Hindustan Unilever Ltd

To the Members,

Your Company's Directors are pleased to present the 78th Annual Report of the Company,along with Audited Accounts for the financial year ended 31st March, 2011.

1.1 Results

1.2 Category wise Turnover

* Others represent service income from operations, relevant to the respectivebusinesses.

2. DIVIDEND

Your Directors are pleased to recommend a final dividend of Rs.3.50 per equity share ofthe face value of Re.1/- for the year ended 31st March,2011. The interim dividend ofRs.3.00 per equity share was paid on 15th November, 2010.

The final dividend, subject to approval at the AGM on 28th July, 2011, will be paid tothe shareholders whose names appear in the Register of Members as on the date of bookclosure i.e. from Tuesday, 12th July, 2011 to Wednesday, 27th July, 2011 (inclusive ofboth dates).

The total dividend for the financial year including the proposed final dividend amountsto Rs. 6.50 per equity share and will absorb Rs. 1,641.80 Crores including DividendDistribution Tax of Rs. 231.34 Crores.

3. BUY-BACK OF EQUITY SHARES

The Board of Directors in their meeting held on 11th June, 2010 approved the buy-backof Company's fully paid-up equity shares of Re. 1/- each, at a price not exceeding Rs.280/- per equity share, up to an aggregate maximum amount of Rs. 630 Crores, i.e. withinthe limit of 25% of the total paid-up equity share capital and free reserves of theCompany as on 31st March, 2010. The approval of the shareholders for the buy-back wasobtained through postal ballot, the results of which were declared on 26th July, 2010.

The buy-back was made out of free reserves and the share premium account of the Companythrough open market purchases through the Bombay Stock Exchange Limited and National StockExchange of India Limited using their nationwide electronic trading facilities, as per theprovisions contained in the SEBI (Buy Back of Securities) Regulations, 1998. The buy-backoffer was open from 23rd August, 2010 to 28th March, 2011.

The cumulative number of Equity Shares bought back under the scheme is 2,28,83,204equity shares for a total consideration of Rs. 625.30 Crores, at an average price of Rs.273.26 per share. The paid-up capital of the Company after the extinguishment of sharesbought back under the scheme stood at Rs. 215.94 Crores comprising of 2,15,94,36,598equity shares of Re.1/- each.

4. RESPONSIBILITY STATEMENT

The Directors confirm that:

* in the preparation of the annual accounts, the applicable accounting standards havebeen followed and that no material departures have been made from the same;

* they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent, so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofits of the Company for that period;

* they have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the

provisions of the Companies Act, 1956, for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; and

* they have prepared the annual accounts on a going concern basis.

5. MANAGEMENT DISCUSSION AND ANALYSIS

In order to avoid duplication between the Directors' Report and Management Discussionand Analysis, we present below a composite summary of performance of the variousbusinesses and functions of the Company.

5.1 Economy and Markets

The world economy continues to face challenges on the road to sustained recovery,including the recent developments in the Middle East. In the context of the slow recoveryin the developed markets, the focus of the world is on the developing and emergingeconomies, including India. According to the Economic Survey of the Government of India(2010-11), the Indian economy has recovered considerably and rapidly from the slowdowncaused by the Global Financial Crisis in 2007-09. India was not as affected as some of thematured economies, owing to a robust regulatory system and a domestic demand driveneconomy. After a dip in 2008-09 with a lower GDP growth rate of 6.7%, the economyregistered a V-shaped recovery, witnessing 8% growth (Quick Estimates) in 2009-10 and then8.6% growth (Advanced Estimates) in 2010-11.

The economy experienced a more balanced and positive growth in 2010-11, aided by asolid recovery in agriculture and continued good performance of industry and services.There has, however, been a deceleration in industrial growth in the second half of theyear and a further deceleration in the last quarter of 2010-11. This sluggishness is amatter of concern.

The inflation rate measured in terms of year-on-year change in the WPI is 8.31% forFebruary 2011, compared to 8.23% in January 2011. This increase is attributed to a surgein the prices of non-food items, despite a moderation in the inflation of primaryarticles, particularly due to a decline in prices of food articles and minerals. In fact,inflation for non-food articles increased from 23.9% in January 2011 to 29.8% in February2011.

The price of crude oil, which was hovering below USD 80 per barrel till September 2010,skyrocketed to over USD 100 per barrel in March 2011, and is expected to remain volatile.

The FMCG markets in India grew in low double digits during the last quarter of 2010-11.As the price increases take effect, mix of growth is being shifted from volume drivengrowth to balanced growth, driven by both price and volume. The competitive environmentremains intense in the FMCG market. Input cost inflation continues to be high andvolatile, despite recent corrections in crude and palm oil.

Your Company's performance for the year 2010-11 has to be viewed in the context of theaforesaid economic and market environment.

Performance of Businesses and Categories

Some highlights are given below in respect of each of the business categories of theCompany.

5.2 Home & Personal Care Business (HPC)

The HPC business consists of Fabric Wash, Household Care, Personal Wash and PersonalCare which includes categories like toothpaste, shampoo, skin care, deodorants and colourcosmetics. During the year, the HPC business saw double digit volume growth and a valuegrowth of 9.8%.

The opportunity for growth in India continues to be immense across all HPC categoriesand your Company believes that market development is critical for sustained growth. Theyear was a landmark in terms of market development. In addition, there was acceleration ininnovation, with almost 35% of turnover coming through innovations. As a result, growthwas broad-based across core categories as well as new categories. This growth wasdelivered in the face of significantly enhanced competitive intensity, with marketing andtrade investments also being maintained at competitive levels throughout the year.

Rural markets present a tremendous growth opportunity considering relatively lowerpenetration in these markets. Your Company rolled out one of the most ambitiouscross-category rural marketing efforts through 'Khushiyon Ki Doli' programme which touchedalmost 25 million consumers.

Volatile and rapidly changing commodity markets posed a major challenge in the latterhalf of 2010, where both vegetable oil and crude oil prices increased significantly. Theimpact of cost inflation was felt in inputs such as Palm oil, laundry chemicals, packagingand freight cost. The business was managed dynamically with increased frequency of costand pricing review, and aggressive cost saving programmes, which helped to minimise priceimpact.

Your Directors believe that sustained investments behind brands by way of technology,innovations, consumer communication and continued focus on market development will benefitthe business in creating long-term value.

5.2.1 Soaps and Detergents

While there was strong volume growth in the Soaps and Detergents category, value grewby 6.1% due to price corrections taken in laundry business in the early part of 2010.

Fabric wash recorded its highest volume growth on the back of brand innovations (Wheel)and a significant strengthening of Rin. The category witnessed significant competitiveaction and your Company has responded strongly to defend and grow its market share in thiscritical portfolio. Particularly satisfying was the acceleration of Rin growth, a brandthat plays in the crucial mid-market segment of the detergents market, which is poised togrow strongly as India becomes more affluent. During the year, the Company rolled outComfort, the fabric conditioner, following its successful test market in the South.

