Hindustan Unilever

The Directors have pleasure in presenting the Seventy Fifth Annual
 Report of the Company along with Audited Accounts for the year ended
 31st December, 2007;
 
 1.  PERFORMANCE OF THE COMPANY
 
 1.1 Results
 
 For the year 2007, your Company achieved an overall turnover growth of
 13.3%; both Home and Personal Care (HPC) and Foods businesses grew by
 12.3% and 20.2% respectively. Profit After Tax registered a growth of
 14.9%.  The summarised figures are given below :
 
                                                        (Rs. in Lakhs)
                                                2007           2006
 
 Turnover, net of excise                       13717,75      12103,39
 Profit before tax                              2184,53       1861,68
 Tax on profits                                 (415,47)      (322,01)
 Exceptional items                               156,41        315,70
 Net profit                                     1925,47       1855,37
 Dividend (incl. tax on distributed            (2331,62)     (1511,38)
 profits)
 Transfer to General Reserve                    (200,00)      (191,00)
 Profit & Loss account balance                   197,50        803,65
 carried forward
 
 Earnings Per Share for the year 2007 at Rs. 8.73, reflects the growth
 of Net Profit (after exceptional items) by 3.8%.  The Board of
 Directors have recommended a final dividend of Rs. 3/- per share. Total
 dividend to our Shareholders for 2007 stands at Rs. 9/- per share, and
 includes the interim dividend of Rs. 3/- per share paid in August 2007
 and Rs. 3/- per share paid in November 2007 as Special Platinum Jubilee
 Dividend to commemorate your Companys 75th year of operations in the
 Country.
 
 1.2 Turnover
 
 Turnover, net of excise, in respect of continuing businesses increased
 by Rs.1,614 crores and is 13.3% higher than previous year. This
 increase results from more volumes sold, better mix of products, and
 selective price increases effected during the year. The details of
 Sales, net of excise, and other revenue by segments are given below:
 
                                                     (Rs. in Lakhs)
                                      2007               2006
                                Sales    Others*   Sales     Others*
 
 Soaps, Detergents            6328,80     45,72   5563,41      32,48
 & Scourers
 Personal Products            3614,76     57,06   3309,65      50,14
 Beverages                    1520,40     12,38   1325,96       4,78
 Foods                         532,98      4,76    380,46       4,45
 Ice Creams                    158,49      2,15    134,42       2,65
 Exports                      1342,26       -     1278,89         -
 Others                        226,88     58,39    120,11      60,14
 Less : Inter
 segment revenue                (6,82)      -       (9,50)        -
 Total                       13717,75    180,46  12103,39     154,64
 
 * Others represents service income from operations, relevant to the
 respective businesses.
 
 1.3 Summarised Profit and Loss Account
 
                                                  (Rs. in Lakhs)
 For the year ended                            2007            2006
 31st December,
 
 Net sales                                  13717,75        12103,39
 Other operational income                     224,82          191,46
 Total                                      13942,57        12294,85
 Operating expenses                        (11832,05)      (10455,33)
 PBDIT                                       2110,52         1839,52
 Depreciation                                (138,36)        (130,16)
 PBIT                                        1972,16         1709,36
 Interest income (net)                        212,37          152,32
 PBT                                         2184,53         1861,68
 Taxation                                    (415,47)        (322,01)
 PAT (before exceptional                     1769,06         1539,67
 items)
 Exceptional items (net of tax)               156,41          315,70
 Net profit                                  1925,47         1855,37
 
 2.  RESPONSIBILITY STATEMENT
 
 The Directors confirm that:
 
 a) in the preparation of the annual accounts, the applicable accounting
 standards have been followed and that no material departures have been
 made from same;
 
 b) they have selected such accounting policies and applied them
 consistently and made judgements 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 profits of the
 Company for that period;
 
 c) they have 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
 
 d) they have prepared the annual accounts on a going concern basis.
 
 3.  CORPORATE GOVERNANCE
 
 Your Company has been practising the principles of good corporate
 governance over the years and lays strong emphasis on transparency,
 accountability and integrity.
 
 A separate section on Corporate Governance and a Certificate from the
 Auditors of the Company regarding compliance of conditions of Corporate
 Governance as stipulated under Clause 49 of the Listing Agreement(s)
 with the Stock Exchange(s) form part of the Annual Report.
 
 In terms of sub-clause (v) Of Clause 49 of the Listing Agreement,
 certificate of the CEO/CFO, inter alia, confirming the correctness of
 the financial statements, adequacy of the internal control measures and
 reporting of matters to the Audit Committee in terms of the said
 Clause, is also enclosed as a part of the Report.
 
 4.  PLATINUM JUBILEE YEAR
 
 17th October, 2007 marked the beginning of your Companys 75 years of
 operations in India. Your Company has had the privilege of being an
 integral part of Indias commercial and social landscape, touching the
 lives of over 700 million Indians, every single day. Our diversified
 portfolio of powerful brands has been built over the years with
 meaningful innovations, outstanding quality and great consumer
 experiences. Many of these brands are household names and icons in the
 categories in which they operate.
 
 Over the last 75 years, your Company has always been guided by the
 belief that What is good for India is good for Hindustan Unilever,
 thereby integrating social good with business goals. This solemn belief
 will continue to guide us in everything that we do for the next 75
 years and beyond.
 
 On this occasion, your Directors wish to convey their sincere gratitude
 to all the shareholders, customers, employees, business partners,
 Governments and all other stakeholders in the Company, for their trust
 and goodwill that helped your Company attain its current stature. Their
 unstinting support and understanding have been the key to the Companys
 success over these 75 years. Your Directors look forward to this
 continued support as we strive to fulfill our vision of making a
 difference to the life of every Indian.
 
 5.  NEW CORPORATE IDENTITY OF THE COMPANY
 
 Approval from Shareholders of the Company (in the 74th Annual General
 Meeting held on 18th May, 2007) and from the Government for the change
 of name to Hindustan Unilever Limited have been obtained; your
 Companys new corporate identity represented by the new logo and name
 Hindustan Unilever Limited has come into effect. The new name
 reflects the right balance between the Indian heritage of the Company
 and the synergies of its global alignment with Unilever. The new logo
 symbolizes the Companys mission of Adding Vitality to Life.
 
 6.  BUY BACK OF EQUITY SHARES OF THE COMPANY
 
 The Board of Directors in their meeting held on 29th July, 2007
 approved buy back of Companys fully paid up equity shares of Re. 1/-
 each, at a price not exceeding Rs. 230/- per equity share, up to an
 aggregate maximum amount of Rs. 630 crores, i.e. within the limit of
 25% of the total paid-up equity share capital and free reserves of the
 Company as on 31 st December, 2006. The approval of the shareholders
 for the buy back was obtained through postal ballot, the results of
 which were declared on 14th September, 2007.
 
 The buy back was made out of free reserves and the share premium
 account of the Company through open market purchases through the Bombay
 Stock Exchange Limited and National Stock Exchange of India Limited
 using their nationwide electronic trading facilities, as per the
 provisions contained in the SEBI (Buy Back of Securities) Regulations,
 1998. The buy back offer was open from 3rd October, 2007 to 31st
 January, 2008.
 
 The cumulative number of Equity Shares bought back under the scheme is
 3,02,35,772 shares for a total consideration of Rs. 626.27 crores, at
 an average price of Rs. 207.13 per share. The paid-up capital of the
 Company after the extinguishment of shares bought back under the scheme
 stood at Rs. 217.75 crores comprising 2,17,74,63,355 equity shares of
 Re.1/- each.
 
 7.  MANAGEMENT DISCUSSION AND ANALYSIS (MD&A)
 
 In order to avoid duplication and overlap between the Directors Report
 and Management Discussion and Analysis, your Directors present a
 composite summary of performance of the various businesses and
 functions of the Company.
 
