DIRECTORS' REPORT To, The Members, Your Directors have pleasure in presenting the 21st Annual Report together with the Audited Financial Statements and Auditors' report thereon for the year ended 31st March, 2015. OPERATIONS / STATE OF COMPANY'S AFFAIRS During the year under review, your company has performed well and achieved total revenue of Rs. 22,859.79 lac (Previous year Rs. 20,991.35 lac). There is increase in net profit from previous year of Rs. 1142.76 lac to Rs. 1477.30 lac in the year under review. Further details are given in Management Discussions and Analysis Report, which forms part of Annual Report. TRANSFER TO RESERVES The Company has transferred a sum of Rs. 50.00 Lac to General Reserve in the current year (previous year Rs. 50.00 Lac). DIVIDEND Your Directors are pleased to recommend dividend of Rs. 1.00 (@10%) per equity share of face value of Rs.10/- each of the Company for the year ended on 31-03-2015 (Previous year @6%) DIRECTORS 1. Retirement by rotation: In accordance with the provisions of section 152[6] of the Act and in terms of Articles of Association of the Company, Shri Hasmukhbhai I. Patel (holding DIN: 00104834)and Shri Arvindbhai G. Patel (holding DIN: 00104885) will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. The Board recommends their reappointment. 2. Appointment: Shri Munjal M. Patel (DIN 02319308) and Shri Aashish R. Patel (DIN: 01309017) have been appointed as Additional Directors and as Whole Time Directors w.e.f. 14th November, 2014, subject to the approval of the Members at the ensuing Annual General Meeting. Resolutions proposing approval of appointments for the same have been set out in notice. Ms. Meha M. Patel (DIN 07254852) has been appointed as an Additional Director (categorized as Independent Director) w.e.f. August 4, 2015, a Resolution proposing her appointment as an Independent Director of the company has been placed in the Notice for obtaining approval of the Members at the ensuing Annual General Meeting 3. Cessation: Shri Maganbhai R. Patel (DIN- 00452855), Independent Director of the Company passed away on 23rd May, 2015. The Board places on record its appreciation for contributions and guidance provided by him during his tenure as an Independent Director of the Company. 4. Independent Directors: All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. 5. Board Evaluation: Pursuant to the provisions of the Companies Act, 2013 and Rules made thereunder, Schedule IV of the Act and clause 49 of the Listing Agreement, the Board has carried the evaluation of its own performance, individual Directors, its Committees, on the basis of attendance, contribution and various criteria as recommended by the Nomination and Remuneration Committee of the Company. The Board has also evaluated the composition of Board, its committees, experience and expertise, performance of specific duties and obligations, governance issues, etc. The Directors expressed their satisfaction with the evaluation process. The performance of each of the non-independent directors (including the chair person) was also evaluated by the Independent Directors at the separate meeting held of Independent Directors of the Company. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION The Directors Appointment and Remuneration policy of the Company comprising the appointment and remuneration of the Directors, Key Managerial Personnel and Senior Executives of the Company including criteria for determining qualifications, positive attributes, independence of a Director and other related matters has been provided as under: a. Criteria determining the qualifications, positive attributes and independence of a Director and Policy for appointment and removal: INDEPENDENT DIRECTORS: • Qualifications of Independent Director:- An Independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, medical, law, management, sales, marketing, administration, research, corporate governance, operations or other disciplines related to the company's business. • Positive attributes of Independent Directors:- An independent director shall be a person of integrity, who possesses relevant expertise and experience and who shall uphold ethical standards of integrity and probity; act objectively and constructively; exercise his responsibilities in a bona-fide manner in the interest of the company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the company in implementing the best corporate governance practices. • Independence of Independent Directors:- An Independent director should meet the requirements of Section 149, Schedule IV of the Companies Act, 2013 and Clause 49(II) (B) of the Listing Agreement. OTHER DIRECTORS AND SENIOR MANAGEMENT i. The Nomination and Remuneration Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director or at Senior Management level and recommend to the Board his / her appointment. ii. A person should possess adequate qualification, expertise and experience for the position he / she is considered for appointment. The said Committee has discretion to decide whether qualification, expertise and experience possessed by a person is sufficient / satisfactory for the concerned position. iii. The Company shall not appoint or continue the employment of any person as Whole-time Director who has attained the age of seventy years. Provided that the term of the person holding this position may be extended beyond the age of seventy years with the approval of shareholders by passing a special resolution based on the explanatory statement annexed to the notice for such motion indicating the justification for extension of appointment beyond seventy years. Moreover any person appointed shall not continue in the Company if the evaluation of his performance is not satisfactory to the said committee. Rationale for Remuneration Framework: i. Internal Ratios: The Compensation package for employees at levels lower than Executive Directors should be revised in the form of performance increments, structural improvements and Cost of Living Adjustments at regular intervals. This will lead to a compressing of the compensation differential between the lowest and highest levels of executive management. ii. Compliance & Risk Parameters: In view of company law regulations, the compliance roles of Executive Directors far outweigh that of any other level, and consequently the risk parameters associated with these jobs are of a significantly higher level as compared