Procter and Gamble Hygiene and Health Care

1.  (a) Contingent Liabilities:
 
 (i) In respect of Income Tax demands for which the Company has
 preferred appeals with appropriate authorities - Rs.25 80 42 721
 (Previous Year : Rs.35 70 68 262)
 
 The liability is mainly on account of various disallowances by the
 Income Tax authorities on which assessee has preferred an appeal.
 
 These are on account of various grounds mainly including advertisement
 and tax holiday etc.
 
 (ii) In respect of Sales Tax matters for which the Company has
 preferred appeals with appropriate authorities - Rs.10 06 72 419
 (Previous Year : Rs.11 66 36 607)
 
 The liability is in respect to matters related to: non-submission of
 “C” Forms / “F” Forms Rs.1 25 577, Incomplete accounts books Rs.1 05 62
 077, Classification issues Rs.76 07 120, Product valuation issues Rs.8
 19 74 831 and other miscellaneous issues Rs.4 02 814.
 
 (iii) In respect of Excise, Customs and Service Tax matters for which
 the Company has preferred appeals with appropriate authorities Rs.5 77
 55 812 (Previous Year : Rs.21 79 53 916).
 
 The liability is in respect to: classification matters Rs.23 50 490,
 valuation matters Rs.3 80 06 429, applicability of Service Tax on
 testing charges Rs.1 64 678 and others Rs.2 34 215.
 
 The Customs liability is towards the old advance licence matters which
 are in dispute.
 
 (iv) In respect of counter guarantees given to bank against guarantees
 given by bank : Rs.11 28 94 773 (Previous Year : Rs.7 98 45 327)
 
 At the request of the Company, its banks have issued guarantees in the
 event of the Company failing to fulfil its performance obligation under
 various commercial agreements. The Company has issued counter
 guarantees to the banks in respect of these guarantees.
 
 (v) In respect of other claims - Rs.22 22 829 (Previous Year : Rs.21 02
 588)
 
 The Company is a party to various legal proceedings in the normal
 course of business. The Company does not expect the outcome of these
 proceedings to have a material adverse effect on the Companys
 financial conditions, results of operations or cash flows.
 
 (b) Estimated amount of contracts remaining to be executed on capital
 account (net of advances) - Rs.13 18 83 576 (Previous year: Rs.3 54 18
 082)
 
 2.  The Company has classified the various benefits provided to
 employees as under: I Defined Contribution Plans
 
 a.  Provident Fund (Previous Year upto December 31, 2007 and Current
 Year from April 1, 2009)
 
 b.  Superannuation Fund
 
 c.  State Defined Contribution Plans: Employers Contribution to
 Employees State Insurance
 
 II Defined Benefit Plans
 
 a.  Gratuity Fund (Funded Scheme): Gratuity is payable to all eligible
 employees of the Company on superannuation, death, permanent
 disablement and resignation in terms of the provisions of the Payment
 of Gratuity Act, 1972 or Companys scheme whichever is more beneficial.
 Benefits would be paid at the time of separation based on the last
 drawn base salary.
 
 b.  Provident Fund (Funded Scheme). With effect from January 1, 2008
 the Company manages Provident Fund plan through Companys own Provident
 Fund Trust alongwith one other group company for its employees.  The
 plan envisages contribution by employer and employees and guarantees
 interest at the rate notified by the Provident Fund authority. The
 contribution by employer and employee together with interest are
 payable at the time of separation from service or retirement whichever
 is earlier. The benefit under this plan vests immediately on rendering
 of service.
 
 c. Post Retirement Medical Benefit (PRMB) (Non-funded Scheme): Under
 this scheme, employees get medical benefits subject to certain limits
 of amount, periods after retirement and types of benefits, depending on
 their grade at the time of retirement. Employees separated from the
 Company as part of early separation scheme are also covered under the
 scheme.
 
 3. Excise duty deducted from turnover represents amount of excise duty
 collected by the Company on sale of goods. Excise duty shown under
 Schedule 15 - “Operating and other expenses” represents difference in
 amount of excise duty on closing stock and opening stock of finished
 goods.
 
