Procter and Gamble Hygiene and Health Care

The Directors have the pleasure of presenting the 44th Annual Report
 and the Audited Accounts of the Company for the year ended June 30,
 2008.
 
 FINANCIAL RESULTS
                                               (Figures in Rs. Crores)
                                                2007/8         2006/7
 
 Sales (less excise duty)                        643.0          538.3
 
 Profit before tax                               180.6          145.5
 
 Profit after tax                                131.4           89.8
 
 Proposed Dividend plus
 tax thereon                                      76.0           76.0
 
 Transfer to General Reserve                      13.15           9.0
 
 Balance carried forward                         126.0           83.7
 
 BUSINESS PERFORMANCE
 
 The Company posted excellent business results for the year ended June
 30, 2008. The Health Care and Feminine Hygiene business sales at Rs.643
 crores (Rs.538.3 crores last year) grew by a healthy 19%.  This strong
 double-digit growth was driven by focusing on the fundamentals, namely,
 strong consumer meaningful innovation backed by distribution growth and
 strong advertising support.
 
 The VICKS range of products has shown a robust growth with VICKS
 Vaporub and VICKS Cough Drops growing by over 25%. Feminine Hygiene
 business too recorded a 21% growth in sales.  WHISPER continued to
 build trials through novel 6 direct marketing and Point of Market Entry
 programs.
 
 Profit Before Tax (PBT) at Rs. 180.6 crores is up by 24% (vs. last
 year’s Rs. 145.5 crores). However, the PBT of the last year included
 one-time pre- operational expenses on setting up of the Plant.  Hence,
 PBT, when compared with last year’s PBT excluding these exceptional
 expenses, grew by 17%.
 
 During the year under review, your Company delivered a Profit after Tax
 (PAT) of Rs.131.4 crores.  However, PAT at Rs. 131.4 crores is not
 comparable to PAT of Rs.89.8 crores last year. The PAT of last year
 includes adjustment for the impact of provisions of taxes for prior
 years and for pre-operational expenses on setting up of plants at
 Baddi. Even after including the expenses on the aforesaid exceptional
 items, PAT is up by 23% primarily reflecting savings from Baddi
 tax-free zone, where your Company has set up its health care plant.
 
 Your Company continued with the expansion of capacities for manufacture
 of Feminine Hygiene products at its Goa Plant with a capital outlay of
 Rs.10 crores during the year. Similarly, the Company made a further
 capital investment of Rs.26.7 crores in its two manufacturing sites at
 Baddi.
 
 Health Care Business
 
 Health Care sales at Rs. 312.3 crores (vs. last year’s Rs. 268.7
 crores) posted a high growth of 16% this year. This growth was
 broadbased and came on the back of strong performances by VICKS
 Vaporub, VICKS Cough Drops and VICKS Inhaler.
 
 VICKS Vaporub’s impressive growth of 25% was driven by strong equity
 advertising to help better connect with consumers. In the case of
 Vaporub, a new consumer insight based campaign ‘The Blanket of Warmth’
 was introduced to drive trial and consumption. Consumers responded
 favorably and we reached a milestone market share for the first time.
 
 The VICKS Cough Drops business made a strong comeback after last year’s
 decline, to post a record growth of 27%. The brand also saw its highest
 ever sales this year. The cold tablets category witnessed intense
 competitive activity this year, due to which sales of VICKS Action 500+
 suffered slightly. With the right blend of product innovation and
 strong marketing plans, VICKS will continue to develop propositions to
 best meet consumer needs and be the preferred brand for cough and cold
 care in India.
 
 Feminine Hygiene Business
 
 Feminine Hygiene business recorded another year of high growth with
 sales at Rs. 340 crores (vs. Rs.  282 crores last year) translating to
 a record 21% growth and value share leadership. This is the fifth year
 in succession where WHISPER has grown at such a fast pace.
 
 A number of initiatives were designed to win with the WHISPER Consumer.
 All of these initiatives viz. consumer need-based product upgrade on
 WHISPER Maxi, value correction on WHISPER Choice, clutter breaking
 window display at the retail level, engaging advertising, came together
 to take Whisper to a 50% value market share in urban India for the
 first time.
 
 WHISPER continued to build future business with an increased focus on
 consumers at the Point of Market Entry (POME) stage i.e. when girls
 start menstruation. Whisper has quadrupled the number of school girls
 contacted and sampled versus two years ago. During the year, your
 Company significantly stepped up POME marketing by increasing its reach
 by a whopping 40% versus a year ago. Not only did the number of
 adolescent girls contacted through this program increase significantly,
 but the program reached out to the lower class towns by training the
 teachers, to conduct this program at schools. Further the proposition
 being offered at these programs has been tailored to suit the
 consumers’ need. For example, your Company is offering a mid-tier brand
 WHISPER Choice as a sample in Government Schools so that they
 experience great performance at a great value.
 
 Being true to your Company’s philosophy of ‘Touching lives, improving
 life’, Directors are happy to report that, WHISPER on a pilot basis has
 entered into a Public Private Partnership (PPP) with the National Rural
 Health Mission (NRHM), Rajasthan, to provide education and sanitary
 protection to rural women of Rajasthan to help them lead healthier,
 hygienic and more productive lives.
 