to the junior levels and accordingly the remuneration should be paid. KEY MANAGEMENT PERSONNEL AND SENIOR MANAGEMENT AND OTHER EMPLOYEES: (1) "Senior Management" shall mean the personnel of the company who are members of its core management team excluding the Board of Directors including Functional Heads. (2) The remuneration package of the Key Management and Senior Management and Other Employees comprises of : (a) Fixed Remuneration: This includes a Monthly Salary such as Consolidated Pay, Variable House Rent Allowance, Compensatory Allowance, Utility Allowance, Interest Subsidy on Housing Loans; (b) Annual Allowances: This consists of Leave Travel Allowance, Medical Reimbursement and House Maintenance Allowance (c) Retirals: This includes Provident Fund, Gratuity and Superannuation, if any. Non-Executive Directors: The Board is responsible for setting policy in relation to the Non-Executive Directors' fees and reviews them periodically. General policy is to provide fees in line with market practice for similar Non-Executive Director roles in the comparable corporates and institutions in India. Fees paid to the Non-Executive Directors also take account of the Company's complexity, the significant travel and time commitments required for attending Board and other meetings in India and the risk profile of the Company. The Remuneration to the non-executive Directors should be determined as per the provisions of the Companies Act, 2013 and related rules framed there under. However the Nomination and Remuneration Committee may from time to time suggest the payment and revision in the same as and when necessary. c. Remuneration Mix: The total remuneration package is designed to provide an appropriate balance between fixed and variable components with focus on Performance Related Pay so that strong performance is incentivized but without encouraging excessive risk taking The Board has approved a policy for Directors Appointment and Remuneration in the meeting held on 14th August, 2014 and has been uploaded on the website i.e. www.lincolnpharma.com DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement of Section 134(5) of the Act, and based on the representations received from the management, the directors hereby 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 have 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 of the Company for that period. iii. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; iv. The Directors have prepared the annual accounts ongoing concern basis. v. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. NUMBER OF BOARD MEETINGS OF THE BOARD: The Board of Directors, during the year 2014-2015 duly met 6 times on (1)24th April, 2014 (2)30th May, 2014 (3)14th August, 2014 (4)14th November, 2014 (5) 29th December, 2014 and (6) 13th February, 2015 in respect of which meetings, proper notices were given and the proceedings were properly recorded and signed in the Minutes Book maintained for the purpose. INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY: The Company has internal control systems commensurate with the size, scale and complexity of its business operations. The scope and functions of internal auditor are defined and reviewed by the Audit committee. The internal auditor reports to the Chairman of the Audit Committee. The internal auditor assesses opportunities for improvement of business processes, systems and controls, to provide recommendations, which can add value to the organization. MATERIAL CHANGES AFFECTING FINANCIAL POSITION OF THE COMPANY: No material changes or commitments, affecting the financial position of the Company have occurred between the end of the financial year of the company to which the financial statements relate, i.e. 31st March, 2015 and the date of the Board's Report. DEPOSITS The Company has not accepted deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013 Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to the financial statements. ISSUE OF CONVERTIBLE WARRANTS After the closuer of the year, the Company has issued 36,89,200 warrants convertible into equal number of equity share of the company within a period of 18 moths from the date of issue and complied with applicable laws and provisions. SUBSIDIARY COMPANY The Company has two subsidiaries, namely M/s. Zullinc Healthcare Limited (WOS) and M/s. Lincoln Parenteral Limited. There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). Further there has been no material change in the nature of business of the subsidiaries. Those Shareholders who are interested in obtaining a copy of the audited annual accounts of the subsidiary companies may write to the Company. Performance and financial position of the subsidiary companies is given as under and in "Annexure-I". PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES Subsidiaries of the Company are engaged in the business of manufacturing and Trading of Pharmaceutical products. The Company's wholly owned subsidiary named Zullinc Healthcare Limited earned other income of Rs. 42.78 lac (Previous year Nil). There is increase in net profit from previous year of Rs. (-0.71) lac to Rs. 10.06 lac in the year under review. The Company's subsidiary named Lincoln Parenteral Limited earned revenue of Rs. 6877.21 lac (Previous year Rs. 2853.45 lac). There is increase in net profit from previous year of Rs. (-123.59) lac to Rs. 16.78 lac in the year under review. In terms of proviso to sub section (3) of Section 129 of the Act, the salient features of the financial statement of the subsidiaries is set out in the prescribed form AOC-1, which forms part of the annual report. INSURANCE The Company has taken adequate insurance to cover its assets. LISTING Company's Securities are listed with the Stock Exchanges at Ahmedabad and Mumbai. The Company has already paid the listing fees for the year 2015-16 to both the Stock Exchanges RISK MANAGEMENT POLICY The Risk Management is overseen by the Audit Committee of the Company on a continuous basis. The Committee oversees Company's process and policies for determining risk tolerance and review management's measurement and comparison of overall risk tolerance to established levels. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuous basis. For details, please refer to the Management Discussion and Analysis report which form part of the Board Report. RELATED PARTY TRANSACTIONS All transactions entered into with Related parties as defined under the Act and clause 49 of the Listing Agreement during the financial year were in the ordinary course of business and on an arm's length basis and do not attract the provisions of section 188 of the Act. There were no materially significant transactions with related parties during the financial year which were in the conflict of interest of the Company at large. Suitable disclosures as required by the Accounting Standard [AS 18] have been made in the notes to the Financial Statements. The Board has approved policies on Related Party Transactions and Material Subsidiary and the same have been uploaded on the website i.e. www.lincolnpharma.com Related Party Transactions of the companies are given in Form AOC-2 in "Annexure-II". CORPORATE SOCIAL RESPONSIBILITY Your Company aims to remain essential to the society with its social responsibility, strongly connected with the principle of sustainability, an organization based not only on financial factors, but also on social and environmental consequences. It is responsibility of your Company to practice its corporate values through its commitment to grow in a socially and environmentally responsible way, while meeting the interest of Stakeholders. Your Company had contributed and still contributing towards development of public facilities. The Board has approved a policy for Corporate Social Responsibility in the meeting held on 14th November, 2014 and same has been uploaded on the website i.e. www.lincolnpharma.com As required under Section 135 of the Companies Act, 2013 and to demonstrate the responsibilities towards Social upliftment in structured way, the Company has formed a Policy to conduct the task under CSR, during the year 2014. The Annual Report on CSR activities is annexed herewith as "Annexure III" HUMAN RESOURCES Many initiatives have been taken to support business through organizational efficiency, process change support and various employee orientation programmes which has helped the Organization achieve higher productivity levels. A significant effort has also been undertaken to develop leadership as well as technical/ functional capabilities in order to meet future talent requirement. VIGIL MECHANISM Pursuant to provisions of Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, the Board of Directors has approved the Policy on Vigil Mechanism/ Whistle Blower Policy, in the meeting held on 14th November, 2014. Through this policy Directors, Employees or business associates may report the unethical behavior, malpractices, wrongful conduct, frauds, violations of the Company's code etc. to the Chairman of the Audit Committee. The Vigil Mechanism/Whistle Blower Policy of the Company has been uploaded on the website i.e. www.lincolnpharma.com DISCLOSURE AS PER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. DISCLOSURE UNDER RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014: Details pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as "Annexure VII" to this report. AUDITORS: 1. COST AUDITOR: M/s. Kiran J. Mehta & Company, Cost Accountants, Ahmedabad, have been appointed to conduct cost audit for the year ended on 31st March, 2016. 2. STATUTORY AUDITOR: Your Directors would like to inform you that M/s. Chandulal M. Shah & Co., Chartered Accountants, (FRN 101698W) has resigned as the statutory Auditors of the company. Pursuant to provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and auditors) Rules, 2014, any casual vacancy caused in the office of the statutory auditors of the Company shall be filled by the Board of Directors within thirty days of such resignation, but if such casual vacancy is due to resignation of the Statutory Auditors, such appointment shall also be approved by the Company at a General Meeting convened within three months of the appointment made by the board and the auditor shall hold the office till the conclusion of the General Meeting approving such appointment. Considering the casual vacancy in the office of statutory Auditors, the Company has approached M/s. J. T. Shah & Co. Chartered Accountants, (Firm Registration Number: 109616W) to act as the Statutory auditors of the Company and they have confirmed their eligibility and willingness to accept office, as proposed in the Resolution placed in the Notice. In view of the above, the Statutory Auditors of your Company, M/s. J. T. Shah & Co. Chartered Accountants, (Firm Registration Number: 109616W) shall hold office from the date of their appointment by the Board of Directors till the conclusion of this Annual General Meeting and shall, subject to your approval, hold the office of Statutory Auditors from the conclusion of this Annual General Meeting until the conclusion of next Annual General Meeting of the company. 3. SECRETARIAL AUDITOR: Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Rahul Agarwal & Associates, Practising Company Secretaries, to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as "Annexure - IV". EXPLANATIONS OR COMMENTS BY THE BOARD ON EVERY QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE BY AUDITORS- • With regard to the auditors' observation for records of Fixed Assets, the Company is in process of updating of its records. • With regard to the auditors' observation for strengthening of internal control system, the management has already appointed Internal Auditor and taking adequate steps to strengthen the internal control system. • With regard to the auditors' observation for payment of statutory dues, the Company has already paid all undisputed statutory dues as on date and taking appropriate action that no delay occurs for the payment of statutory dues in future. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure V" EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure VI". CORPORATE GOVERNANCE REPORT, MANAGEMENT DISCUSSION & ANALYSIS As per Clause 49 of the listing agreement entered into with the stock exchanges, Corporate Governance Report with Auditors' certificate thereon and Management Discussion and Analysis report are given in Annexure - "VIII". ACKNOWLEDGEMENT The Directors gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year. The Directors place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued contribution to the Company. For and on behalf of the Board For Lincoln Pharmaceuticals Limited. Mahendra G. Patel (Managing Director) (DIN: 00104706) Hasmukhbhai I. Patel (Whole-Time Director) (DIN: 00104834) Place : Ahmedabad Date : 04th August,2015 |