being eligible offers himself for re-appointment. Annual General Meeting and offer themselves for re-appointment. The Company has received from them a Certificate to the effect that their AUDIT COMMITTEE re-appointment, if made, would be in conformity with the limits specified Audit Committee of Directors presently comprises of Mr. K.S. under Section 224(1B) of the Companies Act, 1956. Ramsinghaney, Mr. B. Anantharaman and Ms. Sujatha Ratnam. The current terms of reference of this Committee fully conform to the requirements of Section 292A of the Companies Act,1956. For and on behalf of the Board of Directors

New Delhi B. ANANTHARAMAN Director MAY 10, 2007 SUJATHA RATNAM Director

330 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

AUDITORS’ REPORT

TO THE MEMBERS OF PHARMAX CORPORATION LIMITED, (a) We have obtained all the information and explanations which NEW DELHI. to the best of our knowledge and belief were necessary for the 1. We have audited the attached Balance Sheet of Pharmax Corporation purpose of our audit; Limited, New Delhi as at March 31, 2007 and the related Profit and (b) In our opinion, proper books of accounts as required by law Loss Account and Cash Flow Statement for the year ended on that have been kept by the Company, so far as appears from our date annexed thereto, which we have signed under reference to examination of the books; this report. These financial statements are the responsibility of the (c) The Balance Sheet, Profit and Loss Account and Cash Flow Company’s management. Our responsibility is to express an opinion Statement dealt with by this report are in agreement with the on these financial statements based on our audit. books of account; (d) In our opinion, the Balance Sheet, Profit and Loss Account and 2. We conducted our audit in accordance with auditing standards Cash Flow Statement dealt with by this report comply with the generally accepted in India. Those standards require that we plan requirements of Accounting Standards referred to in sub- and perform the audit to obtain reasonable assurance about whether section (3C) of Section 211 of the Act, to the extent applicable. the financial statements are free of material misstatement. An audit (e) On the basis of written representations received from the includes examining on a test basis, evidence supporting the amounts Directors of the Company and taken on record by the Board of and disclosures in the financial statements. An audit also includes Directors, none of the Directors is disqualified as on March 31, assessing the accounting principles used and significant estimates 2007 from being appointed as a Director of the Company in by management, as well as evaluating the overall financial terms of clause (g) of sub-section (1) of Section 274 of the Act. presentation. We believe that our audit provides a reasonable basis (f) In our opinion and to the best of our information and according for our opinion. to the explanations given to us, the said financial statements read together with ‘Significant Accounting Policies & Notes 3. As required by the Companies (Auditors’ Report) (Amendment) to Accounts’ in Schedule ‘11’, give the information required Order, 2004, issued by the Central Government in terms of sub- by the Act, in the manner so required and give a true and fair section 4A of section 227 of the Companies Act, 1956, (hereinafter view in conformity with the accounting principles generally referred to as the ‘Act’) we give in an annexure, a statement on accepted in India: the matters specified in paragraphs 4 and 5 of the said order, to (i) in the case of the Balance Sheet, of the state of affairs of the extent applicable to the Company. the Company as at March 31, 2007; (ii) in the case of the Profit and Loss Account, of the profit of 4. Further to our comments in the annexure referred to in paragraph the Company for the year ended on that date; and (3) above, we report that: (iii) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

RAKESH NANGIA FCA, Partner Membership No. 70776

New Delhi For Nangia and Company MAY 10,2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 331 PHARMAX CORPORATION LIMITED

AUDITORS’ REPORT

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF AUDITORS’ is commensurate with the size and nature of its business. REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON MARCH 31, 2007. 8. The Central Government of India has not prescribed the maintenance of cost records under Section 209(1)(d) of the Act, for any of the On the basis of such checks as we considered appropriate and according products of the Company. to the information and explanation given to us during the course of audit, we report that: - 9. (a) In our opinion and according to the information and explanations given to us and according to the books and records 1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed as produced and examined by us, the Company is regular in assets. depositing undisputed statutory dues including Provident Fund, (b) As explained to us, all the fixed assets have been physically Employees’ State Insurance, Income-Tax, Wealth Tax, Service verified by the management according to a regular program Tax, Cess and any other statutory dues as applicable with the of verification which in our opinion is reasonable having regard appropriate authorities. According to the information and to the size of the Company and the nature of its assets. No explanations given to us, there were no undisputed amounts material discrepancies between book records and the physical payable in respect of Provident Fund, Employees’ State Insurance, inventory have been noticed on such verification. Income-Tax, Wealth Tax, Service Tax, Cess and any other statutory (c) During the year, the Company has not disposed off a substantial dues as applicable, outstanding as at the last day of the financial part of the fixed assets. Based on the information and year concerned for a period of more than six months from the explanation given by the management of the Company and date they became payable. on the basis of audit checks performed by us, we are of the (b) According to the records of the Company, there are no dues of opinion that the sale of fixed assets during the year has not Provident Fund, Employees’ State Insurance, Income-tax, Service affected the going concern status of the Company. Tax, Cess and any other statutory dues as applicable to it, which 2. The Company being in the field of management of real estate, have not been deposited on account of any dispute. carries no inventories, hence the provisions of Clause 4(ii)(a) to 4(ii)(c) of the Companies (Auditors’ Report) (Amendment) Order, 10. In our opinion the accumulated losses of the Company are more 2004 are not applicable. than fifty percent of its net worth. The Company has not incurred any cash losses during the financial year covered by our audit and 3. (a) In our opinion and according to the information and during the immediately preceding financial year. explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties 11. Based on our audit procedures and according to the information listed in the register maintained under Section 301 of the Act. and explanations given by the management, we are of the opinion (b) As the Company has not granted any loans, secured or unsecured, that the Company has not defaulted in repayment of its dues of to companies, firms or other parties listed in the register any financial institution or bank during the year. maintained under Section 301 of the Act, the provisions of clause 4(iii)(b), 4(iii)(c) & 4(iii)(d) are not applicable. 12. The Company has not granted any loans and advances on the basis (c) In our opinion and according to the information and of security by way of pledge of shares and other securities. explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the Register maintained under Section 301 of the 13. The provisions of any special statute applicable to chit Companies Act, 1956. fund/nidhi/mutual benefit fund/societies are not applicable to the Company. 4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures 14. Based on our examination of the records and documents of the commensurate with the size of the Company and the nature of its Company, and according to the information and explanation given business for purchase of fixed assets and for sales of services. Further, to us, we are of the opinion that the Company is not dealing or on the basis of our examination and according to the explanations trading in shares, securities, debentures and other investments, and given to us, we have neither come across nor have we been informed therefore clause (xiv) of The Companies (Auditors’ Report) of any instance of major weaknesses in the aforesaid internal control (Amendment) Order, 2004 is not applicable to the Company. system of the Company. 15. In our opinion, the terms and conditions on which the Company 5. Based on the information and explanations given to us, there are no transactions with Parties covered under section 301 of the Act. has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interests of the 6. In our opinion and according to information given to us, the Company. Company has not accepted deposits from the public within the meaning of Section 58A and 58AA of the Companies Act, 1956 16. Based on the information and explanations given to us by the and rules framed there under. management, the Company has utilized the long-term loan availed 7. In our opinion, the Company has an internal audit system, which from Canara Bank for the purpose for which it was borrowed.

332 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

AUDITORS’ REPORT

17. Based on the information and according to the information and 19. The Company has not issued any debentures during the year. explanations given to us and on an overall examination of the balance sheet of the Company, in our opinion, there are no funds 20. The Company has not raised any money by public issue during the raised on a short term basis which have been used for long term year. investment or vice versa. 21. Based upon audit procedures performed and information and 18. The Company has not made any preferential allotment of shares explanations given by the management of the Company, we report to parties and companies covered in the Register maintained under no fraud on or by the Company has been noticed or reported during section 301 of the Companies Act, 1956 during the year. the course of our audit.

RAKESH NANGIA FCA, Partner Membership No. 70776

New Delhi For Nangia and Company MAY 10,2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 333 PHARMAX CORPORATION LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 205,576,787 205,576,037

LOAN FUNDS 2 Secured Loans 119,388,515 22,362,090 Unsecured Loans 35,800,000 95,954,723 360,765,302 323,892,850

APPLICATION OF FUNDS FIXED ASSETS 3 Gross Block 249,237,328 140,255,036 Less: Accumulated Depreciation 40,561,643 34,904,532 Net Block 208,675,685 105,350,504 Capital Work in Progress 675,430 - 209,351,115 105,350,504

INVESTMENTS 4 55,619,858 72,405,977

CURRENT ASSETS, LOANS AND ADVANCES 5 Sundry Debtors 2,742,401 3,328,203 Cash and Bank Balances 4,735,147 26,167,327 Loans and Advances 14,736,730 22,241,527 22,214,278 51,737,057 Less: CURRENT LIABILITIES AND PROVISIONS 6 Current Liabilities 42,780,536 44,873,119 42,780,536 44,873,119

NET CURRENT ASSETS (20,566,258) 6,863,938

MISCELLANEOUS EXPENDITURE 7 - 8,267 (To the extent not written off or adjusted)

PROFIT AND LOSS ACCOUNT 116,360,587 139,264,164 360,765,302 323,892,850

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 11

Schedule 1 to 11 form an integral part of Accounts. For and on behalf of the Board of Directors

As per our report of even date attached

RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner SUJATHA RATNAM Director Membership No. 70776 HARPREET KAUR Company Secretary

For Nangia & Company Chartered Accountants

New Delhi MAY 10, 2007

334 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

INCOME Lease Rentals* 51,465,973 45,786,388 Other Income 8 3,038,475 12,265,441 * Tax Deducted at Source Rs. 4,858,835 (Previous year Rs. 6,597,597) 54,504,448 58,051,829

EXPENDITURE Administrative Expenses 9 2,200,219 1,160,148 Financial Expenses 10 13,701,045 23,795,790 Depreciation 4 5,863,832 4,438,174 Amortization of Preliminary Expenses 8,267 49,576 (Refer Note 5 of Schedule 11B) 21,773,363 29,443,688

PROFIT BEFORE TAX 32,731,085 28,608,141

Provision for Taxation Current Year Tax 9,790,000 9,820,000 Add: Adjustments Related to Earlier years 37,508 - Net 9,827,508 9,820,000

PROFIT AFTER TAX 22,903,577 18,788,141

(LOSS) BROUGHT FORWARD (139,264,164) (158,052,305)

(LOSS) CARRIED FORWARD TO THE BALANCE SHEET (116,360,587) (139,264,164)

Earnings Per Share (Re. per equity share of Re. 1 each) -Basic 0.41 0.34 -Diluted 0.41 0.34

Number of Shares used in computing earnings per share -Basic 55,304,953 54,912,013 -Diluted 55,939,952 55,939,952

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 11

Schedule 1 to 11 form an integral part of Accounts. For and on behalf of the Board of Directors