 7.1 Home and Personal Care Business (HPC)
 
 The HPC business is made up of Fabric Wash, Household Care, Personal
 Wash and Personal Care categories which include products like
 toothpaste, shampoo, skin care, deodorants and colour cosmetics. In the
 face of an intense competitive scenario, the business for the third
 consecutive year grew in double digits, and ahead of market. The
 business had to cope with the challenge of severe cost pressures on
 account of unprecedented increase in crude petroleum prices and steep
 escalations in vegetable oil costs. High crude prices impacted a range
 of input prices like chemicals, packaging and freight. Cost increases
 were successfully tackled through active cost reduction programmes
 across the entire supply chain and judicious price increases. Overall
 margin of the business was well managed and improved over 2006.
 
 Brands constitute one of the most valuable assets of your Company.
 Proper and adequate investment in brands is therefore critical. The
 business continued to invest appropriately in advertising and
 promotional activities.  To enhance the effectiveness of these
 expenditures, world class quantitative tools such as Advertising Budget
 Guidelines, Minimum Invest Levels, Market Activities Costing and
 Dynamic Resource Allocation were used and fully leveraged. Your Board
 is appreciative of Unilever for providing unlimited access to such
 outstanding Intellectual Properties for the benefit of your business.
 
 7.1.1 Soaps and Detergents
 
 Soaps and Detergents segment recorded a robust growth of 13.9%. This is
 a notable achievement, given that this segment has been facing the
 brunt of cost and competitive pressures.
 
 Fabric Wash
 
 This category continued to be vigorously contested amongst the players.
 Very good growth was achieved on the strength of an excellent brand
 portfolio; Surf, Rin, Wheel and Sunlight addressed the needs of
 consumers at different income levels. All these brands did very well
 and the Companys overall market share for the category improved.
 
 Fabric Wash witnessed severe cost pressures for the fourth consecutive
 year. Crude oil prices continued to rule high. Robust supply chain
 savings helped partly mitigate the cost impact, and selective price
 corrections were implemented. Margins were thus managed well in the
 context of cost and competitive constraints.
 
 Rin Supreme Bar was successfully migrated to Surf Excel Bar. Strong
 growth achieved during the year is a clear evidence of this success.
 Surf franchise recorded strong sales performance with the turnover
 crossing Rs. 1000 crores for the first time. The relaunch of Sunlight
 with superior wash properties enabled it to reinforce its
 competitiveness in strong markets like West Bengal and Kerala.
 
 Wheel is the largest detergent brand in India, with volume of sales
 exceeding 8 lakhs tonnes. Wheel continued to grow strongly on the
 excellent value it offers to consumers. The popular Smart Shrimati
 programme entered its second season with record viewership and
 participation which helped Wheel grow ahead of the market and gain
 market share.
 
 Household Care Products
 
 Dish wash, led by Vim, continued to grow well. The Vim Dish wash Liquid
 launched in 2006 has been extended nationally and has been one of the
 key contributors to growth. Domex offers a powerful proposition for
 floor and toilet cleaning and is being established through marketing
 initiatives and consumer communication. The brand performed well,
 albeit on a small base.
 
 Personal Wash
 
 Personal wash category performed well with brands like Lux, Lifebuoy,
 Hamam and Dove recording good growth.  The category however faced cost
 pressure due to very steep increase in vegetable oil prices (increased
 almost 50% over the previous year) partly due to diversion of oils for
 production of bio fuels. Margins were managed through a series of
 actions such as buying efficiencies, savings in supply chain and
 selective price increases.
 
 Lux grew very well during the year on the back of variants like Haute
 Pink and Crystal Shine. The brand continued to gain market share. Hamam
 grew significantly ahead of the market helped by the Ubtan variant
 launched in 2006.
 
 Lifebuoy Pink did well to sustain its growth during the year. New
 variants like Lifebuoy Care and Deo-fresh contributed to the overall
 good performance of the brand.  Dove, in the premium soap category,
 strengthened its position further, helped by good marketing actions.
 
 Overall market shares marginally declined, with gains in Lux being,
 offset in some other brands.
 
 Protecting our market share and margins in the face of continued
 increase in input costs and a significant escalation in competition
 will be the key challenge for the business in 2008.
 
 7.1.2 Personal Products
 
 Personal product categories like Hair Care, Skin Care, Toothpaste,
 Deodorants and Colour Cosmetics offer high potential for your Company.
 Per capita consumption is currently low in these categories and is
 poised to grow with increasing income levels and awareness in personal
 hygiene and grooming.
 
 Competitive activity remained high across the board, with existing
 players offering a varied choice of brands and propositions and new
 players entering the arena. Your Company responded proactively to these
 challenges.  Overall growth achieved during 2007 was satisfactory, with
 performance in the second half significantly better compared to the
 modest performance of the first half. The category was also affected by
 supply chain disruptions in third quarter, which are now resolved.
 Overall margins improved over 2006.
 
 Hair
 
 Hair Care continues to be an attractive category given the potential
 for higher consumption. Your Company strengthened its leadership
 position by growing its market share through the year by a combination
 of new product launches and re-launch of existing products on improved
 benefit platforms and affordable price-point offerings. The premium
 Dove range of shampoos and conditioners was launched during the second
 quarter of 2007. A combination of high quality advertising and active
 field marketing, helped the brand to perform well and achieve excellent
 results in the first full year.
 
 Clinic Plus continued to grow strongly and strengthened its position as
 the single largest shampoo brand. The brand was re-launched in the
 fourth quarter of 2007.  Clinic All Clear was also relaunched and a new
 mens range was introduced. Sunsilk performed well and is poised to
 gain from further innovation in 2008.
 
 Skin
 
 2007 was an exciting year for the Skin category. The Fair and Lovely
 (FAL) Multivitamin re-launch in the second quarter was very successful
 and helped the brand to regain growth in the second half of the year.
 There is significant opportunity in the top end skin category with rise
 of per capita income, urbanization and growth of modern and specialist
 channels for distributing top end products. Investment in Ponds, as
 the premium Skin Care brand, was scaled up considerably and several new
 innovations were brought to the market.  Ponds consumers now have a
 range of products based on world class technology to meet their
 anti-ageing, moisturizing and skin lightening needs. Vaseline and Lakme
 Skin performed satisfactorily. Your Directors believe given the low per
 capita consumption levels, the Skin Care category has high potential
 and through our portfolio of brands, backed up by a strong Research and
 Development programme, your Company is well placed to capitalise on
 opportunities.
 
 Toothpaste
 
 Close-up continued to do well recording growth ahead of the market for
 the second year in a row, led by a number of good activation programmes
 and launch of special edition variants. Pepsodent Kids was launched
 in the fourth quarter. This along with the new rural pack launch and a
 new variant offering in the first quarter of 2008 should support
 accelerated growth in the year ahead.  The category however was
 impacted by shortage of stocks for about three months in the year on
 account of the lock-out in Doom Dooma factory in Assam. Supplies have
 become normal with the lifting of the lock-out and the category is well
 positioned for improved performance in 2008.
 
 Colour Cosmetics and Deodorants
 
 Colour cosmetics under Lakme range achieved good growth for the year.
 The launch of 9 to 5 premium range, together with good trade and
 consumer activation helped in strong performance. The winter range of
 Lakme Free Spirit launched in the third quarter did well in the market.
 
 Deodorants market is in a nascent stage with significant upside
 potential for future. Both Axe and Rexona brands achieved good growth.
 
 Kimberly Clark Lever Pvt. Ltd. (KCLL)
 
 KCLL is a joint venture between your Company and Kimberly Clark
 Corporation, USA. The turnover of this company continues to grow
 strongly with good underlying volume growth in both infant care and
 feminine care products. Brands like Huggies and Kotex continued to gain
 strong ground in their categories.  During the year, new broducts were
 introduced at various price points aimed at developing the market.
 