 DIVIDEND
 
 Directors are pleased to recommend a dividend of Rs. 20 for each equity
 share for the financial year ended June 30, 2008.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 Shiksha: Padhega India, Badhega India
 
 According to our partner CRY, over 200 million children in India lack
 the access to education. Close to 47% of India’s habitation does not
 have a primary school. When it comes to children’s education – there is
 no dearth of rather disappointing statistics.  Program Shiksha is P&G’s
 attempt to help address these issues and work towards its vision of
 seeing every child in school. Singing the motto ‘Padhega India. Badhega
 India’, Shiksha truly believes that the secret to a brighter future of
 this country lies in quality education for our children.
 
 Over the last four years Shiksha has been able to lead 87,000 children
 on the path of education with all P&G India group Companies donating
 over Rs. 8 crores reaching out to over 300 communities. This year’s
 contribution of approx. Rs. 3 crores has been the single largest
 contribution from P&G India in any year. This year was also memorable
 for unique executions like the Shiksha Time Capsule. A school bag full
 of items from present day education system was buried deep inside the
 earth to be opened 100 years later as a reminder of our times. Actress
 Esha Deol attended the ceremony and the program got wide media
 coverage.
 
 Each year Shiksha wins the hearts of not just the lives it touches –
 but also of everyone that chooses to participate in it. Over the years
 we have had over 20 top celebrities from across the country
 volunteering their time to help generate awareness of the cause. Our
 biggest victory however remains the millions of consumers that believe
 in Shiksha and step forward to buy our brands in order to help lead
 children towards education in their own little way. It may be just
 another drop in the ocean but it is one step closer to a brighter
 India.
 
 RESPONSIBILITY STATEMENT
 
 Pursuant to the requirement under section 217(2AA) of the Companies
 Act, 1956, with respect to Directors’ Responsibilities Statement, it is
 hereby confirmed:
 
 (i) that in the preparation of the annual accounts for the financial
 year ended June 30, 2008, the applicable accounting standards had been
 followed along with proper explanation relating to material departures;
 
 (ii) that the Directors had selected such accounting policies and
 applied them consistently and made judgments and estimates that were
 reasonable and prudent so as to give a true and fair view of the state
 of affairs of the Company at the end of the financial year and of the
 profit or loss of the Company for the year under review;
 
 (iii) that the Directors had taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956, for safeguarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities.
 
 (iv) that the Directors had prepared the accounts for the financial
 year ended June 30, 2008, on a “going concern” basis.
 
 CORPORATE GOVERNANCE
 
 A separate report on Corporate Governance along with Auditors’
 Certificate on its compliance is annexed to this Report.
 
 MANAGEMENT & PERSONNEL
 
 Directors reiterate their confidence in the valuable contributions of
 employees which makes it possible for the Company to maintain the
 strong growth despite challenges of competition and for which the
 Directors wish to record their sincere appreciation.
 
 The information as per Section 217(2A) of the Companies Act, 1956
 (‘Act’), read with the Companies (Particulars of Employees) Rules 1975
 forms part of this Report. As per the provisions of Section
 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the
 shareholders of the Company excluding the statement of particulars of
 employees under Section 217(2A) of the Act. Any shareholder interested
 in obtaining a copy of the said statement may write to the Company
 Secretary at the Registered Office of the Company.
 
 DIRECTORS
 
 Mr. B. V. Patel, Chairman and Ms. Deborah Henretta, Director, retire by
 rotation and, being eligible, offer themselves for re-appointment.
 
 Directors recommend their appointment.
 
 AUDITORS
 
 The Auditors, M/s. Deloitte Haskins & Sells, Mumbai, retire and offer
 themselves for re- appointment.
 
 COST AUDITORS
 
 Company has received the approval of the Central Government for
 appointment of M/s. P.M. Nanabhoy & Company, Cost Accountants, to
 conduct the cost audit of drug formulations for the year ended June 30,
 2008. Company has re-appointed M/s. P.M.  Nanabhoy & Company as Cost
 Auditors for the year ending June 30, 2009, subject to the approval of
 the Central Government.
 
 CONSERVATION OF ENERGY ETC.  INFORMATION
 
 The information, in accordance with the provisions of Section 217(i)(e)
 of the Companies Act, 1956, read with the Companies (Disclosure of
 Particulars in the Report of Board of Directors) Rules, 1988, regarding
 conservation of energy, technology absorption and foreign exchange
 earnings and outgoings, forms part of this Report.
 
 TRADE RELATIONS
 
 Directors wish to thank our Retailers, Wholesalers, Distributors,
 Suppliers of Goods & Services, Clearing and Forwarding Agents and all
 other business associates and acknowledge their efficiency and
 continued support in promoting such healthy growth in the Company’s
 business.
 
 ACKNOWLEDGEMENT
 
 Once again our thanks are due to The Procter & Gamble Company USA and
 Procter & Gamble International Operation Pte. Limited for the
 invaluable support provided by them in terms of access to the latest
 information/knowledge in the field of Research & Development for
 products, ingredients and technologies; timely inputs to exceptional
 marketing strategies; and the goodwill of its world-renowned Trademarks
 and superior brands. These have vastly benefitted the Company.
 
                               On behalf of the Board of Directors
 
 Mumbai                                            Bharat V. Patel
 August 29, 2008                                          Chairman