As per our report of even date attached

RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner SUJATHA RATNAM Director Membership No. 70776 HARPREET KAUR Company Secretary

For Nangia & Company Chartered Accountants

New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 335 PHARMAX CORPORATION LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

A CASH FLOW FROM OPERATING ACTIVITIES PROFIT BEFORE TAX 32,731,085 28,608,141

Adjustments for: Depreciation 5,863,832 4,438,174 Miscellaneous Expenditure Written Off 8,267 49,576 Net (Profit) / Loss on Sale of Investments 2,863 12,807 Net (Profit) / Loss on Sale of Fixed Assets (31,722) - Assets Written Off - 137,773 Debit Balances Written Off - 86,176 Interest Expense 13,701,045 23,795,790 Interest Income (979,454) (8,667,939) Dividend Income (1,712,285) (3,518,784) TDS on Service/other Operating Income (4,858,836) (6,597,597) Liability/Provision No Longer Required Written Back (14,030) -

Operating Profit Before Working Capital Changes 44,710,765 38,344,117

Adjustments for: Trade and Other Receivables (677,705) 188,888,807 Trade Payables 2,692,480 3,928,364 Cash Generated From/ (Used In) Operations 46,725,540 231,161,288

Direct Taxes Refunded / (Paid) 3,867,780 - Cash From / (Used In) Operating Activities 50,593,320 231,161,288

B CASH FLOW FROM INVESTING ACTIVITIES Purchase of Investments (30,075,000) (238,018,784) Sale of Investments 46,858,257 165,600,000 Purchase of Fixed Assets (109,907,722) (25,000) Sale of Fixed Assets 75,000 - Interest and Dividend Received (Net) 2,623,590 12,186,723 Cash From / (Used In) Investing Activities (90,425,875) (60,257,061)

C CASH FLOW FROM FINANCING ACTIVITIES Issue of Equity Shares 750 6,150 Interest Paid (18,472,077) (19,024,758) Repayment of Long Term Loans 97,026,425 (20,682,800) Repayment of Short Term Loans (60,154,723) (106,140,000) Cash From / (Used In) Financing Activities 18,400,375 (145,841,408)

Net Increase / (Decrease) In Cash and Cash Equivalents (21,432,180) 25,062,819

Cash and Cash Equivalents As At March 31, 2006 26,167,327 1,104,508 Cash and Cash Equivalents As At March 31, 2007 4,735,147 26,167,327

Net Increase / (Decrease) In Cash and Cash Equivalents (21,432,180) 25,062,819

336 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

Notes 1) The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2) Cash and Cash Equivalents at the end of the year consist of Cash in Hand, Cheques in Hand and Balances with Banks. RUPEES Schedule As at As at March 31, 2007 March 31, 2006 Cash in Hand 35,766 27,011 Cheques in Hand 2,668,291 - Balances with Banks 2,031,090 26,140,316 4,735,147 26,167,327

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 11

Schedule 1 to 11 form an integral part of Accounts. For and on behalf of the Board of Directors

As per our report of even date attached

RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner SUJATHA RATNAM Director Membership No. 70776 HARPREET KAUR Company Secretary

For Nangia & Company Chartered Accountants

New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 337 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL

Authorised Capital 60,000,000 Equity Shares of Re. 1/- each 60,000,000 60,000,000 (Previous year 60,000,000 Equity Shares of Re. 1/- each)

10% 470,000 Cumulative Convertible Preference Shares of Rs. 100/- each 47,000,000 47,000,000 (Previous year 10% 470,000 Cumulative Convertible Preference Shares of Rs. 100/- each)

9% 1,500,000 Cumulative Redeemable Preference Shares of Rs. 100/- each 150,000,000 150,000,000 (Previous year 9% 1,500,000 Cumulative Redeemable Preference Shares of Rs. 100/- each) 257,000,000 257,000,000

Issued, Subscribed and Paid Up: 55,305,852 Equity Shares of Re 1/- each fully paid up 55,305,852 55,304,852 (Previous year 55,304,852 Equity Shares of Re 1/- each fully paid up) (Refer Note 2(a) of Schedule 11B)

(Of the above Shares 9,113,982 Equity Shares were allotted as fully paid up for consideration other than cash in terms of a Scheme of Arrangement approved by the Hon'ble High Court of Punjab and Haryana in the year 1990-91)

(Of the above Shares 47,117,247 (Previous year 47,117,247) Equity Shares are held by Max India Limited, the Holding Company)

6,341 10% Cumulative Convertible Preference Shares of Rs. 100/- each 634,100 635,100 (Previous year 6,351 10% Cumulative Convertible Preference Shares of Rs. 100/- each) (Refer Note 2(a) of Schedule 11B)

Less: Allotment Money To Be Received (363,165) (363,915) (Refer Note 2(b) of Schedule 11B)

1,500,000 9% Cumulative Redeemable Preference Shares of Rs. 100/- each (Previous year 1,500,000 9% Cumulative Redeemable Preference Shares of Rs. 100/- each) 150,000,000 150,000,000 Redeemable at par on or before 31st March, 2019 at the discretion of the board (Held by Max India Ltd., the Holding Company) 205,576,787 205,576,037

SCHEDULE-2 LOAN FUNDS SECURED LOANS Loans From Banks 119,388,515 22,362,090 (Secured against charge of monthly lease rentals receivable from various lessees and equitable mortgage of undivided share of Freehold Property at Okhla) 119,388,515 22,362,090 Amount payable within one year Rs. 16,493,770 (Previous year Rs.22,362,090)

UNSECURED LOANS Other Loans From Holding Company (Repayable on demand) 35,800,000 95,954,723 35,800,000 95,954,723

338 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

SCHEDULE-3 FIXED ASSETS Refer Note No. C, D, G, I of Schedule 11A and Note 3 of Schedule 11B. Particulars Gross Block Depreciation Net Block

As at April Additions Deletions As at March As at April For the year Deletions As at March As at March As at March 01, 2006 31, 2007 01, 2006 31, 2007 31, 2007 31, 2006

Land (Freehold) 84,296 - - 84,296 - - - - 84,296 84,296 Land (Leasehold) 182,365 - - 182,365 - - - - 182,365 182,365 Building 71,713,373 101,988,293 - 173,701,666 9,699,432 2,411,173 - 12,110,605 161,591,061 62,013,941 Plant & Machinery 67,638,777 2,237,785 - 69,876,562 24,808,112 3,247,318 - 28,055,430 41,821,132 42,830,665 Furniture and Fixtures 284,225 4,497,599 - 4,781,824 124,373 144,403 - 268,776 4,513,048 159,852 Computers 102,000 508,615 - 610,615 76,695 50,137 - 126,832 483,783 25,305 Vehicles 250,000 - 250,000 - 195,920 10,801 206,721 - - 54,080 TOTAL 140,255,036 109,232,292 250,000 249,237,328 34,904,532 5,863,832 206,721 40,561,643 208,675,685 105,350,504

Previous year 140,478,223 25,000 248,187 140,255,036 30,576,772 4,438,174 110,414 34,904,532 105,350,504 109,901,451 Capital Work in Progress (including Capital advances of Rs. 675,430) 675,430

As at As at March 31, 2007 March 31, 2006 SCHEDULE-4 INVESTMENTS Current Non Trade, (Unquoted), at cost (Refer Note E of Schedule 11A and Note 6 of Schedule 11B)

Kotak Mahindra Mutual Fund (Liquid Fund) - 32,815,372 (No. of units - Nil Previous year - 3,269,811.66)

Tata Mutual Fund (Liquid Fund) 21,546,911 39,590,605 (No. of units - 21,468.80 Previous year -35,524.01)

Birla Cash Plus Retail Daily Dividend 3,997,947 - (No. of units - 244,232.94 Previous year - Nil) 25,544,858 72,405,977

Long Term-Trade, (Unquoted), at cost Equity Shares 30,075,000 - 30,075,000 -

55,619,858 72,405,977

SCHEDULE-5 CURRENT ASSETS, LOANS AND ADVANCES

Sundry Debtors * (Unsecured, Considered Good) Debts exceeding six months - - Other Debts 2,742,401 3,328,203 2,742,401 3,328,203 Cash and Bank Balances Cash in Hand 35,766 27,011 Cheques in Hand 2,668,291 - Balances with Scheduled Banks in Current Accounts 2,031,090 26,140,316 4,735,147 26,167,327 Loans and Advances (Unsecured, Considered Good) Advances Recoverable In Cash or in Kind or For Value to be Received 184,969 3,818 Loans 5,800,000 -

MAX INDIA ANNUAL REPORT 2006-07 339 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-5 (Contd.) Interest Receivable 116,000 5,852 Prepaid Expenses 70,205 31,650 Security Deposits 378,138 378,138 Advance Income Tax 37,497,418 41,342,069 Less: Provision for Income Tax (29,310,000) (19,520,000) 14,736,730 22,241,527 *Includes debt due from companies under the same management Max India Limited 287,900 2,528,836 Max Healthcare Institute Ltd. 586,458 778,779 Max New York Life Insurance Company Ltd. 293,697 20,588 Max Healthstaff International Ltd. 680,616 - Neeman Medical International (Asia) Ltd. 893,730 -

Maximum amount outstanding during the year from companies under the same management Max India Limited 2,189,058 2,528,836 Max Healthcare Institute Ltd. 4,116,096 1,023,807 Max New York Life Insurance Company Ltd. 2,462,545 1,173,605 Max Healthstaff International Ltd. 680,616 - Neeman Medical International (Asia) Ltd. 893,730 -

SCHEDULE-6 CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry Creditors* - Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 302,076 12,102 Other Liabilities 42,478,460 44,861,017 42,780,536 44,873,119 *There are no dues to creditors under the definition of Small Scale Industrial Undertakings as at March 31, 2007 and March 31, 2006

SCHEDULE-7 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) (Refer Note 5 of Schedule 11B) Preliminary Expenses - 8,267 - 8,267

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-8 OTHER INCOME Interest on Loans (Gross)* 419,693 8,667,939 Other Interest 559,761 - Net profit on sale of Assets 31,722 - Dividend From Non-Trade Investments - Current 1,712,285 3,518,784 Unclaimed Balances Written Back 14,030 - Miscellaneous Income 300,984 78,718 3,038,475 12,265,441 * Tax Deducted at Source Rs. 68,149 (Previous year Rs. 1,945,086)

340 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-9 ADMINISTRATIVE EXPENSES Rates and Taxes 874,406 438,203 Insurance 180,304 110,352 Legal and Professional (Refer Note 7 of Schedule 11B) 147,838 140,590 Filing Fee 5,000 6,500 Travelling and Conveyance 53,914 62,262 Repair and Maintenance - Building 219,392 16,070 Repair and Maintenance - Others 259,349 5,164 Printing and Stationery 125,496 134,009 Assets Written Off - 137,773 Bank Charges 52,580 1,137 Debit Balances Written Off - 86,176 Miscellaneous 279,077 9,105 Net Loss on Sale of Non Trade Investments - Current 2,863 12,807 2,200,219 1,160,148