 7.2 Foods
 
 The Foods Division of your Company comprises Beverages, Processed
 Foods, Ice-Creams and Modern Foods businesses. The Division recorded
 strong growth in 2007.
 
 7.2.1 Processed Foods
 
 The packaged foods business sustained the momentum of the last two
 years and delivered a strong performance in 2007.
 
 Kissan is one of the most trusted foods brands among Indian consumers.
 The re-launch of Kissan during 2006 has helped to provide strong growth
 momentum to the brand during this year, A new variant in ketchup,
 Chatakdar was launched in December quarter giving a significant
 thrust to the Kissan portfolio.
 
 The entire range of Knorr portfolio has been re-launched during the
 year with enhanced consumer benefits. Knorr soups enjoy a large share
 in the soups market. To expand the market and leverage our position,
 your Company has introduced a new range of Chinese meal-maker products;
 this has been very well received by the consumers.
 
 The staples business of Annapuma grew modestly.  Salt sales were solid
 and in an high commodity cost environment, profitability improved over
 last year. In December Quarter, Bertolli Olive Oil was added to the
 portfolio of processed foods. Bertolli Olive oil is imported and
 positioned to serve health conscious consumers.
 
 Your Company has dedicated resources to drive growth in Foods Sales to
 institutions like restaurants, hotel chains etc. Although currently
 small, the business is progressing well, and has the potential for
 scale up by leveraging the existing supply chain and product
 development capabilities of Foods Division.
 
 Step change and continuous improvements in supply chain in Foods have
 helped to deliver freshness in our products to the consumers. This will
 continue to be an important aspect of Foods business for your Company.
 
 With a strong momentum behind all brands and categories, your Company
 looks forward to 2008 with confidence and excitement to drive Processed
 Foods.
 
 7.2.2 Beverages
 
 Tea
 
 Packet tea market continued to be extremely competitive with national,
 regional and local players vying for increased share and volumes. The
 business performed well during the year, with all brands under the
 Brooke Bond franchise achieving growth. Value market shares either
 improved or were steady across brands except Brooke Bond Taaza,
 resulting in marginal erosion of our overall value share. Prices of
 garden tea remained steady during large part of the year. In 2007,
 Brooke Bond 3 Roses and Brooke Bond Red Label were re- launched
 with improved propositions. A new concept tea Taj Mahal Dessert Teas
 has been launched to add excitement and image to the premium segment of
 our tea portfolio. Lipton continued to grow strongly in out-of-home
 vending channel through acquisition of some major national and regional
 clients and by strong activation at key consumer points. Advertising
 spends were increased across all tea brands.
 
 Tea represents the largest share in the Foods portfolio.  Focus on
 brands, consumer benefits through price point packs, quality, freshness
 and appropriate promotions will continue in this category.
 
 Coffee
 
 The business had yet another excellent year led by strong growth in
 Bru Instant Coffee. Strong trade and consumer communications helped
 us to consolidate our leadership in the branded coffee market which
 includes roasted and ground coffee. Bru Cappuccino continued to attract
 new consumers. During the year, your Company has introduced ice
 cappuccino coffee which received good consumer acceptance and results.
 
 Coffee bean prices witnessed significant increases during the year
 causing pressure on profit margins for the category. Profitability was
 managed with strong efficiency improvements and judicious price
 increases. However, overall margins were lower compared to last year.
 
 Your Company will continue to focus and invest in Bru.
 
 7.2.3 Ice-creams
 
 Building on the success over the last few years, Ice- creams business
 witnessed a very good year in 2007, achieving significant sales growth.
 The business continued to improve its underlying profitability with
 scale and efficiencies. Focus on availability, affordability and
 acceptability was pursued. Unilever has excellent innovation
 capabilities in the category on a global scale, which is leveraged
 fully for the benefit of the business.
 
 During the year, Moo, a milk based ice-cream product was introduced in
 stick and brick formats, positioned on a nutrition and vitality
 platform to address the calcium requirements of children. Further, a
 range of innovations such as Cornetto Flirty Strawberry and Cometto
 Cookies and Cream and Caramel Crunch have been introduced in the
 impulse and in-home segments.
 
 7.2.4 Modern Foods
 
 Modern Foods was merged with the Company during the current year.
 Manufacturing operations are being carried out in six large towns with
 brand franchisee arrangements in many other parts of the country.
 Significant investments in product quality, safety, distribution, cost
 saving programmes and innovation have been made since the acquisition
 of the business in 2000. Unviable operations have been restructured or
 pruned, resulting in elimination of losses and achievement of positive
 operating margin. Modern, as a Foods brand, continues to command good
 equity with consumers. It is your Companys intention to examine
 various alternatives to leverage, the brand better in the: area of
 Processed Foods.
 
 During 2007, Modern business delivered growth through a combination of
 higher volumes, better product mix and price corrections where called
 for.
 
 7.3 Customer Management
 
 During the year, your Company worked on consolidating its strong
 position with customers and channels in general trade. There was a
 special focus on setting up world class distributor management system
 to derive better values from Companys sales strategies and operations.
 This focus has ensured that the Customer Management system is best
 equipped to ensure speed to deliver brand innovations and activation
 schemes to market.
 
 Your Company continued to invest in building capabilities and improving
 processes for the organised retail environment (Modern Trade) which is
 expanding rapidly across the Country. This retail format provides
 consumers with a different shopping experience. Therefore, the Company
 is committing resources to understand the changing shopping habits and
 to deliver apt solutions to grow the business across categories. Your
 Company is leading many initiatives in the areas of customer service,
 category management and merchandising to deliver best practices in this
 area.
 
 As Modern Trade in India is evolving very rapidly, your Companys
 strategy for winning in this growing retail market is to win at the
 point-of-purchase with shoppers and deliver best-in-class service to
 our Modern Trade customers. Your Company entered into a joint venture
 with Smollans Holdings of South Africa to develop and increase the
 capabilities required to meet the overall merchandising demands in
 Modern Trade. This JV will bring in world class execution excellence in
 the market and build the right capabilities to deliver the Companys
 sales and marketing strategy in Modern Trade.
 
 The emerging hybrid customer structure (comprising General Trade,
 Modern Trade and Specialised stores) requires new route to market
 approaches to service customers and distributors. The Company is
 equipping itself with capability and revitalising the distribution and
 customer service network to face the challenges of the new market
 dynamics. This will ensure that we are competitive and meet customer
 service expectations fully.
 
 Your Company is also investing heavily in IT application systems in
 Sales and Distribution area to improve speed of information, quality of
 service and productivity of human resources substantially. This is
 further covered under Section 14 of this report.
 
 7.4 Supply Chain
 
 Indian customer landscape has changed with the significant increase in
 the contribution of Modern Trade to the PMCG market and high
 expectations of General Trade from the Company. To meet the needs of
 this change, your Company has placed greater focus on customer service.
 A Customer Service Excellence team has been set up within the Supply
 Chain function to partner closely with Customer Development. This is to
 ensure the delivery of Outstanding service to customers and a high
 level of availability on shelf of your Companys products. With the
 market getting segmented, it will also build our capability to service
 the emerging needs of different types of sales channels. Thus, we shall
 win with customers and be their most preferred partners.
 
 Total Productivity Management (TPM), a worldwide tool to minimize
 wastages and increase efficiencies by reducing breakdown time, is
 firmly embedded in the work culture of the organization. This has
 enabled the performance of factories to improve continuously. Gains in
 productivity and cost efficiencies, improved responsiveness to changes
 in the market demand and high levels of quality as delivered on shelf
 are being achieved.
 
 Substantial investments have been made to increase capacities in Kalwa
 and Nasik factories to support aggressive growth plans in Foods
 category. Doom Dooma factory after a brief industrial relations problem
 has turned around and is now progressing towards being a vibrant and
 productive factory.
 