 4.  The Company has taken on lease for guesthouses, accomodation for
 employees and godowns for storage of inventories, with an option of
 renewal at the end of the lease term and escalation clause in some of
 the cases. These leases can be terminated with a prior notice as per
 terms and conditions of the respective leave agreements. Lease payments
 amounting to Rs.3 88 58 655 (Previous Year : Rs.2 17 13 631) have been
 charged to the Profit and Loss Account for the year.
 
 5.  Disclosures under the Micro, Small and Medium Enterprises
 Development Act, 2006 :
 
 (a) No payments were due and outstanding to suppliers covered under the
 Micro Small and Medium Enterprises Development Act, 2006 as at the end
 of the current and previous accounting year on account of principal and
 interest respectively.
 
 (b) No interest was paid in the current and the previous accounting
 year.
 
 (c) No interest was payable at the end of the current and previous
 accounting year other than interest under Micro, Small and Medium
 Enterprises Development Act, 2006.
 
 (d) No amount of interest was accrued and unpaid at the end of the
 current and previous accounting year.
 
 The above information and that given in Schedule 10 “Current
 Liabilities” regarding Micro, Small and Medium Enterprises has been
 determined to the extent such parties have been identified on the basis
 of information available with the Company. This has been relied upon by
 the Auditors.
 
 12. Related Party Disclosures :
 
 The Group Companies of The Procter & Gamble Company USA include, among
 others, Procter & Gamble India Holdings BV; Procter & Gamble Iron Horse
 Holding BV; Procter & Gamble Eastern Europe LLC; Procter & Gamble
 Nordic LLC; Procter & Gamble Global Holdings Limited; Procter & Gamble
 Luxembourg Global SARL; Procter & Gamble International SARL; Procter &
 Gamble India Holdings Inc.; Procter & Gamble International Operations,
 SA; Gillette Group (Europe) Holdings, BV; Procter & Gamble Canada
 Holding BV; Procter & Gamble Overseas Canada, BV.;Procter & Gamble
 Overseas India BV;Procter & Gamble Asia Holding BV.
 
 (a) Parties where control exists :
 
 The Procter and Gamble Company, USA - Ultimate Holding Company
 
 (b) Other related parties with whom transactions have taken place
 during the year :
 
 i) Fellow Subsidiaries:
 
 Procter & Gamble Home Products Ltd.
 Procter & Gamble Malaysia Sdn. Bhd.
 Procter & Gamble Manufacturing (Thailand) Ltd.
 Procter & Gamble Lanka Pvt. Ltd.
 Procter & Gamble (Changdu) Ltd.
 Procter & Gamble Asia Pte. Ltd
 Procter & Gamble Australia Pty. Ltd.
 Procter & Gamble US Business Services Company
 Procter & Gamble International Operations Pte. Ltd
 Procter & Gamble Northeast Asia Pte. Ltd.
 Procter & Gamble International Operations SA
 Gillette India Limited
 Procter & Gamble Singapore Pte. Ltd.
 Gillette Diversified Operations Private Limited
 Procter & Gamble Distributing (Philippines) Inc.
 Procter & Gamble Panda Detergent Ltd, Beijing
 Procter & Gamble Tuketim Mallari Sanayl
 Procter & Gamble (Guangzhou) Ltd.
 Procter & Gamble UK
 Procter & Gamble Product Supply (UK) Ltd.
 Procter & Gamble Technology (Beijing) Co.
 Procter & Gamble Vietnam Ltd.
 Procter & Gamble Kabushiki Kaisha
 Procter & Gamble Far East Inc.
 Procter & Gamble Korea Inc.
 Procter & Gamble S.A. Chile
 P&G (East Africa) Ltd.
 PT P&G Home Products Indonesia
 P&G Ceemea- A Division of P&G International Operations SA
 Fameccanica Machinery (Shanghai) Co.
 