SCHEDULE-10 FINANCIAL EXPENSES Interest on Term Loans 6,807,552 3,813,760 Other Interest 6,893,493 19,982,030 13,701,045 23,795,790

MAX INDIA ANNUAL REPORT 2006-07 341 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-11

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS

A SIGNIFICANT ACCOUNTING POLICIES

a Accounting Basis and Convention The accompanying financial statements are prepared in accordance with Generally Accepted Accounting Principles in India (“GAAP”), under the historical cost convention, on the accrual basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956, as adopted consistently by the Company.

b Revenue Recognition (i) The revenue from lease rentals is recognised proportionately over the period of the related agreements. (ii) The interest is recognized on time proportionate basis, taking into the account the amount outstanding and the rates applicable.

c Fixed Assets Fixed assets are stated at their original cost including freight, duties, taxes and other incidental expenses relating to acquisition and installation less accumulated depreciation.

d Depreciation (i) Depreciation on fixed assets is charged on straight-line method on a pro-rata basis at rates prescribed under schedule XIV to the Companies Act, 1956. (ii) Assets costing less than Rs. 5000/- each individually are depreciated at 100% in the year of capitalization.

e Investments (i) Investments are classified into current investments and long-term investments. The cost of investments includes acquisition charges such as brokerage, fees and duties. (ii) Long-term investments are valued at cost. Provision for diminution is made to recognize a decline, other than temporary.

f Miscellaneous Expenditure Preliminary expenditure represents cost incurred for incorporation of the Company and expenses incurred on rights issue. These are being amortized over a period of 10 years.

g Accounting For Leases The assets given under operating lease are shown in the Balance Sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The lease income is recognised in the Profit and Loss account on accrual basis. The initial direct cost incurred for finalising the lease arrangement is recognised as expense immediately in the Profit and Loss account.

h Taxation Provision for tax consists of current tax & deferred tax, which is computed for current income based on the tax liability after considering allowances and exemptions. Deferred tax assets and liabilities when applicable are computed on timing difference at the balance sheet date between the carrying amount of assets and liabilities and their respective tax bases. Deferred tax assets are recognised based on management estimates of available future taxable income and assessing its certainty. The Company does not have any employees and hence the provisions of section 115WA of the Income Tax Act, 1961 are not applicable. Accordingly, the Company is not liable to pay Fringe Benefit Tax under that section.

i Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of the qualifying assets are capitalized as part of the cost of that asset in accordance with Accounting Standard 16 issued by ICAI on “Borrowing Costs”. Other borrowing costs are recognized as an expense in the period in which they are incurred.

B NOTES TO THE ACCOUNTS

1 Contingent liabilities (i) (a) Arrears of dividend on 10% Cumulative Convertible Preference Share is Rs. 337.79 Lacs (previous Year Rs. 337.16 Lacs). Corporate Dividend Tax thereon is Rs. 47.37 Lacs (previous Year Rs. 47.29 Lacs) (b) Arrears of dividend on 9% Cumulative Redeemable Preference Share is Rs. 945.00 Lacs (previous Year Rs. 810.00 Lacs). Corporate dividend tax thereon is Rs. 132.53 Lacs (previous Year Rs.113.60 Lacs). (ii) Claims against the Company not acknowledged as debts Rs. 77,000 (previous Year Rs. 77,000).

342 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(iii) The Company has given a Corporate Guarantee of Rs. 350,000,000 (Previous Year Rs. 290,000,000) to Punjab National Bank, Connaught Place, New Delhi. The Guarantee has been given for securing Term Loan facility to Max Balaji Medical & Diagnostic Research Centre by Punjab National Bank. (iv) Estimated amount of contracts remaining to be executed on capital account and not provided (net off capital advances) Rs. 653,722 (Previous Year - NIL).

2 (a) As per terms of the issue, the Company converted 10 Number, 10% Cumulative Convertible Preference Share of Rs. 100/- each fully paid up into 1000 equity shares of Re. 1/- each fully paid up on 22nd February, 2007 on receipt of allotment money i.e. Rs. 750/- (@ Rs. 75/ per Cumulative Preference Share) (b) Pending reconciliation of the allotment money receivable for remaining 6,341 10% Cumulative Convertible Preference Share of Rs. 100/- each, the conversion will be taken up at a later date to be decided by the Board.

3 Leases Accounting for leases has been done in accordance with Accounting Standard -19 issued by the Institute of Chartered accountants of India. Following are the details of the transactions for the year. a) Finance Lease The Company does not have any finance lease arrangement. b) Operating Lease Income i) Details of assets given under operating lease are as under: RUPEES Particulars Gross value Additions/ Total value Depreciation Depreciation Net value of as at April (deletions) of assets during the reserve upto assets as at 01, 2006 during the given on year March 31, March 31, year lease 2007 2007

Land 266,661 NIL 266,661 NIL NIL 266,661 Building 71,713,373 101,988,293 173,701,666 2,411,173 12,110,605 161,591,061 Plant & Machinery 67,638,777 2,237,785 69,876,562 3,247,318 28,055,430 41,821,132 Total 139,618,811 104,226,078 243,844,889 5,658,491 40,166,035 203,678,854 Previous Year 139,618,811 NIL 139,618,811 4,380,854 34,507,543 105,111,268

ii) There are no leases entered into by the company, which are classified as non-cancelable lease. iii) The company has entered into lease contracts (cancelable) for its assets as mentioned above with various parties including group companies as under:

Name of Lessee Associated Merchandising Corporation Max India Limited (the holding company) Maersk India Limited Max Healthcare Institute Limited Neeman Medical International (Asia) Limited Max HealthStaff International Limited

iv) Description of the significant leasing arrangements The Company has given its assets on operating lease to different parties for various periods, renewable on mutual agreement. A list of the significant lease arrangements is given below: RUPEES Name of Lessee Lease Rent (Per Month) Lease Period

Associated Merchandising Corporation 1,604,064 01.02.2003 to 31.01.2009 Max India Limited (the holding company) 994,315 01.12.2000 to 30.11.2008 Maersk India Limited 759,000 01.01.2000 to 31.12.2008 Max Healthcare Institute Limited 579,548 01.04.2003 to 31.03.2007 Neeman Medical International (Asia) Limited 255,348 01.04.2002 to 31.03.2011 Max HealthStaff International Limited 359,468 01.02.2007 to 31.01.2010

MAX INDIA ANNUAL REPORT 2006-07 343 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

4 Deferred Tax (a) Since the main income of the company (Lease Rentals) is taxed under the head “Income from House Property” and the expenses are not claimed as business expenses therefore, there are no timing differences at the balance sheet date between carrying amount of assets and liabilities and their respective tax bases. Thus, no deferred tax Liability / Asset has been created. (b) No deferred tax asset has been created on account of the carry-forward business losses as there is no reasonable certainty of utilizing them at a future date.

5 Miscellaneous Expenditure represents RUPEES Particulars Balance as at Additions Amortized during Balance as at April 1, 2006 the year March 31, 2007

Preliminary Expenses 8,267 - 8,267 -

6 Movement in Current Non Trade Investments (Unquoted) RUPEES Purchases Sales Name of the Face Value Units Value Units Value Investment per share (Numbers) (Rupees) (Numbers) (Rupees) (Rupees) Kotak Liquid (Institutional Premium)-Daily Dividend 10 2,864,305.26 35,025,011 2,864,305.26 35,025,011

Kotak Liquid (Institutional Premium)-Weekly Dividend 10 3,513,709.40 35,311,530 6,783,521.06 68,126,902

Tata Floating Rate Short Term Institutional Plan-Daily Dividend 10 1,525,632.18 15,264,743 1,525,632.18 15,264,713

Tata Liquid Super High Investment Fund-Daily Dividend 10 89,646.24 99,912,533 125,169.35 139,503

Tata Liquidity Management Fund Weekly Dividend 10 6,986.52 7,032,528 - -

Tata Liquidity Management Fund Daily Dividend 10 15,480.03 15,515,000 997.75 1,000,000

Birla Fixed Maturity Plan 10 398,843.35 4,000,000 398,843.35 3,997,168

Birla Cash Plus Retail Dialy Dividend 10 244,185.38 3,997,168 - -

7 Auditors’ Remuneration (included under Legal & Professional Charges in Schedule 9): RUPEES Description Current Year Previous Year Audit Fees (including service tax) 44,896 33,060 Total 44,896 33,060

8 Segment Reporting The Company operates in single business segment viz Leasing of Estates. In view of general clarifications issued by the Institute of Chartered Accountants of India for Companies operating in single segment, the disclosure requirements as per Accounting Standard 17 “Segment Reporting” are not applicable.

344 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

9 Related Parties (as identified by the management) are classified as:

Holding Company Max India Limited Fellow subsidiaries Max New York Life Insurance Company Ltd., Max Healthcare Institute Ltd., Max Medical Services Ltd., Neeman Medical International Inc. USA, Neeman Medical International Latin America, S.A., Neeman Medical International NV, Neeman Medical International BV, Neeman Medical International (Asia) Ltd., Max UK Ltd., Max Ateev Ltd., Max HealthStaff International Limited (w.e.f. June 30, 2005), Alps Hospital Pvt. Ltd. (w.e.f. April 06, 2006), Malsi Estates Ltd.*, Max Estates Ltd.*, Max Telecom Ventures Ltd.**, Max Asia Pac Ltd.**

* Fellow Subsidiaries till May 31, 2006 ** Fellow Subsidiaries till November 30, 2005

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business: RUPEES S.No. Particulars Holding Fellow Company Subsidiaries 1 Loans taken 35,800,000 - (5,000,000) (-) 2 Loans Refunded 95,954,723 2,940,000 - (18,600,000) 3 Incomes and reimbursement - Lease Income 12,970,626 10,021,956 (13,081,510) (7,630,806) - Reimbursement of expenses 7,852,600 21,054,675 (2,852,482) (3,692,563) 4 Expense - Interest paid 6,893,493 - (12,306,318) (-) - Other expenses - - (-) (-) - Company’s contribution to PF Trust - - (-) (-) 5 Amount outstanding - Against loan taken 35,800,000 - (95,954,723) (-) - Other receivable 287,900 2,454,501 (2,528,836) (799,367) - Other payable 5,802,480 - (5,802,480) -

Within bracket are previous year figures

10 During the year, the Company shared the services of some of its facilities with group Companies. Consequently, the share of cost attributable to these Companies has been charged in accordance with the respective service agreements.

11 No liability has been provided for Leave encashment and other retirement benefits since there is no employee in the Company.