Margins were under pressure due to rising input cost prices, and price increases wereinitiated in the latter part of the financial year. The Company's cost-effectiveprogrammes delivered exceptionally well to neutralise part of the impact.

Your Company will continue to focus on laundry driving innovation and relevantcommunication, even as costs are controlled across the value chain.

Household products recorded double digit volume growth during the period. Vim barcontinues to perform well. Domex continued on its journey to provide better and germ freetoilets to the Indian consumer. During the year, the Company launched OK bar in parts ofIndia, where the penetration of dish wash bars is low.

Personal Wash category recorded good growth during the year. This was driven throughinnovations across the portfolio (Re-launch of Lifebuoy and Hamam, launch of Lux variants)backed by strong micro marketing and market development. Through strong use of market mixmodeling and focus on cost-effectiveness, the Company was able to grow the category,despite stiff competition and volatile commodity costs. As a result, growth wasbroad-based across every segment of the category. Vegetable oil prices, which had droppedto extremely low levels in 2009, began rising in 2010 and increased steeply towards theend of 2010. During the period of falling commodity prices, your Company had passed on thelower vegetable oil prices as extra fill in the form of consumer promotion and highergrammage packs. However, towards the end of 2010, with the increase in material costs,these were discontinued, in line with the approach followed by rest of the industry.

5.2.2 Personal Products

Personal Products categories comprise Hair Care, Skin Care, Oral Care, Deodorants andColour cosmetics. The Personal Products category grew by 15.7% during the year.

Hair Care continues to be an attractive category with high volume growth, driventhrough increased consumption and value growth through premiumisation. Your Company had astrong year, strengthening its position by gaining share across shampoos and conditioners.Dove led the premiumisation agenda with a comprehensive re-stage in the second half of theyear. The brand continues to be the fastest growing brand in the category, thus gainingrapid market share. Clinic Plus strengthened its leadership position and continued to bethe largest Shampoo brand in the category. The re-positioning of the brand on the platformof being ideal for strong and long hair platform has been received well for the brand.Sunsilk continued to grow with superior product quality and packaging backed by thedistinctive proposition of 'co-created by experts'. Your Company continued its focus onmarket development by investing strongly behind the nascent but emerging high potentialhair conditioners segment, thus driving aggressive growth.

The Skin Care category holds very strong potential as the country becomes moreaffluent. In this context, the category delivered strong double digit growth, led by avery powerful innovation programme and strong market development efforts. Fair &Lovely continued to grow well on the back of a re-launch of the brand. Pond's White Beautycontinued its strong growth momentum in the year, growing well ahead of the market.Vaseline successfully entered many new Skin Care categories during the year including Skincreams, Male grooming, Premium jelly and Lip formats, apart from strengthening its corebody lotions portfolio. Pond's Talcum Powder was re-launched in February 2011 and receivedgood response.

Your Company embarked on a plan to accelerate Oral Care business growth and the plannedactions were put into market during the financial year. Pepsodent Germ Kill credentialswere further strengthened with the launch of a focused and engaging 'Pappu & Pappa'campaign. Closeup continued to build its freshness credentials and grew in line with themarket. The toothbrush market has witnessed intense competition during the year and yourCompany has put in place robust actions to compete in this fast growing market.

With key launches of 2010 continuing to perform as per business plans, the ColourCosmetics category witnessed stable growth during the year. Some of the key forays havebeen the re-launch of Elle 18 in the youth space and entry of Lakme into the largest skinsub segment - 'Fairness' with the launch of Perfect Radiance Skin Lightening Compact andFoundation, combining skin benefit with fairness.

Deodorants business continued to witness growth. During the year, your Companystrengthened its position in anti-perspirants category with the launch of Sure brand bothin roll-on and aerosol spray format. Your Company continued to drive new innovationsacross Dove and Axe led by 'Go Fresh' range of Dove and launch of Axe Musicstar Campaign.Your Company has leveraged digital media to build over a million fans for Axe on Facebookand has leveraged gaming and viral campaigns to drive high levels of interaction betweenthe target audience and the brand. The category has significant potential for growth infuture. Your Company is now poised to capitalise in this emerging category with itsportfolio of Axe, Dove and Sure.

Kimberly Clark Lever Private Limited (KCLL)

KCLL is a Joint Venture between your Company and Kimberly-Clark Corporation, USA. TheInfant Care business continued to grow strongly and registered high double-digit growth inthe year. New packs were introduced across the portfolio as the business focused ondriving affordability and building acceptability in this category. On Feminine Care, thejoint venture is focused on building an innovation pipeline, aligned to its long-termstrategic ambition for this category.

5.3 Foods

The Foods portfolio of your Company comprises Beverages (Tea and Coffee), ProcessedFoods (Kissan, Knorr and Annapurna range of products), Ice Creams and Bakery products(Modern Foods).

The Foods business has delivered strong double-digit growth across the portfolio duringthe year. Consumer and Customer needs have been translated into many relevant andsuccessful innovations in beverages, ice creams and packaged foods segments. Your Companyhas continued its focus on micro-marketing initiatives in core categories to increaseconsumption and penetration. Packaged food represents a significant consumer and businessopportunity, given changing demographic profiles, rapid urbanisation, dramatic shifts inincome pyramid and need for products with health benefits. This segment is being developedthrough products, which combine taste and nutrition and also provide cooking convenience.

Your Company has proactively managed multiple challenges, which include:

* High competitive intensity from MNC, National as well as local players in manycategories; your Company has responded through increased brand investments andvalue-enhancing innovations.

* Significant food inflation across the spectrum leading to market slowdown anddowntrading; your Company has countered this challenge through consumer-centric valuepacks, judicious price increases and aggressive cost saving programmes.

5.3.1 Processed Foods

Kissan continues to remain one of the most trusted brands among Indian consumers. Allthe categories under Kissan registered strong growths. By the end of the year, Kissanachieved volume leadership in the Ketchups category by participating in multiple benefitand price segments.

Kissan also forayed into new market segments in three big categories and the initialresponse from the consumers is encouraging. Your Company has launched Kissan Fruit &Soya, a delicious blend of fruit juice and soya milk, which enjoys a differentiatedproposition in this market. The brand has also entered into the Indian (non-sweet) spreadsmarket with the launch of Kissan Creamy Spread across key towns. Kissan Nutrismart hasalso been launched in Tamil Nadu and Andhra Pradesh as a test market.

Your Company maintained its value leadership in the soups segment through Knorr. Thesegment has registered impressive growth in the year, backed by an increase in volumeshare across all the regions. Knorr soups continued its objective of positioning itself asa healthy evening snack to drive soup drinking habit and thus lead market growth andcategory expansion.

