33M India Limited

10

This page is intentionally left free

Your Directors have the pleasure in presenting to you their 22nd Annual Report and Audited Accounts for the year endedDecember 31, 2008.

FINANCIAL RESULTS

(Rs. in lakhs)

Particulars For the year ended For the year endedDecember 31, 2008 December 31, 2007

Total Income 75,240.48 61,905.47

Less : Total Expenditure 65,415.28 50,653.40

Profit before Depreciation 9,825.20 11,252.07

Less : Depreciation 722.92 589.22

Profit before Taxation 9,102.28 10,662.85

Less : Provision for Taxation 3,356.79 3,894.57

Profit after Taxation 5,745.49 6,768.28

COMPANY PERFORMANCE

The Company has recorded a good topline performance during the year under review. The total income was at Rs.75,240.48 lakhs for

the year ended December 31, 2008 as against Rs.61,905.47 lakhs for the same period during the previous year. This represents an

increase of 21%, a commendable growth rate considering the existing economic downturn.

Profit after taxation was at Rs.5,745.49 lakhs for the year ended December 31, 2008 as against Rs.6,768.28 lakhs for the same period

during the previous year. Slow down in the economy, rupee depreciation against all major currencies and change in business mix

compared to the previous year, significantly impacted the profitability.

DIVIDEND

In view of the execution of investment plans towards the expansion of our existing manufacturing facilities as well as towards

product localisation projects, it has been decided to conserve and retain our earnings.

MATERIAL CHANGES AND COMMITMENTS

There were no material changes and commitments that occurred affecting the financial position of the Company between

December 31, 2008 and the date on which this report has been signed.

DIRECTORS

Mr. Thomas P. Spencer resigned as Chairman and in his place Mr. D.J.Balaji Rao has been appointed as Chairman of the Company.

Mr. Bert O’ Donoghue resigned as Director and Managing Director and in his place Mr. Ajay Nanavati has been appointed as Director

and Managing Director.

The Board places on record their sincere appreciation for the services rendered by Mr. Bert O’ Donoghue during his tenure as

Managing Director.

Mr. B.C.Prabhakar and Mr. Richard Lee Becker are retiring by rotation at the ensuing Annual General Meeting and being eligible, they

have offered themselves for re-appointment.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to the Directors Responsibility

Statement, your Directors state:

i) That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper

explanation relating to material departures;

REPORT OF THE DIRECTORS

MAnnual Report 2008

11

ii) That they have selected such accounting policies and applied them consistently and made judgments and estimates that

are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company and of its profits for the

year ended December 31, 2008;

iii) That they have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance

with the provisions of this Act, to safeguard the assets of the Company and to prevent and detect fraud and other

irregularities;

iv) That they have prepared the financial statements for the year ended December 31, 2008 on a going concern basis;

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with stock exchanges, a separate section titled “Corporate Governance” has been

included in this year’s annual report, along with the report of Management Discussion and Analysis and additional shareholder

information.

FIXED DEPOSITS

During the year under review, the Company has not accepted any deposits under Section 58A and 58AA of the Companies Act, 1956

read with the Companies (Acceptance of Deposits) Rules, 1975.

AUDITORS

M/s. Lovelock & Lewes, Chartered Accountants, Bangalore Auditors of the Company will retire at the conclusion of the ensuing

Annual General Meeting and being eligible, offer themselves for re-appointment. The Company has received a certificate from the

Auditors to the effect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act,1956.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report

of the Board of Directors) Rules, 1988 have been enclosed as Additional Information and forms an integral part of this Report.

LISTING

The shares of your Company are presently listed on the Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India

Limited (NSE). The delisting application has been filed with the Calcutta Stock Exchange Association Limited and the formal approval

is awaited.

PERSONNEL

The Board wishes to place on record its appreciation to all employees in the Company, for their sustained efforts and immense

contributions to the good levels of performance and growth that your Company has achieved during the year.

PARTICULARS OF EMPLOYEES

The Annual Report and Accounts are being sent to all the shareholders of the Company without the statement of Particulars of

Employees under Section 217 (2A) of the Companies Act, 1956 read with (Particulars of Employees) Rules, 1975. Members who are

interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation for the continued support and valuable co-operation extended by

all the stakeholders of 3M India Limited. The Directors also wish to express their gratitude to all the shareholders for the faith that

they continue to repose in the Company.