MAX INDIA ANNUAL REPORT 2006-07 345 PHARMAX CORPORATION LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

12 Earnings Per Share (EPS) Calculation of EPS (Basic and Diluted)

Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

Basic Profit / (Loss) after tax (Rupees) 22,903,577 18,788,141 Weighted average number of Equity Shares (Nos) 55,304,953 55,298,090 EPS ( Rupees) 0.41 0.34

Equity Share Details (Nos) Outstanding as at the beginning of the year 55,304,852 55,296,652 Issued on 27th January, 2006 8,200 - Issued on 22nd February, 2007 1,000 - Outstanding as at the end of the year 55,305,852 55,304,852

Diluted Profit after Tax (Rupees) 22,903,577 18,788,141 Weighted average number of Equity Shares (Nos) 55,939,952 55,939,952 EPS ( Rupees) 0.41 0.34

Reconciliation of denominators used for calculating basic and diluted earning per share

Particulars For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

Denominator used for computing basic Earning Per Share 55,304,953 55,298,090 Add : Dilutive impact of : (i) Convertible preference Shares 634,999 641,862 Denominator used for Computing diluted Earning per Share 55,939,952 55,939,952

13 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

14 Previous year’s figures have been regrouped and rearranged wherever necessary to conform to current year’s classification.

Schedule 1 to 11 form an integral part of Accounts. For and on behalf of the Board of Directors

As per our report of even date attached

RAKESH NANGIA B. ANANTHARAMAN Director FCA, Partner SUJATHA RATNAM Director Membership No. 70776 HARPREET KAUR Company Secretary

For Nangia & Company Chartered Accountants

New Delhi MAY 10, 2007

346 MAX INDIA ANNUAL REPORT 2006-07 PHARMAX CORPORATION LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 0 0 0 9 7 4 1 State Code 1 6

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 3 6 0 7 6 5 3 6 0 7 6 5 SOURCES OF FUND Paid-up Capital Reserves and Surplus 2 0 5 5 7 7 N I L Secured Loans Unsecured Loans 1 1 9 3 8 8 3 5 8 0 0 APPLICATION OF FUNDS Net Fixed Assets Investments 2 0 9 3 5 1 5 5 6 2 0 +- Net Current Assets Misc. Expenditure 2 0 5 6 6 N I L Accumulated Losses 1 1 6 3 6 0 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover Total Expenditure 5 4 5 0 4 2 1 7 7 3 +- Profit/Loss before Tax +- Profit/Loss after Tax 3 2 7 3 1 2 2 9 0 4 +- Earning Per Share in Rupees Dividend Rate (%) Basic 0 . 4 1 N I L Diluted 0 . 4 1 V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description L E A S I N G O F E S T A T E S

Item Code Number N . A .

MAX INDIA ANNUAL REPORT 2006-07 347 MAX ATEEV LIMITED MAX ATEEV LIMITED

DIRECTORS’ REPORT

Your Directors have pleasure in presenting their Thirteenth Annual year under review. There were no unclaimed /over due deposit as at Report along with the Audited Accounts for the financial year ended March 31, 2007. March 31, 2007. DIRECTORS’ RESPONSIBILITY STATEMENT FINANCIAL RESULTS As per the provisions of Section 217(2AA) of the Companies Act,1956, During the year under review, your Company incurred a loss of Rs. 27.26 lacs. the Directors confirm that: (i) in the preparation of annual accounts, the applicable accounting OPERATIONS standards have been followed along with proper explanation relating Currently, the Company is not pursuing any business/commercial to material departures; operations. However, the Directors are evaluating potential business (ii) the Directors had selected such accounting policies and applied opportunities for the Company. them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the DIVIDEND state of affairs of the Company at the end of the financial year and In view of the losses, your Directors are unable to recommend any of the profit or loss of the Company for that period; dividend for the year under review. (iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions DIRECTORS of the Companies Act, 1956 for safeguarding the assets of the In accordance with the provisions of the Companies Act, 1956 and the Company and for preventing and detecting fraud and other Articles of Association of the Company, Ms. Sujatha Ratnam is due to irregularities; and retire by rotation and being eligible, offers herself for re-appointment. (iv) the Directors had prepared the annual accounts, on a going concern During the year under review, Mr. Arvind Kakar was appointed as an basis. Additional Director to hold office up to the ensuing Annual General Meeting. The Company has received a notice under Section 257 of the ADDITIONAL INFORMATION Companies Act, 1956, from a member proposing candidature of As your Company does not carry on any manufacturing activity, Mr. Arvind Kakar for being appointed as a Director of the Company. information in accordance with the provisions of Section 217(1)(e) of During the year under review, Mr. Sudip Dasgupta resigned from the the Companies Act, 1956 read with the Companies (Disclosure of Board of Directors of the Company. The Board places on record its Particulars in the Report of Board of Directors) Rules, 1988 is not appreciation for the valuable contribution made by Mr. Sudip Dasgupta furnished herewith. during his association as a Director of the Company. PARTICULARS OF EMPLOYEES AUDIT COMMITTEE The Company had no employee during the year under review. Currently, the Audit Committee comprises of Mr. Neeraj Basur, Ms. Sujatha Ratnam and Mr. Arvind Kakar. The terms of reference of the AUDITORS Audit Committee fully conform to the requirements of Section 292A of M/s Price Waterhouse, Chartered Accountants, Auditors of the Company the Companies Act, 1956. retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received from them a PARTICULARS OF DEPOSITS Certificate to the effect that their re-appointment, if made, will be in Your Company has not accepted any deposit from the public during the accordance with the limits specified under Section 224(1B) of the Companies Act, 1956.

For and on behalf of the Board of Directors

New Delhi NEERAJ BASUR Director JULY 20, 2007 SUJATHA RATNAM Director

350 MAX INDIA ANNUAL REPORT 2006-07 MAX ATEEV LIMITED

AUDITORS’ REPORT

TO THE MEMBERS OF MAX ATEEV LIMITED (v) (a) In our opinion and according to the information and 1. We have audited the attached Balance Sheet of Max Ateev Limited, explanations given to us, the particulars of contracts or as at March 31, 2007, and the related Profit and Loss Account and arrangements referred to in Section 301 of the Act have Cash Flow Statement for the year ended on that date annexed been entered in the register required to be maintained thereto, which we have signed under reference to this report. These under that section. financial statements are the responsibility of the Company’s (b) In our opinion and according to the information and management. Our responsibility is to express an opinion on these explanations given to us, there are no transactions made financial statements based on our audit. in pursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any 2. We conducted our audit in accordance with the auditing standards party during the year which have been made at prices generally accepted in India. Those standards require that we plan which are reasonable having regard to the prevailing market and perform the audit to obtain reasonable assurance about whether prices at the relevant time. the financial statements are free of material misstatement. An audit (vi) The Company has not accepted any deposits from the public includes examining, on a test basis, evidence supporting the amounts within the meaning of Sections 58A and 58AA of the Act and and disclosures in the financial statements. An audit also includes the rules framed there under. assessing the accounting principles used and significant estimates (vii) As the Company is not listed on any stock exchange or the made by management, as well as evaluating the overall financial paid up capital and reserves as at the commencement of the statement presentation. We believe that our audit provides a financial year did not exceed Rupees Fifty Lakhs or the average reasonable basis for our opinion. annual turnover for a period of three consecutive financial years immediately preceding the financial year did not exceed 3. As required by the Companies (Auditor’s Report) Order, 2003, as Rupees Five Crores, Clause (vii) of paragraph 4 of the Companies amended by the Companies (Auditor’s Report) (Amendment) Order, (Auditor’s Report) Order, 2003 as amended by the Companies 2004, issued by the Central Government of India in terms of sub- (Auditor’s Report) (Amendment) Order, 2004 is not applicable section (4A) of Section 227 of ‘The Companies Act, 1956’ of India to the Company for the current year. (the ‘Act’) and on the basis of such checks of the books and records (viii) The Central Government of India has not prescribed the of the Company as we considered appropriate and according to the maintenance of cost records under clause (d) of sub-section information and explanations given to us, we further report that: (1) of Section 209 of the Act for any of the products of the (i) (a) The Company is maintaining proper records showing full Company. particulars including quantitative details and situation of (ix) (a) According to the information and explanations given to fixed assets. us and the records of the Company examined by us, in our (b) The fixed assets of the Company have been physically opinion, the Company is regular in depositing the undisputed statutory dues including provident fund, investor verified by the management during the year and no material education and protection fund, employees’ state insurance, discrepancies between the book records and the physical income tax, sales tax, wealth tax, service tax, customs duty, inventory have been noticed. In our opinion, the frequency excise duty, cess and other material statutory dues as of verification is reasonable. applicable with the appropriate authorities. (c) In our opinion and according to the information and (b) According to the information and explanations given to explanations given to us, a substantial part of fixed assets us and the records of the Company examined by us, there has not been disposed of by the Company during the year. are no dues of income tax, sales tax, wealth tax, service (ii) There are no stocks with the Company or third parties. tax, customs duty, excise duty and cess which have not (iii) (a) The Company has not granted any loans, secured or been deposited on account of any dispute. unsecured, to companies, firms or other parties covered (x) The Company has accumulated losses, as at March 31, 2007 in the register maintained under Section 301 of the Act. more than fifty percent of its net worth and it has incurred (b) The Company has not taken any loans, secured or unsecured, cash loss in the financial year ended on that date and in from companies, firms or other parties covered in the immediately preceding financial year. However, reference is register maintained under Section 301 of the Act. drawn to Note B1 on Schedule 9. (iv) In our opinion and according to the information and (xi) According to the records of the Company examined by us and explanations given to us, having regard to the explanation that the information and explanation given to us, the Company certain items purchased are of special nature for which suitable has not defaulted in repayment of dues to any financial alternative sources do not exist for obtaining comparative institution or bank or debenture holders as at the balance quotations, there is an adequate internal control system sheet date. commensurate with the size of the Company and the nature (xii) The Company has not granted any loans and advances on the of its business for the purchase of inventory, fixed assets and basis of security by way of pledge of shares, debentures and for the sale of goods and services. Further, on the basis of our other securities. examination of the books and records of the Company, and (xiii) The provisions of any special statute applicable to chit fund according to the information and explanations given to us, we / nidhi / mutual benefit fund/societies are not applicable to have neither come across nor have been informed of any the Company. continuing failure to correct major weaknesses in the aforesaid (xiv) In our opinion, the Company is not a dealer or trader in shares, internal control system. securities, debentures and other investments.