Knorr Soupy Noodles has been the highlight of the Packaged Foods business in 2010-11.The All India launch of this mix was completed in 2010 and the product has received goodresponse from consumers across all the markets. Your Company will continue to invest inthis category and focus on consumer relevant innovations in future.

The staples business, through Annapurna, has registered a modest performance during theyear. Your Company will continue to focus on key geographies and optimising costs tofurther enhance the profitability of the portfolio.

Your Company continued its focus on institutional sales of the foods products torestaurants, hotel chains etc. Although nascent, the business is progressing well byleveraging the supply chain and product development capabilities of the Foods Division.

Bakery (Modern Foods)

Bakery (bread and cakes) sustained its growth momentum and continued to deliver strongunderlying profits from enhanced scale and better operational efficiencies. The newproducts (Chapati and Cream Rolls), launched during the year, were well received in themarket place.

5.3.2 Beverages

The market witnessed downtrading in Tea segment and the overall growth in thediscounted segment of the market is becoming larger. Notwithstanding such a competitivecontext, the business has witnessed strong turnover growth, while maintaining satisfactoryvolumes. Commodity inflation continues unabated in the Tea segment, driven by both localas well as international factors. During the year, Coffee prices have also increasedsignificantly (at 14 year high) and are rising further. Spiraling costs continued to exertpressure on margins, which were mitigated through pricing and supply chain cost savings.

In Tea, given the faster growth of the discount segment within the market, a strongparticipation at the bottom end of the pyramid was undertaken through Brooke BondSehatmand and Ruby. 3 Roses continued to perform exceptionally well and has demonstratedsignificant growth, strengthening its competitiveness in southern part of India. Red Labelgrew in volumes very strongly throughout the year. Both 3 Roses and Red Label werere-launched with a new proposition of health benefits from flavonoid in tea.

Taj Mahal grew well in the premium end and also registered good growth in the tea bagssegments. The consumption of tea bags was encouraged through media campaigns and a largesampling initiative carried out with leading airlines. Taaza sales picked up after a slowstart with robust growth in the latter part of the year.

Despite commodity price pressure, your Company was able to register strong volumegrowth in Coffee. In Instant Coffee segment, Bru had a new thematic campaign on 'Discoversomething new' over conversations and coffee. This was backed by strong media campaignsand trade activation programmes. Bru Lite was introduced in few markets and the initialresponse has been encouraging. In conventional coffee, your Company has achieved goodvolume growth.

The ensuing year is expected to be very challenging for coffee business given thecommodity price pressures. Your Company will take pro-active steps towards ensuringsustained growth.

The out-of-home business continues to have high growth potential and has made very goodprogress during the year. Investments are being stepped up in the business and the Companywill be expanding the business into new geographies.

5.3.3 Ice Creams

The Kwality Walls business has had another good year, continuing its consistent growthtrajectory. The three key platforms - Cornetto, Paddle Pop and Selection Take Home Tubs,which are popular with youth, children and families respectively - continued to drivegrowth for the catagory. Cornetto Double Chocolate, the mid price Cornetto launched thisyear, has been extremely well received by consumers. Cornetto also launched Cornetto LuvReels, India's first internet and mobile based, crowd sourced movie talent hunt. Thecampaign has been voted amongst India's most successful Internet campaigns across allcategories, winning three awards at the prestigious Goa Advertising Festival. In PaddlePop, where it is critical to have a portfolio across all kid-friendly price points, yourCompany had four very successful launches - Fun Mango, Strawberry Jelly Kick, RainbowPunch and Twister Ninja. Paddle Pop Gaming League, has become amongst the largest gamingleagues for children in the world. Your Company also launched two popular flavours in thepremium Selection range - Black Forest and Dutch Choco Nut - continuing to strengthen thetheme of the family weekend moment as an occasion for ice cream consumption.

Your Company is also expanding the Swirl's parlours, a well loved concept of creatingand enjoying personalised ice cream. There were over 130 functional Swirl's parlours atthe end of the year.

During the year, input costs have put a significant pressure on profitability. Therobust and well rounded portfolio across Impulse and take-home packs, strong innovationsand well known brands have helped the business to take prudent price increases and manageits profitability in an inflationary environment. Availability and visibility being themost important drivers of growth for the category, investments continue to be made toenhance availability through more freezer deployment, and using information technology andanalytics to drive better asset utilisation.

5.4 Exports Business

The exports business continued to focus on growth of profitable turnover during theyear. Despite a sluggish recovery in most overseas markets, turnover grew by 9.3%. Arobust value analysis and cost savings programme enabled improve margins, thereby drivingprofit growth ahead of turnover growth. The business maintained high levels of customerservice and product quality, and rationalised working capital levels, thereby improvingcash generation.

The Home & Personal Care segment witnessed an outstanding year driven primarily bySkin Care and Hair Care categories. The Pears business continued its excellent growthafter its relaunch last year while sales of Lakme nearly doubled, albeit on a small base.

The Foods & Beverages segment witnessed an excellent year. The flagship Tea bagscategory grew with strong sales to Australia and Japan. Instant Tea also recorded asignificant growth, riding on higher sales to Europe. Sales of Instant Coffee were steady,with tough market conditions in Russia. Profits for the overall segment grewsignificantly, with export incentives being extended to conventional Tea, Instant Tea andrecently Instant Coffee.

The Marine exports segment reported a positive contribution in a year, which saw bothsignificant appreciation of the Rupee against the Euro and increasing raw material prices.The Rice business also reported profits, despite lower turnover caused by sluggish demandin Gulf markets.

To fully exploit the opportunity in export markets and to provide necessary focus,flexibility and speed to the business, the Board of Directors has decided to demerge FMCGexports business of the Company into its wholly owned subsidiary Unilever India ExportsLimited (UIEL). Your Company will continue to provide the necessary support to UIEL todrive the growth of exports business. The Demerger of the FMCG Exports Business shall besubject to necessary approvals of Shareholders, Statutory Authorities and Hon'ble HighCourt.

Leather (Pond's Exports Limited)

The Leather business performed well to maintain operating profitability, despite severepressures on margins, consequent to a strong appreciation of the Rupee against the Eurofor most part of the year. Turnover grew, riding on excellent customer service andflexibility to service small orders.

5.5 Water

Pureit is a unique in-home drinking water purification system that offers protection tochildren and families from waterborne diseases. Pureit has a special Germ Kill Kit thatremoves harmful viruses, bacteria and parasites to give drinking water that is 'as safe asboiled water'. Most notably, Pureit complies with 'virus kill' and 'bacteria kill'criteria of the Environmental Protection Agency (EPA), the regulatory agency in the USA.Leading national and international medical, scientific and public health institutions havetested Pureit's performance. Pureit provides this high level of protection without theneed for boiling and without electricity or continuous tap water supply. It also has an'End-of-life' indicator and an 'Auto shut-off' system, which further ensures water safetyfor consumers.