On behalf of the Board of Directors

Place : Bangalore Ajay Nanavati B.V. Shankaranarayana RaoDate : February 27, 2009 Managing Director Whole-time Director

33M India Limited

12

ADDITIONAL INFORMATION AS REQUIRED UNDER SECTION 217(1)(e) OF THE COMPANIES ACT,1956 READ WITH COMPANIES(DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

A. CONSERVATION OF ENERGY

The Company plant engineering team periodically reviews and monitors energy consumption and significant savings madeduring the previous year under review. No additional investments were made or implemented, for reduction of energy consumptionduring the previous year.

B. TECHNOLOGY ABSORPTION AND RESEARCH & DEVELOPMENT

1. Specific areas in which Research &Development carried out by the Company

2. Benefits derived as a result of the aboveResearch & Development

3. Future plan of action

4. Expenditure on Research & Development

a) Capital

b) Recurring

c) Total

d) Total Research & Development expenditureas a percentage of total turnover

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, the Foreign Exchange earnings were Rs.438.83 lakhs and Foreign Exchange Outgo was Rs.1,123.69 lakhs.

On behalf of the Board of Directors

Place : Bangalore Ajay Nanavati B.V. Shankaranarayana RaoDate : February 27, 2009 Managing Director Whole-time Director

- Industrial Markets : Pressure sensitive adhesives developmentfor tape and label products for industrial and converter markets,new tape coater installed and operational for production. Water-based glue development for Wood and Utility markets. Abrasivediscs development for metal working markets. Polymerprocessing aides developed for polyolefin manufacturersand processors.

- Specialty Materials Markets: Coatings for corrosion protection ofpipelines, brand & asset authentication labels to prevent productcounterfeiting, RFID based solutions for library systems.

- Consumer Office Markets: Floor, Kitchen, utensil & cleaningsolutions - wipes, scrubbers, mops. Repositionable notes, stationeryproducts and tapes.

- Automotive Markets: Automotive graphics, attachment tapes forautomobiles, paint replacement films, and automotive aftermarketformulations for car detailing and body work.

- Healthcare Care Markets: Wound dressings, cleaning infectionprevention products for use in hospitals:

- Traffic and Safety Markets: Signage systems, traffic safetyproducts including median markers and toll plazas:

- New applications development.- Reduced cost solutions for our customers and end users.- Business growth.

- Continue localisation of products.

- Development of products specific for Indian market needs,especially in the areas of Corrosion Protection, Automotive,Industrial, Medical and Consumer markets.

(Rs.in Lakhs)

147.57

70.36

217.93

0.29%

MAnnual Report 2008

13

Investors are cautioned that this discussion contains statements that involve risks and uncertainties. Words like anticipate,believe, estimate, intend, will expect and other similar expressions are intended to identify such forward looking statements.The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis ofany subsequent developments, information or events. Besides, the Company cannot guarantee that these assumptions andexpectations are accurate or will be realised and actual results, performance or achievements could thus differ materially fromthose projected in any such forward looking statements.

MANAGEMENT DISCUSSION AND ANALYSIS

3M India Limited is a diversified manufacturer, technology innovator and marketer of a wide variety of products. 3M continues to

manage its operations in five business segments: Industrial Markets; Automotive & Specialty Materials Markets; Health Care Markets;

Traffic and Safety Markets; Consumer & Office Markets, Construction Markets. 3M’s five business segments bring together common

or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of

business resources. The Management of the Company presents the financial information and other disclosures relating to

3M’s business segments.

a) INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian economy, like the rest of the world is showing signs of an economic slowdown, with weaker industrial production

growth, manufacturing and exports. Growth is expected to slowdown further in 2009 as the liquidity crunch and the global

slowdown will drive down business confidence and personal spending. Real GDP growth has also slowed down during the last

few quarters which is a far cry from the double-digit growth rates seen in the second half of 2006 and the first half of 2007.

This downturn in the economy, currency fluctuations and GDP growth will all have significant effect on the Company’s

performance. The Company continues its focus on Industrial Segments due to its technological advantage of products.

b) OPPORTUNITIES AND THREATS

The Company faces normal market competition in all its businesses, from Indian as well as international companies.