MAX INDIA ANNUAL REPORT 2006-07 351 MAX ATEEV LIMITED

AUDITORS’ REPORT

(xv) In our opinion, and according to the information and examination of those books; explanations give to us, the Company has not given any (c) The Balance Sheet, Profit and Loss Account and Cash Flow guarantee for loans taken by others from banks or financial Statement dealt with by this report are in agreement with institutions during the year. the books of account; (xvi) The Company has not obtained any term loans. (d) In our opinion, the Balance Sheet, Profit and Loss Account (xvii) On the basis of an overall examination of the balance sheet and Cash Flow Statement dealt with by this report comply of the Company, in our opinion and according to the with the accounting standards referred to in sub-section information and explanations given to us, there are no funds (3C) of Section 211 of the Act; raised on a short-term basis which have been used for long- (e) On the basis of written representations received from the term investment. directors, as on March 31, 2007 and taken on record by the (xviii) The Company has not made any preferential allotment of Board of Directors, none of the directors is disqualified as on shares to parties and companies covered in the register March 31, 2007 from being appointed as a director in terms maintained under section 301 of the act during the year. of clause (g) of sub-section (1) of Section 274 of the Act; (xix) There are no debentures outstanding as at the year end. (f) In our opinion and to the best of our information and (xx) The Company has not raised any money by public issues according to the explanations given to us, the said financial during the year. statements together with the notes thereon and attached (xxi) During the course of our examination of the books and thereto give in the prescribed manner the information required records of the Company, carried out in accordance with the by the Act and give subject to Note B1 on Schedule 9 generally accepted auditing practices in India, and according regarding preparation of these accounts on a going to the information and explanations given to us, we have concern basis a true and fair view in conformity with the neither come across any instance of fraud on or by the accounting principles generally accepted in India: Company, noticed or reported during the year, nor have we (i) in the case of the Balance Sheet, of the state of affairs been informed of such case by the management. of the Company as at March 31, 2007; (ii) in the case of the Profit and Loss Account, of the loss 4. Further to our comments in paragraph 3 above, we report that: for the year ended on that date; and (a) We have obtained all the information and explanations, (iii) in the case of the Cash Flow Statement, of the cash flows which to the best of our knowledge and belief were necessary for the year ended on that date. for the purposes of our audit; (b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our V. NIJHAWAN Partner Membership No. F-87228

For and on behalf of New Delhi Price Waterhouse MAY 10, 2007 Chartered Accountants

352 MAX INDIA ANNUAL REPORT 2006-07 MAX ATEEV LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006

SOURCES OF FUNDS SHAREHOLDERS' FUND Share Capital 1 314,436,000.00 314,436,000.00

LOAN FUNDS Unsecured Loans 2 67,448,910.56 68,040,628.56 381,884,910.56 382,476,628.56 APPLICATION OF FUNDS FIXED ASSETS 3 Gross Block 85,263,298.80 86,696,584.68 Less: Depreciation 81,442,089.65 82,080,056.04 Net Block 3,821,209.15 4,616,528.64

CURRENT ASSETS, LOANS AND ADVANCES 4 Sundry Debtors - - Cash and Bank Balances 114,049.24 83,933.24 Loans and Advances 1,309,682.00 1,945,894.00 1,423,731.24 2,029,827.24

LESS: CURRENT LIABILITIES AND PROVISIONS 5 2,192,738.44 275,982.00

NET CURRENT ASSETS (769,007.20) 1,753,845.24

PROFIT AND LOSS ACCOUNT 378,832,708.61 376,106,254.68 381,884,910.56 382,476,628.56 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors This is the Balance Sheet referred to in our report of even date

V. NIJHAWAN NEERAJ BASUR Director Partner SUJATHA RATNAM Director Membership No. F-87228 For and on behalf of VISHAL GARG Company Secretary Price Waterhouse Chartered Accountants

New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 353 MAX ATEEV LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006

INCOME Other Income 6 - 83,640.08 - 83,640.08

EXPENDITURE Administration and Other Expenses 7 2,324,144.04 1,089,283.46 Financial Expenses 8 44,896.00 22,229.00 Depreciation 3 357,413.89 622,718.34 2,726,453.93 1,734,230.80

(LOSS) FOR THE YEAR (2,726,453.93) (1,650,590.72)

(LOSS) BROUGHT FORWARD (376,106,254.68) (374,455,663.96)

BALANCE CARRIED FORWARD TO THE BALANCE SHEET (378,832,708.61) (376,106,254.68)

Earnings Per Share (Rs. per equity share of Rs.10/- each) (Refer Note B6 on Schedule 9) - Basic and Diluted (0.09) (0.05)

Number of Shares used in computing earnings per share - Basic and Diluted 31,443,600 31,443,600

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account

This is the Profit and Loss Account referred to in our report of even date

V. NIJHAWAN NEERAJ BASUR Director Partner SUJATHA RATNAM Director Membership No. F-87228 For and on behalf of VISHAL GARG Company Secretary Price Waterhouse Chartered Accountants

New Delhi MAY 10, 2007

354 MAX INDIA ANNUAL REPORT 2006-07 MAX ATEEV LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES (LOSS) FOR THE YEAR (2,726,453.93) (1,650,590.72)

Adjustments for: Depreciation 357,413.89 622,718.34 Interest Income - (44,072.00) Net (Profit)/Loss on Sale of Fixed Assets 100,394.60 (30,768.08) Assets Written Off - 234,574.45 Diminution in Value of Fixed Assets 1,984,732.44 - Operating (Loss) Before Working Capital Changes (283,913.00) (868,138.01)

Adjustments for: Other Receivables 636,212.00 158,980.00 Trade Payables (67,976.00) (3,117,704.99) Cash From/(Used in) Operations 284,323.00 (3,826,863.00) Direct Taxes Refunded/(Paid) - (20,476.00) Cash From/(Used in) Operating Activities 284,323.00 (3,847,339.00)

B. CASH FLOW FROM INVESTING ACTIVITIES Proceeds from Sale of Fixed Assets 337,511.00 2,780,767.00 Interest Received - 44,072.00 Cash From Investing Activities 337,511.00 2,824,839.00

C. CASH FLOW FROM FINANCING ACTIVITIES Repayment of Loan (591,718.00) (392,465.00) Cash (Used In) Financing Activities (591,718.00) (392,465.00)

Increase/ (Decrease) in Cash and Cash Equivalents 30,116.00 (1,414,965.00)

Cash and Cash Equivalents - As At March 31, 2006 83,933.24 1,498,898.24 Cash and Cash Equivalents - As At March 31, 2007 114,049.24 83,933.24 Net Increase/(Decrease) in Cash and Cash Equivalents 30,116.00 (1,414,965.00) Notes: 1 The above Cash Flow Statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consists of Cash in Hand and Balances with Banks: RUPEES As at As at March 31, 2007 March 31, 2006 Cash in Hand - 1.00 Balances with Banks 114,049.24 83,932.24 114,049.24 83,933.24 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Cash Flow Statement For and on behalf of the Board of Directors This is the Cash Flow Statement referred to in our report of even date

V. NIJHAWAN NEERAJ BASUR Director Partner SUJATHA RATNAM Director Membership No. F-87228 For and on behalf of VISHAL GARG Company Secretary Price Waterhouse Chartered Accountants New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 355 MAX ATEEV LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-1 SHARE CAPITAL Authorised 31,500,000 Equity Shares of Rs. 10/- each 315,000,000.00 315,000,000.00 (Previous year 31,500,000 Equity Shares of Rs. 10/- each)

Issued, Subscribed and Paid UP (Refer Note B3 on Schedule 9) 31,443,600 (Previous year 31,443,600) Equity Shares of Rs.10/- each fully paid up 314,436,000.00 314,436,000.00 314,436,000.00 314,436,000.00

SCHEDULE-2 UNSECURED LOANS From Max India Limited [(The Holding Company)(repayable on demand)] 67,448,910.56 68,040,628.56 67,448,910.56 68,040,628.56

SCHEDULE-3 FIXED ASSETS (Refer Notes A4, A5 and B11 on Schedule 9) RUPEES Net Block Particulars Gross Block Depreciation As at Deletions As at As at For the On Deletions As at As at As at April 01, March 31, April 01, Year March 31, March 31, March 31, 2006 2007 2006 2007 2007 2006

Tangible Assets Plant and Machinery 1,455,631.00 - 1,455,631.00 375,828.42 69,142.47 - 444,970.89 1,010,660.11 1,079,802.58 Computers 14,310,788.83 857,275.88 13,453,512.95 14,297,426.62 13,362.21 857,275.88 13,453,512.95 - 13,362.21 Furniture and Fittings 2,361,299.50 37,440.00 2,323,859.50 792,350.77 147,100.31 12,836.69 926,614.39 1,397,245.11 1,568,948.73 Office Equipment 2,519,989.35 538,570.00 1,981,419.35 565,574.23 127,808.90 125,267.71 568,115.42 1,413,303.93 1,954,415.12

Intangible Assets Technology Fees 66,048,876.00 - 66,048,876.00 66,048,876.00 - - 66,048,876.00 - -

Total 86,696,584.68 1,433,285.88 85,263,298.80 82,080,056.04 357,413.89 995,380.28 81,442,089.65 3,821,209.15 4,616,528.64

Previous year 93,871,209.33 7,174,624.65 86,696,584.68 85,647,388.98 622,718.34 4,190,051.28 82,080,056.04 4,616,528.64 8,223,820.35

356 MAX INDIA ANNUAL REPORT 2006-07 MAX ATEEV LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006

SCHEDULE-4 CURRENT ASSETS, LOANS AND ADVANCES SUNDRY DEBTORS (Refer Note B5 on Schedule 9) (Unsecured) Debts Exceeding Six Months - Considered Doubtful 38,186,512.30 39,283,821.30 - Provision for Doubtful Debts (38,186,512.30) (39,283,821.30) - - - - CASH AND BANK BALANCES Cash in Hand - 1.00 With Scheduled Banks - in Current Accounts 114,049.24 83,932.24 114,049.24 83,933.24 LOANS AND ADVANCES (Unsecured, Considered Good, Unless Otherwise Stated) Recoverable Against Sales of Fixed Assets - 636,212.00 Security Deposit - Considered Good 91,500.00 91,500.00 - Considered Doubtful 3,600,000.00 3,600,000.00 - Provision for Doubtful Advances (3,600,000.00) 91,500.00 (3,600,000.00) 91,500.00 Advance Income Tax 1,218,182.00 1,218,182.00 1,309,682.00 1,945,894.00

1,423,731.24 2,029,827.24

Amounts due from companies under the same management - Max Healthcare Institute Limited - 28,727.00 - Max Healthstaff International Limited - 606,360.00 - Neeman Medical International (Asia) Limited - 1,125.00

Maximum Amount outstanding during the year from companies under the same management - Max Healthcare Institute Limited 28,727.00 1,367,016.00 - Max Healthstaff International Limited 606,360.00 606,360.00 - Neeman Medical International (Asia) Limited 13,388.00 311,625.00

SCHEDULE-5 CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry Creditors* -Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 183,911.00 230,953.00 Other Liabilities 24,095.00 45,029.00 208,006.00 275,982.00 Provisions Provision for Diminution in Value of Fixed Assets 1,984,732.44 - ( Refer Note B11 on Schedule 9) 2,192,738.44 275,982.00

* There are no dues to creditors coming under the definition of Small Scale Industrial Undertaking as at March 31, 2007 and March 31, 2006

MAX INDIA ANNUAL REPORT 2006-07 357 MAX ATEEV LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-6 OTHER INCOME Interest on: (Gross)* - Fixed Deposits - 44,072.00 Profit on Sale of Assets - 30,768.08 Miscellaneous Income - 8,800.00 - 83,640.08 * Includes Tax deducted at source Nil (Previous year Rs. 20,476/-)

SCHEDULE-7 ADMINISTRATION AND OTHER EXPENSES Legal and Professional 232,829.00 235,738.00 Travelling and Conveyance - 1,352.00 Rates and Taxes 168.00 13,343.00 Repairs and Maintenance-Others - 3,000.01 Filing Fee 6,020.00 5,056.00 Loss on Sale of Fixed Assets 100,394.60 - Assets Written Off - 234,574.45 Customs Clearing Charges - 596,220.00 Provision for Diminution in Value of Fixed Assets 1,984,732.44 - (Refer Note B11 on Schedule 9) 2,324,144.04 1,089,283.46

SCHEDULE-8 FINANCIAL EXPENSES Bank Charges 44,896.00 22,229.00 44,896.00 22,229.00

358 MAX INDIA ANNUAL REPORT 2006-07 MAX ATEEV LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-9 A SIGNIFICANT ACCOUNTING POLICIES

1 Accounting Convention The Financial Statements are prepared under net realisable value on accrual basis and in accordance with accounting standards issued by the Institute of Chartered Accountants of India.