In line with Pureit's mission of protecting lives from waterborne diseases, the productwas launched nationally in 2008 at a very affordable price. In January 2010, your Companyachieved another milestone in its mission of making safe drinking water available to everyIndian with the launch of Pureit Compact at a price of just Rs. 1,000. This has nowenabled your Company to help safeguard lives in the segment of society with lowerpurchasing power, where the incidence of waterborne diseases is the highest. During thecourse of the year, Pureit highlighted its safe water credentials with a communicationcampaign highlighting the fact that Pureit is the only purifier that can kill one croreviruses in a litre of water, without needing electricity, pressurised water, and with anauto shut-off safety system. Also during the year, your Company launched a new model,Pureit Marvella. This is being marketed as India's first fully automatic purifier, asconsumers do not need to start, stop, fill or wait to pour water out of it. Theseinitiatives have led to sustained turnover growth with improved margins, in line withbusiness plans.

Pureit has already protected more than four million homes across India in just threeyears of its national launch. During this period, Pureit has received multiple awards,which reflect the high regard in which the brand is held by the scientific community andby the public at large. Key amongst these are the prestigious British Government Award forConsumer Product Innovation, the Golden Peacock Award and the Product of the Year Award.

5.6 Hindustan Unilever Network

Your Company has accelerated the process of re-engineering the business from a massmarket to a Premium Personal Care and Health Care Channel. In line with this strategy, thebusiness has started inducting right profile business partners (who are capable of buyingand selling premium products) into the business and launched new innovations which serveto differentiate the business in the premium Beauty & Wellness space, such as AviancePerfect Radiance Beauty Capsules and Serums. This re-engineering should help in drivingthe top-line in a profitable manner, going forward.

5.7 Beauty & Wellness

Lakme Lever Private Limited (LLPL), a wholly owned subsidiary of HUL, expanded thenetwork of Lakme Beauty Salons during the year with the opening of 11 Company owned andmanaged salons, along with 18 franchisee salons. The expansion was focused on metros aswell as tier I cities which offer a substantial potential for expert beauty services.Based on lessons learnt during the year, the business is now poised for an acceleratedexpansion in the coming year. In order to ensure adequate supply of quality talent ofhairdressers and beauticians to meet its growth ambition, LLPL has entered into anagreement with Pivot Point, USA, a world leader in beauty education, to set up trainingacademies.

6. CUSTOMER MANAGEMENT

The year 2010-11 has been a landmark in terms of customer management initiatives.During the year, your Company restructured the front-end selling system. The processcommenced at the beginning of 2010 and has been fully executed through a number ofcarefully crafted steps by the end of the year. This helped streamline the footprint forthe entire portfolio ensuring that all categories (excluding Colour Cosmetics) can be soldin every store that is on coverage and has led to a sharp increase in distribution for ourbrands, especially in Food and in niche categories.

Building further on customer initiatives, your Company launched CustomerDifferentiation Tool that measures a customer's performance on sales and executionparameters aligned to business objectives and reward them accordingly. This also providesa framework for the Company's personnel to review each customer's performance in atransparent manner, discuss future plans and guide them to perform better in the marketplace.The CEO personally felicitated the top 100 customers at a special function.

The next-generation technology deployed last year has improved execution significantlyand translated into business benefits in urban markets. This capability has, therefore,been extended to rural markets as well. This technology is now supported with improvedback-end analytical models for sharp recommendations and intelligent, scientific andoutlet-specific execution that help improve on-shelf availability and hence 'throughputs'per outlet. The on-shelf availability was supported with an extensive merchandising andvisibility programme. The programme has tripled the scale of operations, and issignificantly more reliable, well-managed and measurable, thus improving the in-storepresence of your Company's products.

Apart from investing in infrastructure and setting up cutting-edge processes, yourCompany had also embarked on an enormous coverage expansion project, in rural and urbanbusinesses. With the help of geo-spatial analysis, potential markets were identified. Thecoverage expansion was well-supported by the required infrastructure and the projectexceeded its ambition. The urban coverage was increased by 20%, while the rural coveragewas tripled. Today, your Company has more than 1.5 million outlets under direct coverage,doubling the coverage in the last two years.

6.1 Project Shakti

During the year, your Company took the Shakti initiative to the next level by extendingthe relationship with Shakti Amma to her family, through project Shaktimaan. ProjectShaktimaan enrols the un-employed/under-employed male member of the family to sell yourCompany's products into the satellite villages of Shakti. The initiative serves twoconvergent purposes - enhances the livelihood opportunity of the Shakti family andimproves the quality and depth of your Company's distribution network. This initiativestrengthens the philosophy behind Shakti, which comprise:

* Leading market development

* Establish a suitable livelihood for the underprivileged

* Creating a self-sustaining business model

* Accessing markets beyond the reach of traditional distribution models

By the end of 2010, there were more than 23,000 Shaktimaan, and the Shakti programmehad spread to an astounding 5,00,000 outlets, adding another dimension to your Company'sdistribution and contributing to tripling the rural footprint.

7. SUPPLY CHAIN

Your Company has made further progress in creating value by delivering world-classservice to our customers and superior quality products to our consumers in a responsive,cost competitive and sustainable manner. Supply Chain service levels as measured by CCFOT(Customer Case Fill on Time) were maintained at the high levels ensuring productavailability. 'Speed' is the new currency and was strongly driven through SAP based ITsolutions for logistics, planning and distribution. To improve customer centricity, theteam is driving cost propositions for every category and product and has re-designed Salesand Operation Planning Process (S&OP) to drive a cross-functional and collaborativemodel aimed at delivering continuous improvement.

The factories have enhanced TPM (Total Productivity Management) capabilities and shownpositive momentum and continuous improvement on the journey of manufacturing excellence.'Throughput' from existing assets has been improved through the use of TPM techniques,thus reducing costs.Your Company has developed long-term manufacturing strategy and acapacity augmentation plan aligned to the business growth. All capacity creation projectswere completed on schedule with flawless ramp-up and smooth delivery during the year. Thesuccess of 'LeverCare' has enabled a world-class consumer connect system to help consumersreach the Company, and equally to help our brands reach out to consumers.

During the year, the Supply Chain team worked on a strong Cost Effectiveness Programmeto deliver savings throughout the supply chain, by various means including identificationof further opportunities for waste elimination. This has facilitated the business toachieve a significant cost reduction (around 6% of supply chain costs), the highest everin the recent past.