3M’s globally competitive cost positions and well crafted business strategies have enabled it to retain its leading market

positions. 3M strongly believes in its brand equity.

c) SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

INDUSTRIAL MARKETS

The Industrial Markets Segment includes products like paper tapes, coated and non-woven abrasives, and specialtyadhesives. Major industrial product applications range from grinding, surface conditioning and super abrasives forpackaging systems.

Rs. in lakhs

31.12.08 31.12.07

Financial Highlights Segment Revenue 13,615.68 11,314.26Profit before Interest & Tax 1,168.28 1,924.24Capital Employed 4,631.58 2,259.90

Highlights The Industrial markets grew by 20% in 2008 and this growth was mainly driven by:

- Entry in the high volume retail segment with specific product line.

- The growth in sales which is attributed to new account penetration and organic growth.

- Continuous development and implementation of specific programs focused on marketslike Construction Components, Automotive, Auto-Parts, Metal Fabrication, Stainless Steel,Energy and Industrial Utility.

33M India Limited

14

AUTOMOTIVE & SPECIALTY MATERIALS MARKETS

Automotive and Specialty Materials Markets provides a wide range of design and engineered solutions to Automotive OEM’sand ancillary industries, corrosion protection and glass bubbles solutions for oil & gas pipelines etc. This segment includesa wide range of automotive repair and car grooming solutions for the Automotive Aftermarket. 3M is acknowledged as aninnovative supplier of solutions and is a market leader in the non-paint consumables segment in the Automotive-Aftermarketspace. 3M is also a pioneer in the car care business and is forging partnerships with the majority of car dealerships by way ofAutomotive OEM approvals.

Rs. in lakhs

31.12.08 31.12.07

Financial Highlights Segment Revenue 24,902.29 21,646.37Profit before Interest & Tax 3,199.45 3,465.44Capital Employed 13,568.38 7,660.94

Highlights The Automotive and Specialty Materials Markets grew by 15% in 2008 and its growthwas driven by:

- The focus on Automotive Aftermarket for growth to compensate for slow growth in theAutomotive Industry.

- The growth in sales which was achieved by the change in the product mix and withthe introduction of new products.

- The various new oil and gas pipeline projects that came up in 2008 which helped inthe growth of the Corrosion Protection Products Division. Products from theCorrosion Protection Plant at Ahmedabad, which support the pipeline manufacturingindustry, were introduced with a dual layer of coating that provided significantbenefits to our customers, both in terms of cost and productivity.

HEALTH CARE MARKETS

3M Healthcare is a global leader offering innovative products and solutions for Skin & Wound Care, Infection Prevention,Dental, Orthodontic, Drug Delivery and Food Safety Markets. Our products enhance the practice, delivery, and outcome ofhealth care by providing innovative solutions and improve patient’s lives.

Rs. in lakhs

31.12.08 31.12.07

Financial Highlights Segment Revenue 12,128.49 8,100.89Profit before Interest & Tax 430.40 294.97Capital Employed 2,095.88 1,132.56

Highlights Healthcare Business grew by more than 50 % in 2008. Some of the keydrivers of growth were

- Continued focus and efforts on knowledge transfer and sharing with customers. Thiswas achieved through successful Indian and International KOL speaker programs andseminars etc.

- Continued value enhancement for customers through new initiatives like formationof critical care nurses club and operating room nurses club etc across the country.

- Successful launch of new products like handrub, disposable drape packs and expressXT impressioning system.

- Entry into the dental lab and digital market with the launch of lava crowns.

- Success in the drug delivery component supplies business to pharmaceuticalcompanies in India.

MAnnual Report 2008

15

TRAFFIC AND SAFETY MARKETS

The Traffic and Safety Markets segment serves markets that include electronic display, traffic safety, commercial graphics,security and protection services. Major products include commercial graphics systems, reflective sheeting for transportationsafety, optical films, solutions for electronic displays, occupational health and environmental products, passport readers andcomputer screen filters.

Rs. in lakhs

31.12.08 31.12.07

Financial Highlights Segment Revenue 14,675.61 12,220.29Profit before Interest & Tax 3,191.62 3,372.98Capital Employed 4,249.95 2,678.04

Highlights The Traffic and Safety Market grew by 20% in 2008 and this growth was mainly driven by :

- The Company’s Commercial Graphics Division which continues to be the preferred supplierof commercial fascia signage material to several large corporations and the banking Industry.In 2008, the growth was driven by big orders from banks.