2 Revenue Recognition (i) Revenue from software development on time and material contracts is recognised based on the software developed and billed to the clients as per the terms of specific contracts. (ii) On fixed Priced contracts, revenue is recognised based on milestones achieved as specified in the contracts on the proportionate-completion method. (iii) Revenue from Annual Maintenance Services is recognised proportionately over the period in which services are rendered. (iv) Revenue from the sale of licenses for the use of software applications is recognised on transfer of the title in the user license.

3 Expenditure The cost of software purchased for use in software development and services is charged to revenue in the year the software is acquired.

4 Fixed Assets and Depreciation (i) Fixed assets are stated at cost of acquisition including freight, duties and other incidental expenses relating to acquisition and installation. (ii) Depreciation on fixed assets is provided under the straight-line method on a pro-rata basis at rates prescribed by Schedule XIV to the Companies Act, 1956 except on computers which are depreciated over a period of three years i.e. useful life of asset as estimated by the management and on Leasehold Improvements, which are depreciated over the period of the lease. (iii) The technology fee capitalized is depreciated over a period of three years.

5 Borrowing Costs Borrowing Costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset in accordance with Accounting Standard 16 on "Borrowing Costs". Other borrowing costs are charged to revenue.

6 Investments Long-term investments are valued at cost. Provision for diminution is made to recognise permanent erosion in value.

7 Income Tax Provision for tax consists of current tax and deferred tax. Current tax provision is computed for current income based on the tax liability after considering allowances and exemptions. Deferred tax assets and liabilities are computed on the timing differences at the Balance Sheet date between the carrying amount of assets and liabilities and their respective tax bases and carry forward of operating loss. Deferred tax assets are recognised based on management estimates of available future taxable income and assessing their certainity.

8 Foreign Exchange Transactions (i) Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at year- end rates. (ii) The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions, other than relating to Fixed Assets, are recognised in the Profit and Loss Account. (iii) Exchange difference in respect of liabilities incurred to acquire Fixed Assets is adjusted to the carrying amount of the Fixed Assets.

B NOTES TO THE ACCOUNTS

1 The Company is not carrying out any commercial operations and is in the process of settling remaining dues and completing assessments with various authorities. However, these accounts have been prepared on a going concern basis on accrual basis in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India.

2 Contingent Liabilities RUPEES Current Year Previous Year

(i) Claims against the company not acknowledged as debts -Sales Taxes 3,938,727.00 3,938,727.00 -Others 244,000.00 244,000.00

MAX INDIA ANNUAL REPORT 2006-07 359 MAX ATEEV LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

(ii) There are certain income-tax proceedings pending against the Company at various stages of appeal, which, alongwith the tax demand (if any) are detailed below-

Assessment Year Appeal Pending Before Demand

2001-2002 Income-tax Appellate Tribunal 110,184.00 2003-2004 CIT(Appeals) - 2004-2005 CIT(Appeals) 5,368,002.00 The Company is hopeful that the above appeals will be disposed off in its favour.

3 Out of the total share capital of Rs. 314,436,000.00 as on March 31, 2007, Max India Limited holds Rs. 314,435,800.00 of the share capital, consisting of 31,443,580 shares of Rs.10/- each. The remaining share capital of Rs. 200.00 consisting of 20 shares of Rs. 10/- each is held by nominees of Max India Limited.

4 Net Deferred Tax Asset has not been recognized due to virtual uncertainty regarding future taxable profits.

5 Debtors include an amount of Rs. 38,186,512.30 (Previous year Rs. 38,186,512.30), being services rendered for "consideration other than cash", and realisable in equity for which the Company is yet to receive shares in accordance with RBI approval. These dues have been fully provided for.

6 Earnings per share Calculation of EPS (Basic and Diluted) RUPEES Current Year Previous Year

Basic and Diluted (Loss) for the year (Rs.) (2,726,453.93) (1,650,590.72) Weighted Average Number of Equity Shares 31,443,600 31,443,600 EPS (Rs.) (0.09) (0.05)

Share Details (Nos.) Outstanding as at the beginning of the year 31,443,600 31,443,600 Outstanding as at the end of the year 31,443,600 31,443,600

7 Auditors' Remuneration Current Year Previous Year Audit fee (Including Service Tax) 22,472.00 22,040.00

8 The Company does not have any finance lease/operating lease arrangement.

9 Related Parties (as identified by the management) are classified as:

Holding Company Max India Limited Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Healthcare Institute Ltd., Max Medical Services Ltd., Neeman Medical International Inc. USA, Neeman Medical International Latin America, S.A., Neeman Medical International NV, Neeman Medical International BV, Neeman Medical International (Asia) Ltd., Max UK Ltd., Pharmax Corporation Ltd., Max HealthStaff International Ltd. (w.e.f. June 30, 2005), Alps Hospital Pvt. Ltd. (w.e.f. April 06, 2006), Malsi Estates Ltd.*, Max Estates Ltd.*, Max Telecom Ventures Ltd.**, Max Asia Pac Ltd.**

* Fellow Subsidiaries till May 31, 2006 ** Fellow Subsidiaries till November 30, 2005

360 MAX INDIA ANNUAL REPORT 2006-07 MAX ATEEV LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of busines are as follows: RUPEES Particulars Holding Fellow Company Subsidiaries Sale of fixed assets - 157,146.00 (2,600.00) (3,026,428.00)

Other income - - (-) (9,750.00)

Other advances - - (201,936.00) (-)

Loan taken during the year 150,000.00 - (3,731,786.00) (-)

Loan repaid during the year 790,100.00 - (4,405,000.00) (-)

Expenses - Others expenses 48,382.00 - (81,413.00) (-) Amount Outstanding - Other payable 67,448,910.56 - (68,040,628.56) (-)

- Other receivable - - (-) (636,212.00) Figures in bracket are for previous year

10 Segment Reporting As the Company is not carrying any business activity, the disclosure requirements as per Accounting Standard 17 “Segment Reporting” are not applicable to the Company.

11 Provision for diminution in value of certain fixed assets amounting to Rs.1,984,732.44 has been provided in the accounts. The same is based on management’s estimate about realisability of fixed assets and the relevant estimated resale price.

12 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

13 Previous year's figures have been regrouped/reclassified wherever necessary to confirm to current year’s classification.

For and on behalf of the Board of Directors

NEERAJ BASUR Director SUJATHA RATNAM Director New Delhi MAY 10, 2007 VISHAL GARG Company Secretary

MAX INDIA ANNUAL REPORT 2006-07 361 MAX ATEEV LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 6 0 7 0 0 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placement/ Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 3 8 1 8 8 5 3 8 1 8 8 5 SOURCES OF FUND Paid-up Capital Reserves and Surplus 3 1 4 4 3 6 N I L Secured Loans Unsecured Loans N I L 6 7 4 4 9

APPLICATION OF FUNDS Net Fixed Assets Investments 3 8 2 1 N I L +- Net Current Assets Misc. Expenditure 7 6 9 N I L Accumulated Losses 3 7 8 8 3 3 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure N I L 2 7 2 6

+- Profit/Loss before Tax +- Profit/Loss after Tax 2 7 2 6 2 7 2 6

+- Earning Per Share in Rupees Dividend Rate (%) 0 . 0 9 N I L

V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY Product Description S O F T W A R E S E R V I C E S

362 MAX INDIA ANNUAL REPORT 2006-07 MAX UK LIMITED MAX UK LIMITED

DIRECTORS’ REPORT

The Directors present their report and the financial statements of the ii the Directors had selected such accounting policies and applied Company for the year ended 31st March 2007. them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the PRINCIPAL ACTIVITIES AND BUSINESS REVIEW state of affairs of the Company at the end of the financial year and Your Company has been providing business and administrative support of the profit or loss of the Company for that period; services at UK to various group companies of Max India Limited, the iii the Directors had taken proper and sufficient care for the parent company. maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the RESULTS AND DIVIDENDS assets of the Company and for preventing and detecting fraud and The results for the year and the Company's financial position at the end other irregularities; and of the year are shown in the attached financial statements. During the iv the Directors had prepared the annual accounts, on a going concern year under review, your Company earned a revenue of Rs. 69.24 lacs basis. and a profit of Rs. 3.53 lacs as against previous year revenue of Rs. 63.93 lacs and profit of Rs. 5.88 lacs. The directors do not recommend a OTHER PARTICULARS dividend. Information pertaining to Section 217 (1) (e) and 217 (2A) of the Indian Companies Act, 1956 are not applicable to the company. DIRECTORS The current directors of the Company are Mr. B. Anantharaman and Ms. AUDITORS K. Stanley. None of the directors hold any interest in the shares of the M/s K.K. Mankeshwar & Co., Chartered Accountants, Auditors of the Company. Company retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. PARTICULARS OF DEPOSITS Your Company has not accepted any deposits from the public during the year under review.