The energy conservation measures across all manufacturing sites have helped to reducespecific energy consumption. In addition, sustainable alternative routes of Bio-fuels arebeing introduced. This has also helped reduce energy costs and carbon emissions. YourCompany is committed to a new strategic approach that incorporates sustainability as anintegral part of the business and a long-term plan has been drawn up for the purpose. Thebuying function of the Company has focused on reducing lead time, procurement cost anddeveloping reliability in the supply of RM and PM by fully leveraging benefits of scaleand synergy through Unilever's global buying network.

8. RESEARCH, DEVELOPMENT AND INNOVATIONS

The R&D Centre started in Mumbai in 1958 by your Company, continues to produce astream of high value technologies which differentiate our brands with strong consumerpropositions. The R&D Centre has now undergone significant expansion with more than700 highly qualified scientists and technologists working at the R&D laboratories inMumbai and Bangalore. The R&D programme in India is strongly aligned with Unilever'sglobal R&D priorities and geared towards delivering bigger, better and fasterinnovations with a robust pipeline of radically new technologies with innovative consumerpropositions in Health and Hygiene, Laundry, Skin Care, Water Purification, Tea, Ice Creamand Naturals segments.

On the back of strong R&D initiatives, a number of new products were launchedsuccessfully in the market in 2010-11. In Skin Care, Vaseline Men range with moisturisingand skin lightening benefits was launched with distinctive packaging and formats. Pond'sGold Radiance range and Lakme Perfect Radiance range of skin care products were introducedduring the year. Dove and Sunsilk hair conditioners were launched to meet the needs ofdifferent segments of the market for hair care. Lifebuoy soap and Close-Up toothpaste werere-launched with new, distinctive benefits. During the year, Rin powder was re-launchedwith shading dye technology. Surf and Wheel range of detergents were re-launched withimproved product propositions. New designs of Pureit were developed by the R&D tocater to needs of consumers at different segments. Variants of Pureit were launched forthe mass market and premium consumers.

Foods R&D made significant contribution in 2010 to the Company's Foods &Beverages portfolio by delivering several innovations to the market. Among them was KnorrSoupy Noodles, which is not just a unique product with a differentiated taste, but alsomeets the healthy choice guidelines laid down by Choices International. The Foods R&Dteam continues to support the Company's vitality mission by providing a scientific andtechnological framework, leading to the launch of healthy beverages, such as Brooke BondSehatmand - a fortified tea for consumers at the bottom of the pyramid with 50% of RDA ofB Vitamins being delivered through 3 cups of tea. In addition, the R&D team hasprovided the science behind the re-launch of Brooke Bond Red Label, which links thegoodness of flavanoids to tea, for the first time in a branded tea. In the conventionalcoffee segment, Bru Select - a premium R&G coffee with 85% coffee and 15% chicory waslaunched with technology to deliver premium taste and packaging. In ice cream segmentseveral new and innovative products were launched like the Cornetto Choco Disc and theBadami using a combination of innovative formulations and processing. R&D has furthercontributed to the sustainability agenda of the Company by enabling significant reductionin packaging material consumption through several material efficiency initiatives.

The continuous stream of innovative and technically advanced products launched in themarket was a result of significant R&D investments and the scientific talent that theCompany can attract and retain. With its strong scientific expertise and potential todeliver high-value technologies, India continues to occupy a premier position in UnileverR&D. With the strong support from R&D as well as the brand developmentcapabilities, your Company is well placed to meet the challenges arising from theincreased competition intensity and the opportunities to drive faster growth. Your Companyis working towards further strengthening the in-house scientific capabilities of theIndian R&D function and building new expertise bases to retain the competitive edge inthe market place.

The details of expenditure on Scientific Research and Development at the Company'sin-house R&D facilities eligible for a weighted deduction under Section 35(2AB) of theIncome Tax Act, 1961 for the year ended 31st March, 2011 are as under:

9. ENVIRONMENT, SAFETY, HEALTH AND ENERGY CONSERVATION

Your Company continued to focus on the vision of being an 'Injury Free' and 'ZeroEnvironment Incident' organisation. The behavioural safety programme has now been in placefor more than six years and continues to deliver better safety statistics and leadingindicators are becoming more rooted than ever before. During the year, the Company definedthree key thrust areas for safety, namely; road safety, hand-in-machine and equipmentengineering controls. These thrust areas have strengthened all safety systems andprocesses across the organisation. Safety monitoring and compliance audits were conductedin distribution centres and co-packers to ensure systems implementation and to raise thebenchmarks. With all these initiatives, the Total Recordable Frequency Rate (TRFR) of yourCompany, in 2010, was significantly reduced by 27% from 2009 baseline.

Your Company has adopted a progressive and pro-active stance on environmental issueslike education of Green House Gases (GHG), Water conservation and Waste reduction acrossthe value chain. Your Company believes that the impact of the business goes beyond thefactory gate and extends to sourcing of raw materials and the use of products by theconsumer. These principles are clearly articulated in the Unilever Sustainable Living Plan(USLP), details of which are provided on page no.16 of this report.

Your Company has taken steps to reduce the CO2 emission from its operationssignificantly. The CO2 emissions were reduced by 1% from 2009 and 30% from 2004 baselinein our own factories on a per tonne basis. On the energy front, the Company's operationsachieved 5% reduction from 2009 and 41% reduction from 2004 baseline. Your Company hasalso increased the use of renewable resources like bio-mass and spent coffee/tea and therenewable energy proportion has touched 9% of total energy consumption in 2010.

India accounts for only 4% of the world's water resources, which is utilised by apopulation estimated to be around 18% of the world's total. Access to potable water is asignificant concern in large parts of the Country. Your Company has adopted 4R strategy(Reduce-Reuse-Recycle-Recharge) to contribute to water conservation. This multi-prongedapproach guides in monitoring water consumption at all stages, benchmarking specificconsumption, undertaking programmes to reduce water consumption across manufacturingunits, maximising water recycle, recharging groundwater through Rainwater Harvesting andwatershed projects in the communities. Fifty six percent of our own manufacturing sitesalready have rainwater harvesting facilities - to reuse/ recharge the rain water. Thesemeasures enabled your Company to conduct operations without increasing water consumptionduring the year, despite significant volume growth.

Your Company actively pursues a two-pronged approach to waste management. One is toreduce waste generation through technical interventions and optimisation of processes likeCIP (cleaning in place), sludge digester and filter press at Effluent Treatment Plant. Thesecond is to dispose waste in a sustainable manner. Over 96% of the waste generated duringthe year was liquidated through sustainable recycling. The vermi-composting project hasbeen initiated at three sites to treat the Effluent Treatment Plant waste into manure,which is being used for gardening.

The information required under Section 217(1)(e) of the Companies Act, 1956, read withthe Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules,1988 with respect to energy conservation is appended hereto and forms part of this report.

