Exhibit 1: Research & Development Amortization for EVA Calculation

($000s) 1995 1996 1997 1998 1999 2000 2001E 2002E

R&D Expense as reported on P&L(5year
Amortization Period) $10,673 $12,487 $14,610 $17,094 $20,000 $39,000 $27,378 $32,032
1995 2,135 2,135 2,135 2,135 2,135
1996 2,497 2,497 2,497 2,497 2,497
1997 2,922 2,922 2,922 2,922 2,922
1998 3,419 3,419 3,419 3,419 3,419
1999 4,000 4,000 4,000 4,000
2000 7,800 7,800 7,800
2001 5,476 5,476
2002 6,406
R&D Amortization Under EVA 2,135 4,632 7,554 10,973 14,973 20,638 23,617 27,101
Cumulative R&D Expense (P&L) 10,673 23,160 37,770 54,864 74,864 113,864 141,242 173,274
Less:Cumulative Amortization(EVA) 2,135 6,767 14,321 25,294 40,267 60,905 84,522 111,623
Capitalized R&D for EVA Calculation of capital $8,538 $16,393 $23,449 $29,570 $34,597 $52,959 $56,720 $61,651

Notes:

1995 R&D Expense included for purpose of

1 calculating 1999 EVA only
2 R&D grew at 17% p.a. from 1997 to 1999
3 2001 estimated R&D of $27,378=$20,000 *(1.17) 2
4 2002 estimated R&D of $32,032=$27,348*1.17
Note: R&D amortization for a period of 05 years
 Exhibit -2 Consumer Advertising Schedule for EVA Calculation
($000s) 1998 1999 2000 2001E 2002E
Advertising Expense as reported on P&L(3 Year
Amortization Period) $41 $45 $50 $55 $61
1996 11
1997 13 13
1998 14 14 14
1999 15 15 15
2000 17 17 17
2001 18 18
2002 20
Advertising Amortization under EVA 38 42 46 50 55
Cumulative Advertising Expense (P&L) 113 $158 $208 $263 $324
Less: Cumulative Amortization(EVA) 73 115 161 211 266
Capitalized Advertising for EVA Calculation of
capital $40 $43 $47 $52 $58
Note:
1 Consumer advertising grew at 10% p.a. from 1997to 2000. Same rate used to estimate 2001 and 2002.

Note: Consumer adverising for a period of 03 years

Exhibit -3 EVA Calculation for Dermatology Division
($000s except bonus) 1999a 2000 2001Ec 2002Ec
NOPAT:
Net Income Before Tax $20,000 $51,000 $27,848 $32,861 Based on NI before Tax Growth rate
Research & Development Expense 20,000 39,000 27,378 32,032
1. R&D Adjustments (14,973) (20,638) (23,617) (27,101)
Advertising Expense 45 50 55 61
2. Advertising Adjustment (42) (46) (50) (55)
3. Goodwill amortization 2,500 2,500 2,500 2,500
Net Opearting Profit Before Taxes (NOPBT) 27,530 71,866 34,114 40,298
Current Year's Income Tax Payments (7,875) (18,725) (10,622) (12,376) 10622 = (34115+2500)*0.35
Net Operating Profit After Taxes (NOPAT) $19,655 $53,141 $23,492 $27,922

CAPITAL: Net Income

Net Opearing Assets (NOA) $110,000 $135,000 $153,164 $180,734
1. Capitalized R & D 34,598 52,960 56,721 61,653 From Exhibit-1
2. capitalized Advertising 43 47 52 58 From Exhibit-2
3. Accumulated Goodwill Amortization 7,500 10,000 12,500 15,000 7500=2500*3 years
Capital $152,141 $198,007 $222,437 $257,445

Capital Charge (11%) (16,736) (21,781) (24,468) (28,319)

Economic Value Added (EVA) $2,919 $31,360 ($976) ($397)

Notes:

a
EVA was introduced in the Dermatology division for the first time in 2000. The EVA figure was
calculated retroactively solely to set 2000 EVA targets. The 1999 EVA calculation includes the
amortization of a 1995 R&D expense of $10,673.
b
Taxes = 35% of ( Net Income Before Tax + Goodwill Amortization). 0.35
c
2001 and 2002 estimated results obtained by forecasting four financial statement items at historical growth rates from 1999 base:
net income before tax at 18%. R&D at 17%, consumer advertising at 10%, and net operating assets at 18%.
For example, 2001 estimated NOA of $153,164 = $ 110,000 * (1.18) 2
 2002 estimated NOA of $ 180,734 = $ 153,164 * 1.18.

Note: Goodwill not to be amortized.

Growth rate

(7875=20000+2500)*0.35 Refer Exhibit -8 Net income before tax

10622=(20000*1.18*1.18+2500)*0.35
12376=(20000*1.18*1.18*1.18+2500)*0.35
Growth rate = 20000/16949=18%
Exhibit -4 EVA Bonus Calculation for Divisional Manager
($000s except bonus) 1999 2000 2001E 2002E
Old Model EVA Year 1 EVA Year 2 EVA Year 3
Economic Value Added (EVA)a $2,920 $31,360 ($976) ($397)
EVA Improvement Goal 2,150 2,150 2,150
EVA Target b 5,070 33,510 1,174
Interval 12,000 12,000 12,000

Actual EVA Improvement $28,440 ($32,336) $579

EVA Performance c
319% -187% 87%

North American Manager's Bonus: 2000 2001E 2002E

Base Salary $200,000 $200,000 $200,000
Target EVA Bonus (60% Base Salary) 120,000 120,000 120,000

Starting Bank Balance -- 131,400 (93,000)

1. Calculated Bonus d
382,800 (224,400) 104,279
New Bank Balance $382,800 ($93,000) $10,869

Pay Out 100% of Available Target 120,000 -- 10,869

Plus 50% Remaining bank Balance 131,400 -- --
2. Total Bonus Payout $251,400 -- 10,869

Ending Bank Balance $131,400 ($93,000) --

Notes:

a
EVA was introduced in the Dermatology division for the first time in 2000. The 1999 EVA figure
was calculated retroactively solely to set 2000 EVA targets. The 1999 EVA calculation includes the
amortization of a 1995 R&D expense of $ 10.673.
b
EVA target = Prior Year's EVA + EVA improvement Goal for this year.
For 2000, EVA Target of $5,070 = $2,920 + $2,150
c
EVA Performance (%) = 1 + [(Actual Improvement - Improvement Goal )/ EVA interval]
For 2000, EVA performance of 319% = 1 + [ ( 31,360 - 2,920 - 2,150) / 12,000) ]
d
Calculated Bonus = Target Bonus X EVA Performance
For 2000, calculated bonus of $ 382,897 = 319% X 120,000
Given in Exhibit-8 page-15

Given in Exhibit-8 page-15