- Expansion of the road network at the national and state levels which resulted incontinued demand for the Company’s reflective sheeting products for traffic signage.

- During the year, the Company’s Occupational Health & Environment Safety Divisionfurther strengthened its leadership position as the preferred supplier of respiratory andhearing protection products to the Indian industry.

CONSUMER & OFFICE MARKETS, CONSTRUCTION MARKETS

This segment offers an array of products that help keep homes cleaner, offices organized and buildings maintained. Thisbusiness segment features some of the world’s best-known brands, from Scotch®, Scotch-Brite® to Nomad™ and Post-it ®.

Rs. in lakhs

31.12.08 31.12.07

Financial Highlights Segment Revenue 8,521.00 7,376.38Profit before Interest & Tax 483.88 927.88Capital Employed 530.29 787.87

Highlights During the year 2008, the segments grew by 16% and this was driven by :

- The Home Care and Office Supplies Division which achieved growth by expandinggeographical reach and by expanding the product range.

- The expansion of the Modern Trade in tier A / smaller cities which also helped 3M inachieving higher growth levels.

- Portfolio extension by introducing new range of Nomad™ modular matting and PrestigeSun Control films.

- The focus on renewable energy opportunities with 3M window film products.

OTHERS

Rs. in lakhs

31.12.08 31.12.07

Financial Highlights Segment Revenue 422.85 397.60Profit before Interest & Tax 66.00 44.69Capital Employed - -

33M India Limited

16

d) OUTLOOK

Depreciating rupee, industrial production and weaker global demands have put pressure on the overall economic growth.

However, the Company will continue to strive to attain global leadership in markets, products and manufacturing processes.

Technology will be the key to success and products that respond to local market needs will need to be introduced at a fast pace

on a regular basis.

Forward looking statements are based on certain assumptions and expectations of future events that are subject to risks and

uncertainties. Actual future results and trends may differ materially from historical results, depending on a variety of factors.

e) RISKS AND CONCERNS

All key functions and divisions of the Company are independently responsible to monitor risks associated within their

respective areas of operations such as production, treasury, insurance, legal and others areas like health, safety and environment.

The Company’s high levels of integration, globally competitive operations and domestic leadership position have helped it in

mitigating the adverse impact of generic industry risk factors. Foreign exchange rate volatility has also had an impact on the

business. The Company has identified various risks and procedures to mitigate the same.

f ) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate systems of internal control in place. This is to ensure that assets are safeguarded against loss from

unauthorized use or disposition, and that transactions are authorized, recorded and reported correctly. The Internal audit

function is empowered to examine the adequacy, relevance and effectiveness of control systems, compliance with policies,

plans and statutory requirements. The top management and the Audit Committee of the Board review the findings and

recommendations of the internal audit panel.

The Internal Auditor functionally reports to the Audit Committee and administratively to the Managing Director. The Audit

Committee periodically reviews the audit plans, audit observations of both internal and external audits, risk assessment and

adequacy of internal controls. The Company has developed adequate internal control systems commensurate to its size and

nature of its business. Reports of the Internal Auditor are submitted to the Management and Audit Committee. The Statutory

Auditors also review their findings with the Senior Management and the Audit Committee.

g) DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company believes that consistent employee performance and overall satisfaction and engagement will lead to the

growth of the company. In keeping with this philosophy, to enhance the employees potential, the Company has continued to

invest in training and developing employees. All new hires are inducted into the organization through a 3 day induction

program, conducted periodically during the year. Training needs for high potential employees are also identified by the

learning and development organization in the Company. Based on specific training needs, programs are conducted. In 2008,

over 1500 man days of training in the area of leadership, sales and technical skills were conducted for employees. The Company

has been continuously focusing on people and processes to encourage and realize their full potential. Cordial and harmonious

relations with employees continued to prevail throughout the year under review.

On behalf of the Board of Directors

Place : Bangalore Ajay Nanavati B.V. Shankaranarayana RaoDate : February 27, 2009 Managing Director Whole-time Director

MAnnual Report 2008

17

REPORT ON CORPORATE GOVERNANCE

In Compliance with Clause 49 of the Listing Agreement with the Stock Exchanges, a report on the Corporate Governance for the year

under review is given below.