10. HUMAN RESOURCES

Your Company's Human Resource agenda for the year focused on strengthening four keyareas: building a robust talent pipeline, enhancing individual and organisationalcapabilities for future-readiness, driving greater employee engagement and strengtheningemployee relations further through progressive people practices at the shop floor.

In the first half of 2010, a comprehensive Talent and Organisation Assessment wasundertaken to understand their readiness to partner the business ambition in the mediumterm and a holistic people strategy was drawn up, which was the basis of the work done inthe key areas mentioned above. This Human Resource agenda not only looks at the currentneeds of the business, but also enhances the Company's preparedness for the future.

Your Company is widely acclaimed for its people development practices and has furtherreinforced its position in this area in 2010-11. Your Company's ability to attract thebest talent gives a competitive edge to the organisation. Through 2010, the Company'sEmployer Brand, was further strengthened and it continued to retain the top spot as 'DreamEmployer' for the top business schools, for the second successive year. The Companyadopted an integrated performance management process that builds greater stretch andalignment in targets across the organisation with greater focus on development planningand performance-linked reward for employees.

Your Company has identified Beauty, Foods and Modern Trade as key capabilities in orderto 'win' in the future and our investment in capability building is focused on these inaddition to our 'core' capabilities in Marketing, Sales and Distribution. The Companyunder took intensive training programmes through a combination of face-to-face and virtuallearning approaches and over 35,000 e-learning registrations took place, indicating thatthe spirit of 'learn where you are' is imbibed in employees of the Company.

The Company participates in a Global People Survey every 2 years, which is a leadingindicator of employee morale and motivation, with Employee Engagement being one of the keydimensions measured. For the current year, the employee participation rate for this surveywas over 99% (with an employee base of approximately 15000) and your Company were rankedamong the top performing companies across Unilever globally in all dimensions. This was onaccount of a number of proactive and innovative initiatives to engage our employees, themost significant being continuous and consistent business linked engagement, a vision forthe future of the business and clarity and transparency to individuals on their owncareers. We also transitioned to a new head office campus in Mumbai in the first half of2010. This change also brought an opportunity to create a workplace with a more vibrantand open culture that supports flexibility for employees.

The Company spearheaded a major change in practices for shop floor employees. The yearsaw 31 workers and staff being promoted to the supervisory cadres on merit. Significanttraining and development inputs, combined with a robust, standardised performanceappraisal system and an IT enabled training and development system aimed exclusively atworkmen across the Country, supported this process and strengthened our edge in peopledevelopment processes and tools.

In line with the growth ambition, new units and capacities were added at Haridwar(Personal Products and Water), Rajpura (Foods) and Baddi (Soaps). The continued volumeexpansion witnessed a total of 673 new workers being recruited through a scientificrecruitment process.

The focus on proactive and employee centric shop floor practices, quick grievanceresolution mechanisms and alignment to overall business goals ensured that there waspractically no loss of man days due to industrial issues in 2010 - the third successiveyear in a row for this record. Eleven productivity linked long-term settlements weresigned through the process of collective bargaining involving over 2,200 employees. Allthese settlements were signed with zero disruption to business activity reflecting thecollective maturity of our workforce.

While the Dharwad Tea Unit went through a process of restructuring, your Companyfocused on minimising disruption to employment. Most workmen in the unit were gainfullyredeployed in four other locations. This process has been significant because the paradigmthis time was very different from the earlier restructuring programmes. Your Company hadworked on the basis that, to the maximum extent possible, there would be no separation ofworkmen; instead, the Company would encourage them to relocate to other sites requiringtrained workforce. Business Linked Engagement and TPM Edge programmes continued with fullfocus and rigour during the year and delivered significant improvement in factoryoperations.

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 theprovisions of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sentexcluding the statement containing the particulars to be provided under Section 217(2A) ofthe Act. Any member interested in obtaining such particulars may inspect the same at theRegistered Office of the Company or write to the Company Secretary for a copy thereof.

11. INFORMATION TECHNOLOGY

Your Company continues to invest in Information Technology, leveraging it as a sourceof competitive advantage.

The enterprise-wide SAP platform forms the backbone of IT and encompasses all corebusiness processes in the Company and for collaboration with our suppliers and customers.It provides a comprehensive data warehouse with analytics capability that helps in betterand speedier decisions. Supply chain optimisation, enabled by the IT capability, remains asource of significant value.

Your Company has institutionalised an extensive IT capability for customer developmentfunction to support execution in the front-end. All distributors run a standarddistributor management system. The distributors' salesmen use handheld devices foraccepting retail orders which enable faster tracking and real-time sales information. YourCompany has enhanced this capability for analytics and intelligent sales calls to improvefront-end execution. In 2010, an extensive programme was undertaken to enhance directdistribution and coverage, especially in rural India. This significantly leverages ITcapability for geo-spatial analysis and mobile-based solutions. Your Company has put inplace an enabled consumer interaction centre for addressing complaints and suggestionsfrom consumers, retailers and distributors.

Your Company continues to invest in IT infrastructure to support business applications,and has leveraged India's expanded telecom footprint to provide high bandwidth terrestriallinks to all operating units. Your Company also used Software as a service to provideagile, cost-effective IT capabilities in select areas.

As the IT systems become more sophisticated and mission critical, there is a continuousfocus on IT security and reliable disaster recovery management processes. These areperiodically reviewed and tested for efficacy and adequacy.

12. FINANCE AND ACCOUNTS

Your Company's continued focus on cash generation resulted in a strong operating cashflow during the year; driven by good business performance, efficiencies and cost savingsacross the supply chain and greater focus on working capital management. Your Companymanaged investments prudently by deploying cash surplus in a balanced portfolio of safeand liquid instruments. Capital Expenditure during the year was at Rs. 311.31 Crores(during the year ended 31st March, 2010 - Rs. 572 Crores). This was primarily in the areasof capacity expansion, consolidation of operations, information technology, energy andother cost savings.

The Company has not accepted any fixed deposits during the year. There was nooutstanding towards unclaimed deposit payable to depositors as on 31st March, 2011.

In terms of the provisions of Investor Education and Protection Fund (Awareness andProtection of Investors) Rules, 2001, Rs. 3.74 Crores of unpaid/unclaimed dividends,interest on debentures and deposits were transferred during the year to the InvestorEducation and Protection Fund.

Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for thelast four years and for the year ended 31st March, 2011 are given below:

* Annualised numbers for proportionate period

* * for fifteen month period

Segment-wise results

Your Company has identified seven business segments in line with the AccountingStandard on Segment Reporting (AS-17), which comprise: (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 Water. The audited financialresults of these segments are given as part of financial statements.

13. EMPLOYEE STOCK OPTION PLAN (ESOP)

Details of the shares issued under ESOP, as also the disclosures in compliance withClause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines, 1999 are set out in the Annexure to thisReport.