 An organizational effort to reduce costs resulted in your Company
 meeting the challenge of rising input costs with strong cost efficiency
 programmes covering the entire Supply Chain. There Were targeted
 projects in areas like buying, logistics, energy and capacity
 utilisation to generate sustained cost savings to partly mitigate the
 input cost inflation.
 
 7.5 Exports Business
 
 Export businesses had a good year, growing by 5%, despite the pressure
 of the rupee appreciation; in Dollar terms, the growth was in excess of
 15%. During the year, some of the activities were restructured to prune
 costs and improve productivity. Product portfolios were rationalized to
 exit from low value added segments.  Exports comprising Home and
 Personal. Care, Food and Beverages and Specialties are now managed
 under one structure to drive synergies and to share expertise across
 businesses. These steps will improve the underlying performance of
 exports going forward.
 
 7.5.1 Home and Personal Care (HPC) Exports
 
 The HPC Exports portfolio continued its growth momentum of many years.
 Skin, Oral and Hair categories grew handsomely aided by executing
 innovations required by customers as well as creating capacity in time
 for improved flexibility and better customer service.  Unilever
 Companies across geographies like Europe and Middle East continue to be
 our major customers, accounting for greater than 80% share of HPC
 Exports.  The Pears brand, which is marketed by your Company globally,
 grew strongly with the key markets of UK and GCC showing robust growth.
 
 Your Company consolidated its position as a major sourcing hub for
 Unilever. A state-of-the-art modern plant has been commissioned at
 Kandla, for producing top end Skin Care products, within a record time
 of 8 months.  Kandla also obtained USFDA approval and is working
 towards Canadian MOH certification. These will enable your Company to
 deliver and service high quality/high value added skin care products to
 the developed markets.  Business is making significant investment in
 Kandla for augmenting capacities for skin and oral categories and for
 modernizing the plant and processes.
 
 7.5.2 Foods and Beverages (F&B) Exports
 
 The F&B portfolio achieved a modest growth. The business was impacted
 by global crop and commodity price trends. Value added tea bags
 portfolio grew well and your Company emerged as a key supplier to
 Unilever global sourcing network for original tea besides securing
 approval to supply instant tea to Europe and US. Instant tea plant at
 Etah will implement this project. Plans to increase instant coffee
 sales to newer geographies are progressing and will be activated next
 year. Operational efficiencies and plant productivity gains have
 contributed to improving underlying margins.
 
 7.5.3 Specialty Exports
 
 During 2007, your Company exited from low value added Shrimps and
 Castor exports as a part of the restructuring exercise to improve the
 overall quality of the portfolio.  Resultant decrease in sales is
 expected to be made up over time through FMCG exports i.e. HPC and F&B.
 
 Marine Exports
 
 Adverse factors like high antidumping duty, non trade barriers, lower,
 availability of sea caught shrimps and appreciation of rupee have all
 made the shrimps business totally unviable. Consequently the shrimps
 processing units at Aroor and Kuthiathode in Cochin, Kerala were closed
 in October 2007 and the employees voluntarily separated. The Marine
 Business will, for the time being, continue with more value added
 Surimi and Crabsticks Exports.
 
 The proposal, already approved by the members (through postal ballot)
 to divest the marine portfolio will be implemented in due course.
 Management is engaged in the task of identifying a suitable buyer for
 the remaining Surimi and Crabstick business. In the meantime, steps are
 being taken to improve its performance.
 
 Castor Exports
 
 Your Company exited from exports of castor and castor derivatives in
 December quarter 2007, given that they are largely commodity oriented,
 with poor margins and without any sustainable advantage. These exports
 do not have any brands or fixed assets nor any committed long term
 customers. Phasing out of tax incentives for exports and poor sales
 realisation have rendered these businesses unsustainable even from a
 long term perspective.
 
 Rice Exports
 
 The business reported good growth with branded rice growing higher
 helped by markets in GCC, North America and Mauritius. Higher prices
 for Basmati during the year impacted the margins adversely. Some price
 increases were effected and steps were also taken to reduce fixed
 costs.
 
 7.5.4 Leather (Ponds Exports Limited)
 
 Leather Exports business is carried out by Ponds Exports, a 100%
 subsidiary of your Company. The Industry had a difficult year. Expected
 benefit of higher order flows due to the antidumping duty on Chinese
 and Vietnamese exports to EU did not fully materialise. The
 appreciating rupee also adversely affected competitiveness.
 
 The Uppers segment did well and continued to deliver savings from
 restructuring of facilities carried out earlier.  This segment
 currently services large requirements of brands like Gabor and is
 hopeful of adding new customers from Europe. The outlook for Uppers,
 therefore, appears satisfactory.
 
 The Shoes segment faced difficulties due to the anticipated orders not
 coming from key customers, who preferred to source from cheaper
 locations. The business is striving to find new international customers
 and also to service the emerging domestic retail chains. The business
 has plans to tie up with a design centre in China to provide a stream
 of new designs which will potentially increase orders both from,
 existing and new customers.
 
 Plans include implementation of an industry specific ERP system in
 March quarter of 2008, which will improve staff productivity and
 material usages. Business is working to restructure costs and improve
 execution. The shareholders have already approved the disposal of this
 business and efforts are ongoing to find a suitable buyer.
 
 7.6 Water
 
 Your Company has developed and launched Pureit, an in-home drinking
 water purification system. Pureit is the culmination of a series of
 technological breakthroughs. It purifies water as safe as boiled
 water, providing children and families with complete protection from
 all waterborne diseases like diarrhoea, jaundice, typhoid and cholera.
 It is the only purifier in the world that provides this level of safety
 without depending on cooking gas, electricity and pressurised tap
 water. It is affordable and given that 80% of all diseases are
 water-related with children being the most affected, Pureit ensures
 that safe drinking water is now within reach of the common man.
 
 Pureit was test marketed in Tamil Nadu during the last two years and
 the consumer response has been very encouraging. Pursuant to that, the
 water business built up a unique distribution system and its overall
 capability with respect to manufacturing, supply chain, and customer
 service. During 2007, the product was launched in Karnataka, Andhra
 Pradesh, Kerala, Maharashtra, West Bengal and Delhi with good response.
 The rollout of Pureit to other States is continuing and is planned to
 be completed in the coming year.
 
 Your Directors are pleased with the outcome of this innovation and look
 forward to advancing this business in the future.
 
 7.7 Hindustan Lever Network
 
 In 2007, the Network business was aligned with Home and Personal Care
 division. During the year the business focused on redefining its
 strategy in line with its vision, to empower the modern Indian woman by
 serving her with superior beauty and healthcare products for herself
 and her family, through customised and professional services.
 
 Accordingly, the network channel has been repositioned, to offer
 premium products in the two growing categories of Beauty Solutions and
 Health & Wellness, under two core brands viz. Aviance and Ayush,
 respectively. This is an important channel and the key challenge is now
 to drive the business to scale through outstanding execution.
 
 7.8 Project Shakti - Changing Lives in Rural India
 
 Hindustan Unilevers Project Shakti is a rural initiative that targets
 small villages with a population of less than 5000.  It is a unique
 win-win initiative that empowers women in rural India even as it
 benefits the business. Project Shakti impacts society in three
 favourable ways - Shakti Entrepreneur program creates livelihood
 opportunities for underprivileged rural women; Shakti Vani program
 improves quality of life by spreading health and hygiene awareness and;
 iShakti community portal empowers rural community by creating access to
 information.  Parallely, Project Shakti benefits your business by
 significantly enhancing its direct rural reach, and by enabling
 Companys brands to communicate effectively in regions not touched by
 any media.
 