DIRECTORS’ RESPONSIBILITY STATEMENT As per the provisions of Section 217(2AA) of the Indian Companies Act, For and on behalf of the Board of Directors 1956, the Directors confirm that: i in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating New Delhi B. ANANTHARAMAN Director to material departures; JULY 10, 2007 KARIN STANLEY Director

MAX INDIA ANNUAL REPORT 2006-07 365 MAX UK LIMITED

AUDITORS’ REPORT

TO THE MEMBERS OF MAX UK LIMITED (1) of Section 209 of the Act for any of the products of the 1. We have audited the attached Balance Sheet of MAX UK LIMITED Company. as at March 31, 2007, and the related Profit and Loss Account and viii. (a) According to the information and explanations given to Cash Flow Statement for the year ended on that date annexed us and the records of the Company examined by us, in our thereto. These financial statements are the responsibility of the opinion, the Company is generally regular in depositing Company’s management. Our responsibility is to express an opinion the undisputed statutory dues, investor education and on these financial statements based on our audit. protection fund, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material 2. We conducted our audit in accordance with the auditing standards statutory dues as applicable with the appropriate authorities. generally accepted in India. Those standards require that we plan As informed, the provisions relating to Employees Provident and perform the audit to obtain reasonable assurance about whether Fund and Miscellaneous Provisions Act, 1952 and Employees the financial statements are free of material misstatement. An audit State Insurance are not applicable to the Company. includes examining, on a test basis, evidence supporting the amounts (b) According to the information and explanations given to and disclosures in the financial statements. An audit also includes us and the records of the Company examined by us, there assessing the accounting principles used and significant estimates are no dues of income tax, sales tax, wealth tax, service made by management, as well as evaluating the overall financial tax, customs duty, excise duty and cess which have not statement presentation. We believe that our audit provides a been deposited on account of any dispute. reasonable basis for our opinion. ix. The Company has accumulated losses, as at March 31, 2007 more than fifty percent of its net worth and has not incurred 3. As required by the Companies (Auditor’s Report) Order, 2003, as cash losses in the financial year and the immediately preceding amended by the Companies (Auditor’s Report) (Amendment) Order, financial year. 2004, issued by the Central Government of India in terms of sub- x. During the course of our examination of the books and records section (4A) of Section 227 of ‘The Companies Act, 1956’ of India of the Company, carried out in accordance with the generally (the ‘Act’) and on the basis of such checks of the books and records accepted auditing practices in India, and according to the of the Company as we considered appropriate and according to the information and explanations given to us, we have neither information and explanations given to us, we further report that: come across any instance of fraud on or by the Company, i. The Company has maintained proper records showing full noticed or reported during the year, nor have we been informed particulars including quantitative details and situation of fixed of such case by the management. assets. xi. The other clauses of paragraph 4 of the Companies (Auditor’s ii. The fixed assets of the Company have been physically verified Report) Order 2003, as amended by the Companies (Auditor’s by the management during the year and no material Report) (Amendment) Order, 2004,are not applicable in the discrepancies between the book records and the physical case of the Company for the current year, since in our opinion inventory have been noticed. In our opinion, the frequency of verification is reasonable. there is no matter which arises to be reported in the aforesaid iii. During the year, the Company has not disposed off a major order. part of the fixed assets. iv. The Company has neither granted nor taken any loans, secured 4. Further to our comments in paragraph 3 above, we report that: or unsecured, to/from companies, firms or other parties covered (a) We have obtained all the information and explanations, which in the register maintained under Section 301 of the Act. to the best of our knowledge and belief were necessary for the v. In our opinion and according to the information and purposes of our audit; explanations given to us, having regard to the explanation that (b) In our opinion, proper books of account as required by law certain items purchased are of special nature for which suitable have been kept by the Company so far as appears from our alternative sources do not exist for obtaining comparative examination of those books; quotations, there is an adequate internal control system (c) The Balance Sheet, Profit and Loss Account and Cash Flow commensurate with the size of the Company and the nature Statement dealt with by this report are in agreement with the of its business for the purchase of fixed assets and for sale of books of account; services. Further, on the basis of our examination of the books (d) In our opinion, the Balance Sheet, Profit and Loss Account and and records of the Company, and according to the information Cash Flow Statement dealt with by this report comply with the and explanations given to us, we have neither come across nor accounting standards referred to in sub-section (3C) of Section have been informed of any continuing failure to correct major 211 of the Act; weaknesses in the aforesaid internal control system. (e) On the basis of written representations received from the vi. In our opinion, the Company has an internal audit system directors, as on March 31, 2007 and taken on record by the commensurate with the size and nature of its business. Board of Directors, none of the directors is disqualified as on vii. The Central Government of India has not prescribed the March 31, 2007 from being appointed as a director in terms of maintenance of cost records under clause (d) of sub-section clause (g) of sub-section (1) of Section 274 of the Act;

366 MAX INDIA ANNUAL REPORT 2006-07 MAX UK LIMITED

AUDITORS’ REPORT

(f) In our opinion and to the best of our information and according the Company as at March 31, 2007; to the explanations given to us, the said financial statements (ii) In the case of the Profit and Loss Account, of the profit together with the notes thereon and attached thereto give in for the year ended on that date; and the prescribed manner the information required by the Act and (iii) In the case of the Cash Flow Statement, of the cash flows give a true and fair view in conformity with the accounting for the year ended on that date. principles generally accepted in India: (i) In the case of the Balance Sheet, of the state of affairs of DINESH K. BACHCHAS Partner Membership No. 097820

For and on Behalf of New Delhi K. K. Mankeshwar & Co. MAY 10, 2007 Chartered Accountants

MAX INDIA ANNUAL REPORT 2006-07 367 MAX UK LIMITED

BALANCE SHEET AS AT MARCH 31, 2007

RUPEES

Schedule As at As at March 31, 2007 March 31, 2006 SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 21,300,000 21,300,000 Reserves and Surplus 2 2,909,218 2,130,865 24,209,218 23,430,865

APPLICATION OF FUNDS FIXED ASSETS 3 Gross Block 977,025 889,580 Less: Depreciation 943,093 824,376 Net Block 33,932 65,204

CURRENT ASSETS, LOANS AND ADVANCES 4 Cash and Bank Balances 2,155,592 2,975,048 Sundry Debtors 4,365,151 5,798,650 Loans and Advances 3,663,927 343,257 10,184,670 9,116,955 LESS: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 5 866,534 1,257,910 Provisions 296,091 - 1,162,625 1,257,910

NET CURRENT ASSETS 9,022,045 7,859,045

PROFIT AND LOSS ACCOUNT 15,153,241 15,506,616 24,209,218 23,430,865

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors

This is the Balance Sheet referred to in our report of even date

DINESH K. BACHCHAS B. ANANTHARAMAN Director Partner KARIN STANLEY Director Membership No. 097820

For and on behalf of K.K. Mankeshwar & Co. Chartered Accountants

New Delhi MAY 10, 2007

368 MAX INDIA ANNUAL REPORT 2006-07 MAX UK LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 INCOME Overheads Recovered 6,874,495 6,363,149 Other Income 6 49,274 29,795 6,923,769 6,392,944 EXPENDITURE Administration and Other Expenses 7 6,226,925 5,757,128 Financial Expenses 8 9,138 7,824 Depreciation 3 37,746 39,516 6,273,809 5,804,468

PROFIT BEFORE TAX 649,960 588,476

Provision for Taxation 296,585 -

PROFIT AFTER TAX 353,375 588,476

(LOSS) BROUGHT FORWARD (15,506,616) (16,095,092)

(LOSS) CARRIED FORWARD TO BALANCE SHEET (15,153,241) (15,506,616)

Basic and Diluted earnings per share Profit after tax 353,375 588,476 Weighted average number of ordinary shares 299,742 299,742 Earning per ordinary share of GBP 1/- each 1.18 1.96

Number of Shares used in computing earnings per share 299,742 299,742 Outstanding at the beginning of the year 299,742 299,742 Outstanding at the end of the year 299,742 299,742

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Profit and For and on behalf of the Board of Directors Loss Account

This is the Profit and Loss Account referred to in our report of even date

DINESH K. BACHCHAS B. ANANTHARAMAN Director Partner KARIN STANLEY Director Membership No. 097820

For and on behalf of K.K. Mankeshwar & Co. Chartered Accountants

New Delhi MAY 10, 2007

MAX INDIA ANNUAL REPORT 2006-07 369 MAX UK LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

RUPEES

Schedule For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit Before Tax 649,960 588,476

Adjustments for: Depreciation 37,746 39,516 Interest Income (27,925) (10,037) Operating Profit Before Working Capital Changes 659,781 617,955

Adjustments for: Other Receivables (1,887,171) 2,623,778 Trade Payables (391,376) (204,889) Cash From/(Used in) Operating Activities (1,618,766) 3,036,844

B. CASH FLOW FROM INVESTING ACTIVITIES

Cash From/(Used in) Investing Activities - -

C. CASH FLOW FROM FINANCING ACTIVITIES Interest received on Deposit with Bank 27,925 10,037 Cash From/(Used in) Financing Activities 27,925 10,037

Net Increase/(Decrease) in Cash and Cash Equivalents (1,590,841) 3,046,881 Foreign Currency Translation Reserve 771,385 (445,638) (819,456) 2,601,243

Cash and Cash Equivalents As At March 31, 2006 2,975,048 373,805 Cash and Cash Equivalents As At March 31, 2007 2,155,592 2,975,048 Net Increase/(Decrease) in Cash and Cash Equivalents (819,456) 2,601,243

Notes: 1 The above Cash Flow statement has been prepared under the "Indirect Method" as set out in the Accounting Standard-3 on 'Cash Flow Statements' issued by The Institute of Chartered Accountants of India. 2 Cash and Cash Equivalents at the end of the year consist of Cash and Balances with Bank:

As at As at March 31, 2007 March 31, 2006 Cash in Hand 3,410 2,018 Balance with Bank 2,152,182 2,973,030 2,155,592 2,975,048 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS 9

The Schedules referred to above form an integral part of the Cash Flow Statement For and on behalf of the Board of Directors

This is the Cash Flow Statement referred to in our report of even date

DINESH K. BACHCHAS Partner B. ANANTHARAMAN Director KARIN STANLEY Director Membership No. 097820

For and on behalf of K.K. Mankeshwar & Co. Chartered Accountants

New Delhi MAY 10, 2007

370 MAX INDIA ANNUAL REPORT 2006-07 MAX UK LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

RUPEES

As at As at March 31, 2007 March 31, 2006 SCHEDULE-1 SHARE CAPITAL Authorised 1,000,000 (Previous year 1,000,000) Ordinary shares of GBP 1/- each 71,061,111 71,061,111

Issued, Subscribed And Paid Up 299,742 (Previous year 299,742) Ordinary Shares of GBP 1/- each 21,300,000 21,300,000 (held by Max India Limited, the Holding Company) 21,300,000 21,300,000

SCHEDULE-2 RESERVE AND SURPLUS FOREIGN CURRENCY TRANSLATION RESERVE Opening Balance 2,130,865 2,582,040 Additions during the year 778,353 (451,175) Closing Balance 2,909,218 2,130,865

SCHEDULE-3 FIXED ASSETS (Refer Notes A4 and A5 on schedule 9)