No employee has been issued share options, during the year, equal to or exceeding 1% ofthe issued capital (excluding outstanding warrants and conversions) of the Company at thetime of grant.

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 Scheme'. The Scheme has beenregistered with the Income Tax authorities in compliance with the relevant provisions ofSEBI (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 ofconditional rights to receive equity shares of the

Company at the face value of Re. 1/- per share. These awards will vest only on theachievement of certain performance criteria measured over a period of 3 years. 168employees, including Whole-time Directors, were awarded conditional rights to receive atotal of 3,08,455 equity shares at the face value of Re. 1/- each. The above mentionedcomprises of conditional grants made to eligible managers covering performance period2011-13.

14. CORPORATE GOVERNANCE

Your Company is renowned for exemplary governance standards since inception andcontinues to lay a strong emphasis on transparency, accountability and integrity.

A separate report on Corporate Governance is provided on page no. 48 of this reporttogether with a Certificate from the Auditors of the Company regarding compliance ofconditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreementwith the Stock Exchange(s). A certificate of the CEO and CFO of the Company in terms ofsub-clause (v) of Clause 49 of Listing Agreement, inter alia, confirming the correctnessof the financial statements, adequacy of the internal control measures and reporting ofmatters to the Audit Committee is also annexed.

The Ministry of Corporate Affairs, Government of India introduced the CorporateGovernance Voluntary Guidelines, 2009. These guidelines have been issued with the view toprovide Corporate India a framework to govern themselves voluntarily as per the higheststandards of ethical and responsible conduct of business.

The recommendation of the Voluntary Guidelines pertaining to separation of offices ofthe Chairman and the CEO, constitution of Audit Committee and Remuneration Committee, RiskManagement framework, are already practised by your Company. Your Company has been insubstantial compliance of these guidelines. Some of these guidelines are in the process ofbeing implemented. During the year a Secretarial Audit was carried out; the detailedreport is given at page no. 66 of this report.

14.1 Risk and Internal Adequacy

Your Company manages cash and cash flow processes assiduously involving all parts ofthe business. There was a net cash surplus of Rs. 1640.01 Crores as on 31st March, 2011.The Company's debt equity ratio is very low which provides ample scope for gearing theBalance Sheet should that need arise. Foreign exchange transactions are fully covered withstrict limits placed on the amount of uncovered exposure, if any, at any point in time.There are no materially significant uncovered exchange rate risks in the context ofCompany's imports and exports. Company accounts for 'mark-to-market' gains or losses atevery quarter end in line with the requirements of AS-11.

The Company's internal control systems are commensurate with the nature of its businessand the size and complexity of its operations. These are routinely tested and certified byStatutory as well as Internal Auditors and cover all offices, factories and key areas ofbusiness. Significant audit observations and follow up actions thereon are reported to theAudit Committee. The Audit Committee reviews adequacy and effectiveness of the Company'sinternal control environment and monitors the implementation of audit recommendationsincluding those relating to strengthening of the Company's risk management policies andsystems.

Your Company has an elaborate process for Risk Management. This rests on the threepillars of Business Risk Assessment, Operational Controls Assessment and Policy Complianceprocesses. Major risks identified by the businesses and functions are systematicallyaddressed through mitigating actions on a continuing basis. These are discussed with bothManagement Committee and Audit Committee. Some of the risks relate to competitiveintensity and costs' volatility.

14.2 Outlook

India's GDP growth for 2011-12 is projected at 8.5%. In Q1 and Q2 of 2011-12, the GDPgrowth is projected at 8.4 and 8.5% respectively, which is lower than the growth rate of8.9% in the first two quarters of 2010-11. This is essentially due to the expectedslowdown in industry and services. In the second half of 2011-12, however, the GDP growthrate is projected to touch 8.6%. The macroeconomic assessment places the overall GDPgrowth, in constant prices, at 8.5% in 2011-12. Wholesale Price Index (WPI) basedinflation rate is projected at 6.8%, which is a slightly optimistic figure given theprevailing rate of inflation.

FMCG markets are expected to grow, though there would be change in the mix of volumeand price. Input costs will continue to remain high, with the added challenge ofvolatility. The competitive environment is also expected to remain intense. Your Company'sstrategy and focus remains consistent to robustly defend and strengthen leadershippositions, and concurrently lead market development of categories and channels of future.Your Company will ensure that it remains competitive, in market and in costs, and willmanage the business even more dynamically.

14.3 Cautionary Statement

Statements in this Report, particularly those which relate to Management Discussion andAnalysis, describing the Company's objectives, projections, estimates and expectations,may constitute 'forward looking statements' within the meaning of applicable laws andregulations. Actual results might differ materially from those either expressed orimplied.

15. SUBSIDIARY COMPANIES

During the year, the Board of Directors agreed to divest 43.31% stake in HindustanField Services Private Limited (HFS) in favor of Smollan Group (the JV partner). YourCompany will continue to hold 7.69% shareholding in HFS. HFS will, accordingly, cease tobe a subsidiary of the Company post completion of the divestment.

A statement pursuant to Section 212 of the Companies Act, 1956 relating to SubsidiaryCompanies is attached to the accounts.

In terms of General Exemption under Section 212(8) of the Companies Act, 1956 grantedby Ministry of Corporate Affairs vide its circular no. 02/2011 dated 8th February, 2011and in compliance with the conditions enlisted therein, the Audited Statement of Accountsand the Auditors' Reports thereon for the financial year ended 31st March, 2011 along withthe Reports of the Board of Directors of the Company's subsidiaries have not been annexed.The Annual Accounts and related documents of the Subsidiary Companies shall be kept forinspection at the Registered Office of the Company. The Company will also make availablethese documents upon request by any Member of the Company interested in obtaining thesame. However, as directed by the said circular, the financial data of the Subsidiarieshave been furnished under 'Subsidiary Companies Particulars' forming part of the AnnualReport (Refer page no. 146). Further, pursuant to Accounting Standard AS-21 issued by theInstitute of Chartered Accountants of India, Consolidated Financial Statements presentedby the

Company in this Annual Report includes the financial information of its subsidiaries.

16. CORPORATE SOCIAL RESPONSIBILITY

Your Company's strategy is to integrate the social, economic and environmental agendain the fabric of its business and operations. This requires the business, to identify therelevant impact areas and define strategies that drive consumer preference, and inparallel, address these issues i.e. strategies that do well by doing good. The reasons forgrowing the business sustainably are compelling and your Company sees no conflict betweenpromoting sustainable development and business growth.

Your Company's vision is to increase the positive impact in the social agenda byimproving health and well being, reduce the environmental impact from greenhouse gases,water and waste and work towards prosperity of India and business by enhancing livelihoodsamongst farmers through sustainable sourcing and expanding our small distributor model.