 Shakti Entrepreneur program recognizes the role of micro-credit in
 alleviating poverty. However, such micro credit also requires
 appropriate investment opportunities.  Shakti creates profitable
 micro-enterprise opportunities for rural women. Supported by
 micro-credit, rural women become Shakti entrepreneurs (Shakti Ammas) as
 direct-to-home distributors in rural markets with earning good returns.
 This micro-enterprise has low risks as HUL products distributed by them
 are some of Indias most trusted brands relevant to rural consumers.
 Your Company also invests in training the entrepreneurs, helping them
 become confident and business literate to be capable of running their
 own small enterprises.  By the end of the year 2007, the network had
 grown to more than 45,000 Shakti Ammas covering 100,000 plus villages
 across 15 states in the country and reaching over 3 million homes.
 
 Poor hygiene practices are the largest cause of common diseases such as
 diarrhoea due to which over five lakh children die each year in rural
 India. Shakti Vani program attempts to educate the rural community
 about basic hygiene. Shakti women are appointed as Vanis and trained to
 communicate in social forums such as schools and village get-togethers.
 The Vani program covers areas such as sanitation, good hygiene
 practices and women empowerment. Brand messages are embedded in all of
 these communications thus creating a platform for brands to connect
 with rural consumers. Over the past three years, we have covered more
 than 50,000 villages.
 
 Project Shaktis third intervention, iShakti, provides the rural
 community with a computer based information portal on key areas such as
 agriculture, health, vocational training, legal procedures and
 education. The computers are equipped with the iShakti software, which
 is based on a unique dialogue-interactive technology developed and
 patented by Unilever. Users can surf across various content areas,
 accessing information or posting queries which are then answered by
 experts. This year the same kiosks were used to provide value added
 services in the field of education. Services like spoken English
 programs and com putter education have been received welI in the pilot
 villages.
 
 In the next three years, your Company aims to cover 500,000 villages,
 with 100,000 Shakti entrepreneurs reaching out to over 600 million
 people in rural India.
 
 7.9 Beauty and Wellness Division
 
 Your Company has formed a Beauty and Wellness division, merging Ayush
 Therapy Centre and Lakme Beauty Salon. The merger generates synergies
 in operations such as franchisee management, back end processes, ground
 support and common HR services.
 
 Market for beauty services is estimated to be at Rs.  1500 crores in
 2007, of which the organised market is at Rs. 440 crore and is growing
 strongly at 25% per annum.
 
 Lakme is the largest organised player in the beauty market.  Lakme
 Salon business grew in excess of 30% in 2007 and added 24 new salons.
 There are 105 salons spread across 30 cities, both, Company and
 franchisee owned.  Franchisees are supported with training and
 marketing for which royalties are paid to your Company.
 
 The total wellness market is estimated to be at Rs. 700 crores of which
 the authentic ayurveda market is at Rs. 200 crores, growing at 20% per
 annum. The market is fragmented and localised with regional players
 owning chains of ayurvedic centres. This market also has top end spas
 which offer premium rejuvenation services, also growing strongly.
 
 Currently, Ayush has 45 Therapy Centres in 7 cities.  Ayush has a
 technical collaboration with the renowned Arya Vaidya Pharmacy in
 Coimbatore, which help us with service development and innovations. The
 business is expected to grow well with increasing consumer awareness
 and spends on such activities.
 
 8.  RESEARCH & DEVELOPMENT AND TECHNOLOGY
 
 Your Company has a long-standing culture and history of delivering high
 consumer business value through superior technology for its brands.
 This sustained high performance has helped build a strong foundation
 for our business and also differentiated our brands strongly.  The
 technology drive in your Company is a journey that began with the great
 vision of Sir Henry Turner way back in 1950s when he initiated the
 Countrys first major Research and Development (R&D) operation in the
 Company.
 
 The strong research foundation, laid in the 1950s, on which the
 Companys research was built, its expansion over the ensuing years and
 technology woven as an inseparable part of business have all combined
 to produce a steadily accelerating stream of high-value deliveries to
 our consumers.
 
 The most recent testimony to the value of R&D is the launch of Pureit
 brand and our foray into in-home purification of water. The challenge
 of cost effectively fulfilling the social requirement of protection
 from diseases that are caused by microbial contamination in drinking
 water was executed successfully by the R&D team. This technology stands
 out in any scrutiny to rank among the best in a global context.
 Notwithstanding the excellent standards set by your Companys current
 proposition in the market, a series of exciting new inventions are in
 the pipeline for further advances in the in-home water purification
 business.
 
 Providing skin care benefits, and meeting the aspirations of millions
 in this region, was yet another notable contribution. High quality R&D
 has been pursued to innovate further in this important area of business
 and consumer interest. Significant progress has been made in
 understanding the environmental effects on skin quality and on the ways
 and means to minimize their adverse impact.
 
 Providing superior cleaning in laundry and household care has been the
 focus of research. Development of several novel consumer excitable
 propositions are in progress.
 
 A major R&D emphasis for us in recent times has been in the area of
 Naturals and Ayurveda. After exploring our countrys vast traditional
 knowledge base, the best sustainable offerings are identified and
 refined, to provide specific performance benefits to consumers in the
 areas of Home and Personal Care as well as Foods.  Ayush Therapy
 Centres and Ayush range of products, Ayurvedic Fair and Lovely and
 Nature Care tea have all been the result of these efforts.
 
 Foods R&D continues to be focused on providing food options with the
 combination of superior aroma and taste, with specific enhancements in
 health and nutritional benefits to consumers. A series of new and
 superior products are under development helped by Unilevers formidable
 global research and development in this domain.
 
 Overall, R&D continues to occupy the centre stage in the scoping and
 conduct of business for your Company.  The Company has recently
 consolidated most of its research at Bangalore, securing synergy from
 intellectual resources in different scientific disciplines and
 different category research groups of HPC and Foods. The Bangalore
 research centre has been expanded with significant additional
 world-class laboratory space. The Companys major strength continues to
 be the ability to attract, develop and retain scientists who are
 best-in- class by virtue of their pedigrees and performance.
 
 Recognition of the outstanding capabilities and performance of the
 Bangalore Discovery Laboratory, and the HPC/Foods Design and Deploy
 groups in Mumbai/ Bangalore, has led to a significant expansion in the
 content as well as the context, of the work done by these groups. India
 is now a premier global R&D domain for Unilever, performing leading
 research and development to advance its brands and categories. All this
 work is of high relevance to the Company businesses. In addition to the
 professional growth of people and creation of new products, their
 global role also facilitates further advances, through synergistic
 links to the other major Unilever laboratories.
 
 9.  ENVIRONMENT, SAFETY AND ENERGY CONSERVATION
 
 Safety and Environment Performance has been integral to the business
 performance of your Company and continue to receive focus throughout
 the year. Our vision is to be a zero-injury organization. Unilevers
 Framework safety and environmental standards, which are aligned to
 international standards of ISO 14001/OHSAS 18001, have been implemented
 across the Company. Effective implementation of these standards is
 supported by your Companys occupational safety programme based on the
 behavioral safety management techniques. This is accepted world wide as
 the best way to achieve sustained safety improvement. We continue to
 focus on behavioural safety aspects of employees and visitors along
 with continual improvements in engineering controls and safety
 management systems. All these efforts have resulted in significant
 improvement in the Companys safety record and we continue to have one
 of the lowest accident rates among Unilever Companies worldwide.
 
 In the past, many of the Companys manufacturing units have been
 recognized by various organizations for their exemplary performance on
 safety. Continuing this trend during the year, Aroor factory received
 the National Safety Council award in the medium size industry category
 while Cochin tea factory received the safety performance award in the
 medium scale non-engineering non-chemical factory category.
 