Particulars Gross Block Depreciation Net Block

As on April Additions Translation As on March As on April Additions Translation As on March As on March As on March 01, 2006 Reserve 31, 2007 01, 2006 Reserve 31, 2007 31, 2007 31, 2006

Furniture, Fixture and Equipments - Furniture and Fixture 487,484 - 47,919 535,403 487,484 - 47,919 535,403 - - - Office Equipment 402,096 - 39,526 441,622 336,892 37,746 33,052 407,690 33,932 65,204 Total 889,580 - 87,445 977,025 824,376 37,746 80,971 943,093 33,932 65,204 Previous year 942,945 - (53,365) 889,580 832,688 39,516 (47,828) 824,376

As at As at March 31, 2007 March 31, 2006

SCHEDULE-4 CURRENT ASSETS, LOANS AND ADVANCES

CASH AND BANK BALANCES Cash in Hand 3,410 2,018 With Non-Scheduled Bank - in Current Account (Barclays Bank Plc.) * 2,152,182 2,973,030 2,155,592 2,975,048 * Maximum balance outstanding during the year Rs. 5,809,880/- (Previous year Rs. 4,858,276/-)

SUNDRY DEBTORS Unsecured ** Debts exceeding six months - Considered Good 4,365,151 3,974,467

Other Debts - Considered Good - 1,824,183 4,365,151 5,798,650 ** Amounts due from companies under the same management -Max India Limited Nil (Previous year Rs. 1,824,183/-) -Neeman Medical International NV Rs. 4,365,151/- (Previous year Rs. 3,974,467/-) Maximum amount outstanding during the year from companies under the same management -Max India Limited Rs. 2,371,438/- (Previous year Rs. 2,371,438/-) -Max Healthcare Institute Limited Rs. 1,824,183 (Previous year Rs. 1,824,183/-) -Neeman Medical International NV Rs. 4,365,151/- (Previous year Rs. 4,163,275/-)

MAX INDIA ANNUAL REPORT 2006-07 371 MAX UK LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-4 (Contd.) RUPEES

As at As at March 31, 2007 March 31, 2006 LOANS AND ADVANCES Unsecured, Considered Good Advances recoverable in cash or in kind or for value to be received 3,648,155 328,896 Prepaid Expenses 15,772 14,361 3,663,927 343,257

10,184,670 9,116,955

SCHEDULE-5 CURRENT LIABILITIES Sundry Creditors*** Total Outstanding Dues of Creditors Other Than Small Scale Industrial Undertakings 802,422 654,688 Other Liabilities 64,112 603,222 866,534 1,257,910 *** There are no dues to creditors coming under the definition of Small Scale Industrial Undertakings as at March 31, 2007 and March 31, 2006

For the Year Ended For the Year Ended March 31, 2007 March 31, 2006 SCHEDULE-6 OTHER INCOME Interest on Fixed Deposit with Bank 27,925 10,037 Miscellaneous Income 21,349 19,758 49,274 29,795

SCHEDULE-7 ADMINISTRATION AND OTHER EXPENSES

PERSONNEL, (Refer Note B6 on Schedule 9) Salaries and Wages 3,511,970 3,042,754

ADMINISTRATION & OTHER EXPENSES Power and Fuel 9,052 6,718 Legal and Professional 1,005,982 1,149,213 Travelling and Conveyance 82,238 143,286 Rent 689,157 622,381 Communication 304,698 200,269 Rates and Taxes 55,508 50,028 Printing and Stationery 39,539 9,958 Repairs and Maintenance-Others 56,619 61,487 Insurance 430,659 373,824 Miscellaneous Expenses 41,503 97,210 6,226,925 5,757,128

SCHEDULE-8 FINANCIAL EXPENSES Bank Charges 9,138 7,824 9,138 7,824

372 MAX INDIA ANNUAL REPORT 2006-07 MAX UK LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE-9

A SIGNIFICANT ACCOUNTING POLICIES

1 The Financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, accounting standards issued by the Institute of Chartered Accountants of India ('ICAI’) and the provisions of Companies Act, 1956 as adopted consistently by the Company

2 Revenue Recognition (i) Revenue represents amounts invoiced during the year, exclusive of value added tax. (ii) Dividend is recognized as income as and when the right to receive such payment is established.

3 Expenditure Expenses are accounted for on the accrual basis and provisions are made for all known losses and liabilities.

4 Fixed Assets Fixed Assets are stated at their original cost.

5 Depreciation Depreciation is charged on straight-line method on a pro-rata basis at rates estimated by the management based on the economic useful life of the assets, which are not lower than the rates prescribed under Schedule XIV to the Companies Act, 1956.

6 Taxation Provision for tax consists of current tax and deferred tax. Current tax provision is computed for current income based on the tax liability after considering allowances and exemptions. Deferred tax assets and liabilities are computed on the timing differences at the balance sheet date between the carrying amount of assets and liabilities and their respective tax basis. Deferred tax assets are recognized based on management estimates of available future taxable income and assessing its certainty.

7 Foreign Exchange Transactions (i) Monetary assets and liabilities related to foreign transactions remaining unsettled at the end of the year are translated at year-end rates. (ii) The difference in translation of monetary assets and liabilities and realized gains and losses on foreign exchange transactions, are recognized in the profit and loss account.

8 Leases Leases of assets under which the lessor effectively retains all the risks and benefits of ownership are classified as operating lease. Payments made under operating lease are charged to Profit and Loss Account on a straight-line basis over the period of the lease.

B NOTES TO THE ACCOUNTS

1 Country of Incorporation Max UK Limited is incorporated and operates under the applicable laws of England and Wales.

2 Basis of Preparation and Translation into Indian Rupees (i) These financial statements have been prepared for the purpose of compliance with the provisions of Section 211 and Section 212 of the Indian Companies Act, 1956 and have been translated to Indian Rupees (Rs.) in accordance with Accounting Standard-11 issued by ICAI on ‘The Effects of Changes in Foreign Rates’. The functional currency of the Company is Pound Sterling (GBP).

(ii) The translation of foreign currency into Rs. has been carried out: a) For assets and liabilities (both monetary and non-monetary items) using the rate of exchange prevailing on the balance sheet date (1GBP = Rs. 85.2552 as on March 31, 2007 and 1GBP = Rs. 77.6248 as on March 31, 2006). b) For revenues and expenses using average exchange rates prevailing during the reporting period (1GBP= Rs. 85.3975 for the period April 1, 2006 to March 31, 2007 and 1GBP= Rs. 79.0326 for the period April 1, 2005 to March 31, 2006). c) Resulting exchange differences are taken into foreign currency translation reserve as required under Accounting Standard-11.

3 Contingent Liabilities – Nil

4 Leases Accounting for leases has been done in accordance with Accounting Standard-19 issued by the ICAI. Following are the details of lease transactions for the year: a) Finance Lease The Company does not have any finance lease arrangement.

MAX INDIA ANNUAL REPORT 2006-07 373 MAX UK LIMITED

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

b) Operating Lease (i) Lease rentals recognised in the profit and loss account for the year is Rs. 689,157/- (Previous year Rs. 622,381/-). (ii) The Company has entered into operating leases that are renewable on a periodic basis and cancellable at Company’s option. The Company has not entered into sublease agreements in respect of these leases. (iii) The total of future minimum lease payments under non-cancellable leases are as follows: RUPEES March 31, 2007 March 31, 2006 Not later than one year 336,295 311,230

5 Segment Reporting The Company operates only in one business segment viz. to work as a representative office of Max Group companies. Accordingly there are no reportable business segments.

6 Salaries and wages include an amount of Rs. 3,511,970 (Previous year Rs. 3,042,754) paid to a director of the Company.

7 Deferred Tax The net deferred tax asset has not been recognized due to virtual uncertainty regarding future taxable profits.

8 Related Parties (as identified by the management) are classified as:

(i) Holding Company Max India Limited, India (ii) Fellow Subsidiaries Max New York Life Insurance Company Ltd., Max Ateev Ltd., Neeman Medical International BV, Neeman Medical International NV, Neeman Medical International Inc., USA, Neeman Medical International Latin America, S.A., Max Medical Services Ltd., Max Healthcare Institute Ltd., Alps Hospital Pvt. Ltd. (w.e.f. April 6, 2006), Pharmax Corporation Ltd., Neeman Medical International (Asia) Ltd., Max HealthStaff International Ltd. (w.e.f June 30, 2005), Max Estates Ltd.*, Malsi Estates Ltd.*, Max Asia Pac Ltd.**, Max Telecom Ventures Ltd.** (iii) Key Management Personnel Ms. Karin Stanley * Fellow subsidiaries till May 31, 2006 ** Fellow subsidiaries till November 30, 2005

Summary of significant related party transactions (as identified by the management) carried out in ordinary course of business is as follows: RUPEES Holding Fellow Subsidiaries Key Management Company Personnel (i) Income - Overhead Recovered 3,437,247 3,437,248 - (3,161,303) (3,201,846) (-) (ii) Salaries and Wages - - 3,511,970 (-) (-) (3,042,754) (iii) Amount Outstanding - Other Receivable - 4,365,151 - (1,824,183) (3,974,467) (-)

9 Other disclosure requirements of Schedule VI to the Companies Act, 1956 are not applicable to the Company.

10 Auditors’ Remuneration RUPEES Current Year Previous Year Audit Fees 298,891 316,130 11 Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year's classification.

For and on behalf of the Board of Directors

New Delhi B. ANANTHARAMAN Director MAY 10, 2007 KARIN STANLEY Director

374 MAX INDIA ANNUAL REPORT 2006-07 MAX UK LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I REGISTRATION DETAILS : Registration No. 3 6 2 5 9 0 4 State Code N A

Balance Sheet Date 3 1 0 3 2 0 0 7 Date Month Year

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue Rights Issue N I L N I L Bonus Issue Private Placements/Others N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities Total Assets 2 4 2 0 9 2 4 2 0 9 SOURCES OF FUND Paid-up Capital Reserves and Surplus 2 1 3 0 0 2 9 0 9 Secured Loans Unsecured Loans N I L N I L APPLICATION OF FUNDS Net Fixed Assets Investments 3 4 N I L Net Current Assets Misc. Expenditure 9 0 2 2 N I L Accumulated Losses 1 5 1 5 3 IV PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (Total Income) Total Expenditure 6 9 2 4 6 2 7 4 +- Profit/Loss before Tax +- Profit/Loss after Tax 6 5 0 3 5 3 +- Earning Per Share in Rupees Dividend Rate (%) Basic 1 . 1 8 N I L Diluted 1 . 1 8 V NAME OF THREE PRINCIPAL PRODUCTS/SERVICE OF COMPANY

Product Description N O T A P P L I C A B L E

MAX INDIA ANNUAL REPORT 2006-07 375 Max India Limited Max House, Okhla, New Delhi-110 020 Tel: +91 11 42598000 www. maxindia.com