During the year, Unilever launched the 'Unilever Sustainable Living Plan' globally. TheUnilever Sustainable Living Plan (USLP) has three significant outcomes by 2020:

* Help more than a billion people take action to improve their health and well-being

* Halve the environmental impact of the making and use of Unilever products

* Enhance the livelihoods of thousands of people in Unilever's supply chain

The first outcome is to help more than a billion people to take action to improve theirhealth and well-being. Our everyday use products like soap, spreads and toothpaste canmake a meaningful difference to people's lives. The Lifebuoy handwashing educationprogramme has already reached over 124.7 million people in India and South Asia. Clinicaltrials reveal that washing hands at key moments helps in significantly reducing the riskof diarrhoeal disease - one of the biggest reasons for fatalities among children.

Today, nearly 1 billion people do not have access to safe drinking water. The UNestimates that nearly one-and-a-half million children die each year from water relateddiseases. A few years ago your Company decided that there had to be a better, cheaper,more sustainable way to provide safe drinking water. The product developed to address thisis Pureit, a water purification system. The water it produces is as safe to drink asboiled water, tastes a whole lot better than water purified with chlorine based sachets,and is a fraction of the price of bottled water. It is easy to operate and safe to use.

To make this product affordable to low income groups, your Company works with NGOs andWomen's Self-Help Organisations to facilitate the availability of low-interestmicro-loans. Today, Pureit is protecting around 20 million people with clean, safedrinking water. After the success of the product in India, Unilever has decided tointroduce Pureit across other countries in South - East Asia, Latin America andsub-Saharan Africa.

The second outcome is to halve the environmental impact of the making and use of ourproducts. This means halving water, waste and greenhouse gases across the lifecycle of theproducts. The Company has reduced water usage in manufacturing operations by 36% since2004 (measured on per tonne basis). Fifty six percent of our own manufacturing sites nowhave rainwater harvesting facilities and five of the sites have potential to return morewater to the ground than their consumption.

The products/business life cycle impact analysis shows that your Company's directimpact is relatively small; it is the sourcing of raw materials and usage of the productsthat accounts for a much larger impact. This means that the Company has to designproducts, which allow consumers to get better results with less energy and less waterconsumption.

The third outcome is to enhance the livelihoods of thousands of people in Unilever'ssupply chain. Your Company works with many small holding farmers, small-scale distributorsand micro-entrepreneurs (for example Project Shakti in India) helping them improve theirskills and increase productivity.

The outcomes that Unilever has committed to itself are ambitious and challenging andeach person at Unilever is willing to stretch, given the excitement for and the beliefthat it is the right way to go; for our business, for the society and for the environment.

Our products touch the lives of 2 out of 3 Indians everyday, hence changes made to theway the products are designed, sourced and used will have a far reaching impact in makingconsumption sustainable.

Your Company released its first 'Sustainable Development Report' at the Annual GeneralMeeting held on 27th July, 2010. Your Company's Sustainable Development Report presentedthe Company's Corporate Responsibility (CR) framework which integrates the social,economic and environmental agenda with business priorities. An update on progress on ourcommitments made under the CR strategy of the Company is provided at page no. 17 of theAnnual Report.

17. BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE

There are no changes in the Board of Directors and Management Committee of the Companyduring the year.

In accordance with the Articles of Association of the Company, all other Directors,except for Managing Director, will retire at the ensuing Annual General Meeting and beingeligible offer themselves for re-election.

The day-to-day management affairs of the Company are vested with the ManagementCommittee, which is subjected to the overall superintendence and control of the Board. TheManagement Committee is headed by Mr. Nitin Paranjpe, as the Chief Executive Officer, andhas functional/business heads as its members.

18. AUDITORS

M/s. Lovelock & Lewes, Statutory Auditors of the Company retire and offerthemselves for re-appointment as the Statutory Auditor of the Company pursuant to Section224 of the Companies Act, 1956.

19. APPRECIATIONS AND ACKNOWLEDGEMENTS

Your Directors place on record their deep appreciation to employees at all levels fortheir hard work, dedication and commitment. The enthusiasm and unstinting efforts of theemployees have enabled the Company to remain at the forefront of the Industry.

Your Directors would also like to acknowledge the excellent contribution by Unilever toyour Company in providing with the latest innovations, technological improvements andmarketing inputs across almost all categories in which we operate. This has enabled theCompany to provide higher levels of consumer delight through continuous improvement inexisting products and introduction of new products.

The Board places on record their appreciation for the support and co-operation yourCompany has been receiving from its suppliers, redistribution stockists, retailers,business partners and others associated with the Company as its trading partners. YourCompany looks upon them as partners in its progress and has shared with them the rewardsof growth. It will be Company's endeavor to build and nurture strong links with the tradebased on mutuality of benefits, respect to and co-operation with each other, consistentwith consumer interests.

The Directors also take this opportunity to thank all investors, clients, vendors,banks, regulatory and government authorities and stock exchanges, for their continuedsupport.

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

1. Specific areas in which R&D carried out by the Company

- New product / process development

- Quality enhancement to achieve International Standards.

- Technology Upgradation

- Speciality ingredients from natural sources

- Development and evaluation of alternative raw materials

- Project of Global relevance

2. Benefits derived as a result of the above R&D and future plans of action:

The benefits and future plan of action have been discussed in details in the Director'sreport

TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

1. Efforts, in brief, made towards technology absorption, adoption and innovation:

The Company maintains interaction with Unilever internationally.

This is facilitated through a well co-ordinated management exchange programme.

2. Benefits derived as a result of the above efforts:

The benefits have been covered in the Director's report.

3. Imported Technology:

Disclosure pursuant to the provisions of Securities and Exchange Board of India(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

Disclosure pursuant to the provisions of Securities and Exchange Board of India(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

Details of Options granted during the year ended 31st March, 2011 under PerformanceShare Plan 2011.

Notes:

(i) Pursuant to approval of the Members at the Annual General Meeting of the Companyheld on 29th May, 2006, the Company had adopted a revised Scheme "2006 HLLPerformance Share Scheme" in place of the existing "2001 HLL Stock OptionPlan".

(ii) The Pricing Formula adopted by the Company for 'Employees Stock Option Plan' forthe years 2001 to 2005, was based on the "Market Price" as defined in SEBI(Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, andMaximum number of options to be issued per employee in a fiscal year did not exceed 0.01%of the outstanding issued share capital, as expressed in Clause 11 of the '2001 HLL STOCKOPTION PLAN' in the line with Clause 6.2(h) of SEBI (Employees Stock Option Scheme andEmployee Stock Purchase Scheme) Guideline 1999.

(iii) Details of Options granted to senior managerial personnel.