 Your Company has been focussing on improving environmental performance
 and has drawn up an ambitious plan to reduce the environmental impact
 of operations including reduction in greenhouse gases.  This has
 resulted in a lower environmental load in key parameters which are
 monitored very closely every month. Your Company received 1,50,000 CERS
 (carbon credits) for an innovative soap manufacturing process which
 consumes significantly lower energy and water.  This technology was
 developed in-house and patented by the Company. Your Company was the
 first in Unilever to receive carbon credits. The Company is also
 focusing on alternative sources of renewable fuels and has installed a
 bio-mass based boiler at Chiplun factory. Rainwater harvesting projects
 have been progressed further at the manufacturing sites, helping to
 conserve ground water. Other ongoing sustainability projects such as
 greening of barren land in and around our factories and
 vermi-composting of waste into value added fertilizer supplements are
 progressing well.
 
 10.  HUMAN RESOURCES
 
 The Human Resource (HR) agenda for the year 2007 was focused on three
 key areas - embarking on human resource transformation program,
 building organizational and individual capabilities and significantly
 enhancing people productivity to drive sustainable business growth.
 
 HR transformation program is a business change program and impacts ways
 of working in Unilever companies across the world. At the core of this
 program are world class info-tech platform 6 solutions to efficiently
 manage Human Resources transactions. The HR function has been
 simplified into three distinct streams - Business Partners, Expertise
 Teams and Corporate Services. The IT platforms would rely on self
 service mode thereby enhancing the productivity of HR Management by
 freeing up their time from managing routine and transactional workload.
 In the course of 2008, your Company expects to progressively move to
 this new way of working.
 
 The belief great people create great organizations has been at the
 core of the Companys approach to its people. Your Company made
 significant investments for training in the areas of marketing,
 excellence in customer service and building expertise and capabilities
 for organised retail trade. A step in this direction is the formation
 of a JV with Smollan Holdings of South Africa, referred in Section 7.3.
 
 Arising from the focus in driving a holistic capability program, over
 300 training programs were delivered through classrooms. 2007 also saw
 a significant amount of sharing of Unilever best practices in building
 functional expertise through Global Learning Academies. In 2007,
 Unilever introduced an e-learning platform which offers a bouquet of
 3000 courses on a self learning mode via computer and internet. These
 programs can be accessed by a Unilever employee anywhere in the world,
 at anytime.
 
 During 2007, TPM gains were further consolidated as four of our sites
 underwent audits for TPM award, of which Khamgaon unit is now the
 second in HUL to be accredited with the prestigious Special award.
 Employee Relations in the Company continued to be largely positive.
 During the year, nine productivity linked Long Term Settlements were
 finalised through bilateral negotiations benefiting over 2000
 employees.
 
 In 2007, five units underwent restructuring; extensive efforts towards
 relocation of the affected employees were undertaken. Except a few who
 have opted to separate by taking a fair and generous package, other
 employees willingly relocated to other units of the Company thereby
 ensuring job security for them. All restructuring initiatives were
 supported by liberal VRS packages and relocation facilitated through
 relocation schemes.
 
 There were three unfortunate incidents of disturbances in our otherwise
 cordial Industrial relations. At Baddi Factory (in Himachal Pradesh)
 and at the Companys detergents factory at Pondicherry, workmen
 resorted to illegal strikes which were resolved timeously and without
 major disruption with the intervention of local labour authorities.
 The third incident was at Doom Dooma factory (in Tinsukhia, Assam);
 sixteen members of the Management and Officers were subjected to
 illegal confinement by a section of workmen resulting in indiscipline
 and lack of security in the workplace. Management had no option but to
 respond to the illegal strikes of the workmen by declaring a lock out
 as per law. The lock out commenced on 15th July, 2007 and was lifted on
 3rd September, 2007 with an agreement arrived at between the Management
 and the Union before the Conciliation Officer.
 
 In line with our commitment towards affirmative action, the Special
 Apprenticeship Program was introduced through which over 75 Interns
 have got one year internship in our factories and sales network. As a
 responsible corporate, your Company has accepted to abide by the Code
 evolved by Confederation of Indian Industries (Cll) for affirmative
 actions in private sector.
 
 The year 2007 saw your Company being recognized by the Industry for its
 cutting edge and best in class talent practices. One of the key
 recognitions that came our way was in the field of leadership - Top
 Company for Leaders award conferred by Fortune and Hewitt
 Associates-1st in Asia Pacific and 4th in the Globe. This is great
 testimony to its strong leadership development programmes that have
 been an integral part of your Company over the last 75 years.
 
 Information as per Section 217 (2A) of the Companies Act, 1956, read
 with the Companies (Particulars of Employees) Rules, 1975, forms part
 of this Report.  However, as per the provisions of Section
 219(1)(b)(iv)of the Act, the report and accounts are being sent
 excluding the statement containing the particulars to be provided under
 Section 217(2A) of the Act. Any member interested in obtaining such
 particulars may inspect the same at the Registered Office of the
 Company or write to the Company Secretary for a copy thereof.
 
 The information required under Section 217(1)(e) of the Companies Act,
 1956, read with the Companies (Disclosure of Particulars in the Report
 of the Board of Directors) Rules, 1988 is appended hereto and forms
 part of this report.
 
 11. MERGERS/ ACQUISITIONS/ JOINT VENTURES AND DISPOSALS
 
 11.1 Divestment of Sangam Direct
 
 In March 2007 Sangam Direct a non-store home delivery retail
 business, operated by Unilever India Exports Limited (UIEL), a fully
 owned subsidiary of your Company was transferred to Wadhavan Foods
 Retail Pvt. Limited (WFRPL) on a slump sale basis.
 
 In 2001, the Sangam business was conceptualized and test marketed in
 Mumbai to experiment with the direct to consumer channel combining the
 twin benefits of convenience and value. The business comprised a
 dedicated call centre with trained personnel for order procurement
 using customized ERP systems to distribute through a network of
 re-distribution agents. It reported a turnover of about Rs. 26 crores
 for the calendar year 2006. The decision for a larger roll out was put
 on hold in the context of evolving/changing retail scenario in the
 Country. Although the business met many of its milestones successfully,
 your Company felt that it was not in its strategic interest to continue
 to be present in this format of organized retail and that the business
 would have a better opportunity to realise its full potential through
 the Wadhavan group.
 
 11.2 Amalgamation of Modern Foods Industries (India) Limited and Modern
 Foods and Nutrition Industries Limited with Hindustan Unilever Limited
 
 Your Company had sought approval from the shareholders and the Courts
 to merge the above Companies as of 30th September, 2006. While the
 shareholder approvals were received in 2006, your Company received
 approvals from the High Courts of Mumbai and Delhi in March Quarter
 2007. Thus the two companies have been merged with your Company w.e.f.
 1st October, 2006.
 
 11.3 Demerger of the non-operational facilities in Shamnagar, Jamnagar
 and the Janmam land into separate companies
 
 Your Company had undertaken demerger of its non- operational facilities
 in Shamnagar, Jamnagar and Nilgiris district into three independent and
 separate companies, being 100% subsidiaries of the Company known as
 Shamnagar Estates Pvt. Limited, Jamnagar Properties Pvt. Limited and
 Daverashola Estates Private Limited (Formerly known as Hindustan
 Kwality Walls Foods Private Limited).
 
 Following the approval of the shareholders, the Honble High Court at
 Bombay have also approved this and the demerger is effective from 29th
 March, 2007.
 
 11.4 Joint venture with Smollan Holdings
 
 Your Company has entered into a strategic tie-up through a Joint
 Venture (JV) with Smollan Holdings of South Africa, which aims to build
 long term capabilities and bring in-store execution focus in
 servicing the Companys Modern Trade customers. Smollan Holdings is one
 of the leading in-store execution and field services companies
 internationally. It has leading edge capabilities in-servicing Modern
 Trade focused on shelf filling, logistics for merchandising materials
 and in-store execution.
 