 
 Procter & Gamble Korea S&D Co.  
 Procter & Gamble Philippines Inc.
 Pocter & Gamble Technical Centers Ltd.  
 Procter & Gamble Trading Thailand) Ltd.  
 Procter & Gamble Bangladesh Pvt. Ltd. 
 Procter & Gamble Manufacturing Company 
 Procter & Gamble Europe N.V.  Wella India Hair cosmetics Pvt. Ltd. 
 Procter & Gamble Eastern Europe LLC 
 Procter & Gamble (Manufacturing) Ireland Ltd.  
 Procter & Gamble distributing Company 
 Procter & Gamble Taiwan Ltd.  Rosemount LLC 
 Procter & Gamble Hair Care LLC
 
 ii) Key Managerial Personnel of the Company No. of shares held
 
 Mr. Shantanu Khosla Managing Director 67 (Previous year 67)
 
 13.  The Company operates in a single reportable business segment i.e.
 Manufacturing and Marketing of Health and Hygiene Products and one
 reportable Geographical segment i.e within India.
 
 14.  (a) International Stock Ownership Plan (Stocks of the Parent
 Company) :
 
 The Procter and Gamble Company, USA has a “International Stock
 Ownership Plan” (employee share purchase plan) whereby all permanent
 employees of the Company have been given a right to purchase shares of
 the parent company i.e. The Procter and Gamble Company, USA. Every
 employee who opts for the scheme contributes up to a specified
 percentage (upto 15%) of his base salary towards purchase of shares on
 a monthly basis. The Company contributes 50% of employees contribution
 (restricted to 2.5% of his base salary). Such contribution is charged
 to staff cost.
 
 The shares of The Procter & Gamble Company, USA are listed with
 Securities Exchange Commission of USA and are purchased on behalf of
 the employees at market price on the date of purchase. During the year
 ended June 30, 2009, 4 154.25 shares (Previous year 3 829.21 shares)
 were purchased by employees at weighted average fair value of Rs.2 845
 (Previous Year Rs.2 719) per share.
 
 The Companys contribution during the year on such purchase of shares
 amounting to Rs.32 01 481 (Previous year Rs.32 06 498) has been charged
 to the Profit and Loss Account.
 
 (b) Employees Stock Options Plan (Stocks of the Parent Company) :
 
 The Procter and Gamble Company, USA has a “Employee Stock Option Plan”
 whereby the employees covered by the plan are granted an option to
 purchase shares of the Parent Company i.e. The Procter and Gamble
 Company, USA at a fixed price (grant price) for a fixed period of time.
 The shares of The Procter & Gamble Company, USA are listed with
 Securities Exchange Commission of USA. The options exercise price equal
 to the market price of the underlying shares on the date of the grant.
 Accordingly no stock compensation expenses have been incurred by the
 Company during the year. The grants issued are vested after 3 years and
 have a 10 years life cycle.
 
 15. In terms of rules applicable to the employees whose services have
 been seconded to Procter & Gamble subsidiaries abroad, Rs.33 01 008
 (Previous year Rs.30 03 717) has been contributed to Provident
 Fund/Superannuation Trusts in respect of Mr. P. Agarwal (Director as at
 June 30, 2009).
 
 Also in terms of rules applicable to the employees retiring after the
 age of 50, Rs.9 755 (Previous year Rs.44 412) has been paid during the
 year as reimbursement of medical expenses to Mr.B.V.Patel, who was a
 Director of the Company till March 31, 2009.
 
 As these payments have been made in the capacity of a seconded
 employee/retired employee and not related to their directorship,
 provisions of Sections 198, 309, 310 and 314 of the Companies Act, 1956
 are not applicable. Legal opinion confirms this position. Thus the same
 has not been considered as managerial remuneration.
 
 16.  Common service expenses paid/recovered include payments/recoveries
 on account of finance, personnel, secretarial, administration and
 planning services rendered under common services agreements with
 Procter and Gamble Home Products Limited and Gillette India Limited.
 
 17.  Salaries, wages and bonus under Schedule 15 include Rs.3 13 90 800
 (Previous year: Rs.Nil) for expenditure on Voluntary Retirement Scheme.
 
 18.  Subsequent to the year end, The Malabar Company - a Delaware
 Corporation, an Overseas Corporate Body (OCB) has merged with Rosemount
 LLC, Delaware, a P&G group Company with effect from August 20, 2009. As
 a result the overall shareholding of The Procter and Gamble Company,
 USA (the ultimate holding company) in the Company stands increased from
 2 23 10 090 shares (68.73%) to 2 29 29 773 shares (70.64%).
 
 19.  Previous years figures have been regrouped rearranged wherever
 considered necessary.