 The new company has been named as Hindustan Unilever Field Services
 Private Limited (HUFS) and will work exclusively on behalf of the
 Company in Modern Trade channel only. The operations will begin with
 the existing Modem Trade in-store execution team of the Company moving
 into HUFS.
 
 12.  EMPLOYEE STOCK OPTION PLAN (ESOP)
 
 Details of the shares issued under ESOP, as also the disclosures in
 compliance with clause 12 of the Securities and Exchange Board of India
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999 are set out in the Annexure to this Report.
 
 None of the management employee or Whole-time Director have received
 options exceeding 5% of the value of the options issued for the year
 ending December 2007.
 
 Likewise, no employee has been issued share options, during the year
 equal to or exceeding 1 % of the issued capital of the Company at the
 time of grant.
 
 Adoption of the Global Share Performance Scheme in place of ESOP
 
 Pursuant to the approval of the members at the Annual General Meeting
 held on 29th May, 2006, the Company adopted the 2006 HLL Performance
 Share Plan. The Plan has been registered with the Income Tax
 authorities in compliance with the relevant provisions of SEBI
 
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999. As per the terms of the Performance Share Plan,
 employees are eligible for the award of conditional rights to receive
 equity shares of the Company at the face value of Re. 1/- per share.
 These awards will vest only on the achievement of certain performance
 criteria measured over a 3 year period.  169 Employees including
 Whole-time Directors were awarded conditional rights to receive a total
 of 2,35,950 equity shares at the face value of Re. 1/- each.
 
 13.  CORPORATE RESPONSIBILITY
 
 As in the earlier years, your Company continued to involve itself in
 social welfare initiatives across the Country, both through charity and
 social investment around issues like education, health, nutrition and
 initiatives for the economic upliftment of the underprivileged.
 
 In addition to initiatives like Shakti, your Company has commenced a
 pilot in its tea business, in partnership with an NGO (Partners in
 Change) to source tea directly from small producers and thereby improve
 their livelihood.
 
 The effort of the Company in improving water availability through soil
 conservation and water harvesting methods has borne good results. In
 the Parkhed region (near Khamgaon factory), we have been successful in
 demonstrating the effectiveness of the model which is now ready for
 roll out. In Kharchond, Silvassa the area under irrigation has
 increased, thereby improving the economic condition of the villagers in
 the region.
 
 The Company believes that brands must be at the forefront of driving
 social change. The extension of the Lifebuoy Swasthya Chetna programme
 to 43000 villages with a view to improve hygiene standards and thereby
 reduce the risks of infant mortality through diarrhoea is a case in
 point.
 
 Your Company has formalized a brand imprint protocol, which will help
 every brand to assess the opportunities for social contribution and
 integrate the same in the overall brand strategy.
 
 While much has been done, the issues facing society are complex and
 expectations from stakeholders are increasing. Your Company is alive to
 the challenges and remains firm in its belief that it is -possible to
 do good while doing well and that running a successful business and
 creating positive social impact are not separate objectives.
 
 14.  INFORMATION TECHNOLOGY
 
 Your Company has continued to invest significantly in Information
 Technology and leverage it for business value.
 
 Information technology in the area of sales and customer development
 has been one of the key thrusts. All redistribution stockists operate
 on a common transaction system fully integrated with our systems. This
 capability has enabled us to collaborate with customers on a near
 on-line basis and significantly improve our field execution and
 customer service. We have also leveraged IT to collaborate with the
 emerging Modern Trade Channels to enhance efficiencies and service
 levels.
 
 Significant progress has been made in building and implementing an
 enterprise-wide SAP transaction capability. This was accompanied by
 re-engineering and simplification of business processes to improve
 agility and customer service. In 2007, SAP based transaction systems
 were successfully rolled out for all customer facing order-to-cash
 processes. A significant aspect of this program has been the
 replenishment based ordering and servicing on SAP for all our
 customers. The capability development for the balance processes
 covering Supply Chain and Central Financials is underway. By the end of
 2008, your Company will have an end-to-end SAP platform that will
 provide a robust foundation to address several emerging business needs.
 
 Your Company continues to invest in IT infrastructure to support
 business applications. We have a robust virtual private network using
 MPLS technology, supplemented by VSATs for remote locations. We have
 leveraged the excellent and growing telecom network in the country to
 provide high bandwidth terrestrial links to all our operating units.
 This has enabled us to coordinate activities effectively across
 geographically dispersed locations.
 
 Information Security and reliable disaster recovery management continue
 to be a critical focus area - especially as most business processes
 become fully IT-enabled. We carry our regular exercises to reassure
 ourselves on the same.
 
 Your Company views IT as a strategic tool to enhance business value and
 enable new ways of doing business.
 
 15.  FINANCE AND ACCOUNTS
 
 Your Company continued its focus on cash generation and delivered a
 strong operating cash flow during the year. This was driven by good
 business performance, efficiencies and cost savings across Supply Chain
 and a continued efficient collection system. Your Company managed
 investments prudently by deployment of cash surplus in a balanced
 portfolio of safe and liquid debt market instruments; returns earned
 were higher than market benchmarks. An amount of Rs. 1399 crores was
 used up during the year by way of a Special Platinum Jubilee Dividend
 (Rs. 773 crores including DDT) and Share Buy Back (Rs. 626 crores).
 Capital Expenditure during the year was at Rs. 372 crores (2006, Rs.
 151 crores) and was in the areas of capacity expansion, information
 technology, energy and other cost savings.
 
 The totaI amount of fixed deposits taken by the company as of 31st
 December, 2007 was nil. There was no outstanding towards unclaimed
 deposit payable to depositors as on 31st December, 2007.
 
 In terms of the provisions of Investor Education and Protection Fund
 (awareness and protection of investor) Rules 2001, Rs. 298 lakhs of
 unpaid/unclaimed dividends, interest on debentures and deposits were
 transferred during the year to the Investor Education and Protection
 Fund.
 
 Return on Net Worth (RONW), Return on Capital Employed (ROCE) and
 Earnings Per Share (EPS) for the last five years are given below :
 
 For the year ended 
 31st December,          2003     2004     2005     2006     2007
 
 RONW(%)                 82.8     57.2     61.1     68.1     80.1
 R0CE(%)                 60.2     45.9     68.7     67.0     79.4
 EPS of Re.1 (after
 exceptional items)      8.05     5.44     6.40     8.41     8.73
 Economic Value Added 
 (EVA)
 
 Economic Value Added for the last five years is given below:
 
 Years          EVA             Average Capital Employed
 
 2003         1,429                      3,780
 2004           887                      3,704
 2005         1,014                      2,560
 2006         1,125                      2,677
 2007         1,340                      2,785
 
 The above EVA has been computed under conservative assumptions.
 
 Segment-wise results
 
 Your Company has identified seven business segments in line with the
 Accounting Standard on Segment Reporting (AS-17). These are: (i) soaps
 and detergents, (ii) personal products, (iii) beverages, (iv) foods,
 including culinary and branded staples, (v) ice-creams, (vi) exports,
 and (vii) others, including chemicals and agri-products. The audited
 financial results of these segments are given as a part of financial
 statements.
 
 Risk and Internal Adequacy
 
 Your Company has a low debt equity ratio and in fact had a surplus cash
 and investments of Rs. 1554 crores as on end December 2007 and is well
 placed to take care of any of its borrowings. Your Company is a large
 net foreign exchange earner and the transactions are generally always
 fully covered with strict limits placed on the amount of exposure, if
 any, at any point in time, There are no materially significant exchange
 rate risks associated with the Company.
 
 Your Companys internal control systems are well commensurate with the
 nature of its business and the size and complexity of its operations.
 These are routinely tested and certified by Statutory as well as
 Internal auditors and cover all the offices, factories and key areas of
 business. All significant audit observations and follow-up actions
 thereon are reported to the Audit Committee, Audit Committee reviews
 the adequacy and effectiveness of the Companys internal control
 environment and monitors the implementation of audit recommendations
 including those relating to strengthening the Companys risk management
 policies and systems.
 
 Outlook
 
 The Indian economy has grown at a healthy 8% + level for the last three
 years and is expected to continue to grow at these levels. This growth
 is driven by a strong performance by the industry and service sectors,
 with agriculture slated to register a positive growth of 3%.  Our plans
 assume continued economic and market growth. It is believed that in
 spite of the fears of a global recession, Indian domestic demand will
 provide sufficient fillip and resilience to GDP growth. We are however
 cognizant of the inflationary pressures which have been significant for
 the last few years, largely led by global petroleum and commodity price
 increases. The Company will continue its relentless focus on cost
 management, savings and efficiencies, besides examining the need for
 appropriate price corrections if and when needed to manage margins.
 
 Cautionary Statement
 
 Statements in this Report, particularly those which relate to
 Management Discussion and Analysis, describing the Companys
 objectives, projections, estimates and expectations may constitute
 forward looking statements within the meaning of applicable laws and
 regulations. Actual results might differ materially from those either
 expressed or implied.
 
 16.  DIVIDEND
 
 The Board of Directors have recommended a final dividend of Rs. 3/- per
 equity share of the face value of Re. 1/- each for the year 2007,
 amounting to Rs. 653.24 crores . The Company has earlier during the
 year declared an interim dividend of Rs. 3/- per share which was paid
 on 22nd August, 2007 and a special Platinum Jubilee
 
 Dividend of Rs. 3/- per share which was paid on 22nd November, 2007.
 
 The final dividend, subject to approval of shareholders, will be paid
 to the shareholders whose names appear on the Register of Members
 reference to the book closure from 19th March, 2008 to 3rd April, 2008
 (inclusive of both dates).
 
 The total dividend for the year including the proposed final dividend
 is Rs. 9/- per share and amounts to Rs. 2,331.62 crores including the
 Dividend Distribution Tax.
 
 17.  SUBSIDIARY COMPANIES
 
 During the year, Brooke Bond Real Estates Private Limited and Hindustan
 Unilever Field Services Private Limited became wholly owned
 subsidiaries of your Company.
 
 A statement pursuant to Section 212 of the Companies Act, 1956 relating
 to subsidiary companies is attached to the accounts.
 
 In terms of approval granted by the Central Government under Section
 212(8) of the Companies Act, 1956, the Audited Statements of Accounts
 and the Auditors Reports thereon for the year ended 31st December,
 2007 along with the Reports of the Board of Directors of the Companys
 subsidiaries have not been annexed.  The Company will make available
 these documents upon request by any member of the Company interested in
 obtaining the same. However, as directed by the Central Government, the
 financial data of the subsidiaries have been furnished under
 subsidiary companies particulars forming part of the Annual Report.
 Further, pursuant to Accounting Standard 21 issued by the Institute of
 Chartered Accountants of India, Consolidated Financial Statements
 presented by the Company in this Annual Report includes the financial
 information of its subsidiaries.
 
 18.  BOARD OF DIRECTORS
 
 Mr. V. Narayanan, who was appointed as the Non- Executive Director of
 the Company will be retiring on the conclusion of the ensuing Annual
 General Meeting on attaining the age of 70 years in accordance with the
 policy of the Company, and therefore will not be seeking
 re-appointment. The Board places on record its deep appreciation for
 the distinguished services rendered by Mr. V. Narayanan during his
 tenure as a Director of the Company, initially as the Chairman of Audit
 Committee and now for the past 3 years, as the Chairman of
 Remuneration/Compensation Committee.
 
 To fill up the vacancy caused by the retirement of Mr. V Narayanan, the
 Company proposes to appoint Dr. R. A. Mashelkar as Non-Executive
 Independent Director of the Company in accordance with Section 269 and
 Article 111 of the Articles of Association. Notice has been received
 from a member pursuant to Section 257 of the Companies Act, 1956,
 together with necessary deposits of Rs. 500/- proposing the appointment
 of Dr. R. A. Mashelkar to the Board of Directors.
 
 In accordance with the Articles of Association of your Company, all
 other Directors of the Company will retire at the ensuing Annual
 General Meeting and being eligible offer themselves for re-appointed.
 
 Brief resumes of the Directors proposed to be appointed/ re-appointed
 as required under Clause 49 of the listing agreement are provided in
 the Notice of the Annual General Meeting forming part of the Annual
 Report.
 
 19.  MANAGEMENT COMMITTEE
 
 The day-to-day management of your Company is vested with the Management
 Committee comprising business and functional heads, who work under the
 overall superintendence and control of the Board. The Management
 Committee is headed by Mr. Douglas Baillie as the Chief Executive
 Officer.
 
 During the year, Mr. Sanjay Dube, Executive Director - Sales and
 Customer Development and a member of the Managing Committee was
 appointed Chairman, Poland and Baltics, Unilever, with effect from 1st
 June, 2007.The Board places on record its appreciation for the
 extensive contribution of Mr. Sanjay Dube to the sales and customer
 development function of the Company.
 
 Pursuant to his appointment as the Whole-time Director, Mr. Sanjiv
 Kakkar has taken charge of the Sales and Customer Management portfolio
 of the Company and has been appointed as Executive Director - Sales and
 Customer Development in place of Mr. Sanjay Dube.  Mr. Shrijeet Mishra,
 who was VP Activation - Asia AMET in Singapore, has replaced Mr. Sanjiv
 Kakkar as Executive Director-Foods and is appointed as a member of the
 Management Committee w.e.f. 1st June, 2007.
 
 Mr. Ashok Gupta and Ms. Leena Nair were appointed as Executive
 Directors, heading the Legal and HR functions respectively to form part
 of the Management Committee effective from 1st June, 2007.
 
 20.  AUDITORS
 
 M/s. Lovelock & Lewes, statutory auditors of the Company retire and
 offer themselves for re-appointment as the statutory auditor of the
 Company pursuant to Section 224 of the Companies Act, 1956.
 
 21.  APPRECIATION
 
 Your Directors wish to place on record their appreciation to employees
 at all levels for their hard work, dedication and commitment. The
 enthusiasm and unstinting efforts of the employees have enabled the
 Company to remain at the forefront of the industry despite increased
 competition from several existing and new players.
 
 Your Directors would like to acknowledge the tremendous contribution by
 the parent Company, ever in providing your Company with the very latest
 innovations and marketing inputs in almost all the categories in which
 we operate. This has enabled the Company to provide higher consumer
 satisfaction through continuous improvement in existing products and
 bring in the latest products from Unilever portfolio backed by global
 research. Unilever has also supported your Company extensively to
 follow and adopt world class business processes in all functional areas
 like Customer Development, Supply Chain Planning and Execution, Finance
 and Human Resources.
 
 22.  TRADE RELATIONS
 
 The Board place on record their appreciation for the support and
 co-operation your Company has been receiving from
 suppliers/re-distribution stockists, retailers and others associated
 with the Company as its trading partners. Your Company has always
 looked upon them as partners in its progress and has happily shared
 with them the rewards of growth. It will be the Companys endeavour to
 build and nurture strong links with trade based on mutual respect and
 co-operation consistently aligned with consumer interests.
 
 23.  ACKNOWLEDGEMENT
 
 Your Directors take this opportunity to thank all investors, clients,
 vendors, banks, regulatory and government authorities and stock
 exchanges, for their continued support. Your Directors also wish to
 place on record their appreciation of the contribution made by the
 business partners/associates at all levels.
 
                                          On behalf of the Board
 
                                                Harish Manwani
                                                   Chairman
 Mumbai
 13th February, 2008