1. PHILOSOPHY ON CORPORATE GOVERNANCE

3M India Limited believes that transparent accounting policies, appropriate disclosure norms, best in class board practices and

consistently high standards of corporate conduct towards its stakeholders are essential for sustained corporate growth.

Corporate Governance comprises of a unique combination of factors like regulations, compliance, policies and economic

environments, voluntary practices and disclosures.

2. BOARD OF DIRECTORS

The Board of Directors of the Company was headed by the Non-Executive Chairman, Mr. Thomas P. Spencer till

September 10, 2008 and consequent to his resignation as Chairman, Non-Executive and Independent Director Mr. D.J.Balaji Rao

had been appointed as Chairman. The Board of the Company comprises an appropriate blend of Executive, Non-Executive and

Independent Directors, with professional background and experience in Business, Industry, Finance and Law. During the year

2008, five Board Meetings were held, the dates being February 27, 2008, April 28, 2008, July 25, 2008, September 10, 2008 and

October 29, 2008. The last AGM was held on April 28, 2008. The details of the Board composition, attendance, their other

directorships / committee memberships as of December 31, 2008 are appended below:

* Excludes alternate directorship, directorship in foreign companies and private companies, which are neither a subsidiary nor a holdingCompany of a public Company.

# Excludes committees other than Audit Committee, Shareholders / Investors Grievance Committees.(a) Nominee of 3M Company, USA.** Resigned as a Director and Managing Director on September 30, 2008.*** Appointed as a Director and Managing Director on October 1, 2008.

No.of Directorships and CommitteeName & Designation No. of Meetings Memberships/Chairmanships Whether

of the Director Category AttendedOther Committee Committee Last AGM

Held Attended Directorships* Memberships# Chairmanships#

Mr. D.J. Balaji Rao

(Chairman - Board of

Directors and Shareholders Non-Executive

Grievance Committee) & Independent 5 5 10 8 2 Yes

Mr. Bert O’Donoghue (a)** Executive

(Managing Director) (Promoter Group) 4 4 Nil Nil Nil Yes

Mr. Ajay Nanavati (a)*** Executive

(Managing Director) (Promoter Group) 1 1 Nil Nil NIl N.A.

Mr.Thomas P. Spencer Non-Executive

Director (Promoter Group) 5 3 Nil Nil Nil Yes

Mr.Richard Lee Becker Non-Executive

Director (Promoter Group) 5 1 Nil Nil Nil Yes

Mr. B.S. Iyer Non-Executive &

(Chairman, Audit Committee) Independent 5 5 Nil Nil Nil Yes

Mr. B. C. Prabhakar Non-Executive

Director & Independent 5 5 2 2 Nil Yes

Mr. B. V. Shankaranarayana Rao Executive

(Whole-time Director) (Promoter Group) 5 5 Nil Nil Nil Yes

33M India Limited

18

Code of Conduct

The Company’s Board has laid down a code of conduct for all Board Members and Senior Management of the Company. The codeof conduct is available on the website of the Company, www.3m.com\in. Requisite annual affirmations of compliance with respectivecodes have been made by the Directors and Senior Management of the Company.

3. AUDIT COMMITTEE

The Audit Committee of the Company functions in accordance with the requirements of Section 292A of the CompaniesAct, 1956 and the Listing Agreement

Constitution of Audit Committee : The current Audit Committee consists of four Non-executive Directors, three of which areindependent directors and all of them have financial and accounting knowledge. Mr. B.S. Iyer having financial expertise andexperience acted as Chairman of the Audit Committee. The Company Secretary acted as the Secretary to the Committee.At the invitation of the Committee, the Internal Auditor, the Managing Director, the Head of Finance, Head of LegalDepartment and Statutory Auditors attend the Audit Committee meetings, to answer and clarify the queries that are raised atthe Committee meetings.

Composition of Audit Committee and Number of Meetings Attended : During the year under review, four meetings of the AuditCommittee were held, February 27, 2008, April 28, 2008, July 25, 2008 and October 29, 2008. The composition of the AuditCommittee and the number of meetings attended during the year under review as under:

Name of the No. of Meetings held No. of MeetingsCommittee Member during the tenure attended

Mr. B.S. Iyer 4 4

Mr. D.J. Balaji Rao 4 4

Mr. B.C. Prabhakar 4 4

Mr. Richard Lee Becker 4 1

The Terms of Reference of Audit Committee: The role and terms of reference of the Audit Committee include the following :

• Overview of the Company’s financial reporting process and the disclosure of its financial information to ensure that thefinancial statements are correct, sufficient and credible.

• Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the StatutoryAuditors and the fixation of audit fees.

• Approval of payment to Statutory Auditors for any other services rendered by them.

• Reviewing, with the management, the annual financial statements before submission to the Board for approval, withparticular reference to:

- Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report in termsof clause (2AA) of Section 217 of the Companies Act, 1956.

- Changes, if any, in accounting policies and practices and reasons for the same.

- Major accounting entries involving estimates based on the exercise of judgment by Management.

- Significant adjustments made in the financial statements arising out of audit findings.

- Compliance with listing and other legal requirements relating to financial statements.

- Disclosure of any related party transactions.

- Qualifications in the draft audit report.

• Reviewing, with the Management, the quarterly financial statements before submission to the Board for approval.

• Reviewing, with the Management, performance of Statutory and Internal Auditors, adequacy of the internal control systems.

• Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffingand seniority of the official heading the department, reporting structure, coverage and frequency of internal audit.

• Discussion with Internal Auditors any significant findings and follow-up there on.

• Reviewing the findings of any internal investigations by the Internal Auditors into matters where there is suspected fraudor irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

MAnnual Report 2008

19

• Discussion with Statutory Auditors before the audit commences, about the nature and scope of audit as well as post-auditdiscussion to ascertain any area of concern.

• To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in caseof non-payment of declared dividends) and creditors.

• Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

Powers of the Audit Committee: The Audit Committee has the following powers:

• to investigate any activity within its terms of reference

• to seek information from any employee

• to obtain outside legal or other professional advice

• to secure the attendance of outsiders with relevant expertise, if it considers necessary

Review of information by Audit Committee: The Audit Committee reviews the following information

• Management discussion and analysis of financial condition and results of operations.

• Statement of significant related party transactions (as defined by the Audit Committee) submitted by Management.

• Management letters / letters of internal control weaknesses issued by the Statutory Auditors.

• Internal audit reports relating to internal control weaknesses.

• The appointment, removal and terms of remuneration of the Chief Internal Auditor.

4. REMUNERATION TO DIRECTORS:

The Company has not constituted a separate Remuneration Committee. None of the Non-Executive Directors have any pecuni-ary relationship with the Company. The Company has currently two Executive Directors, Mr. Ajay Nanavati, Managing Directorand Mr. B. V. Shankaranarayana Rao, Whole-time Director. The terms of appointment of the Executive Directors were fixed by theBoard and approved by the Shareholders.

Details of remuneration paid to Executive Directors during the year 2008:In Rupees

Name and Designation Period Salaries & Contribution to Estimated TotalAllowances Provident Fund Value of

& Other Funds Benefits

Mr. Ber O’ Donoghue January 1,2008 –(Managing Director) September 30, 2008 5,690,566 - 2,340,000 8,030,566

Mr. Ajay Nanavati October 1, 2008 –(Managing Director) December 31, 2008 1,720,013 132,222 518,780 2,371,015

Mr. B.V. Shankaranarayana Rao January 1,2008 –(Whole-time Director) December 31,2008 5,552,591 609,815 - 6,162,406

Presently, 3M India Limited does not have a scheme for grant of stock options either to the Executive Directors or to other employees.

The Non-Executive Directors do not draw from the Company any remuneration other than sitting fees. Sitting fees paid to theNon-Executive Directors during the year 2008 are given below :

In Rupees

Name of the Director Board Meeting Committee Meetings Total

Mr.B.S. Iyer 100,000 160,000 260,000

Mr.D.J. Balaji Rao 100,000 160,000 260,000

Mr. B.C. Prabhakar 100,000 160,000 260,000

Mr.Thomas P. Spencer and Mr. Richard Lee Becker waived payment of sitting fees.

33M India Limited

20

5. SHAREHOLDERS’ / INVESTORS’ GRIEVANCE COMMITTEE :

During the year under review, four Shareholder’s/Investors’ Grievance Committee meetings were held, the dates being,February 27, 2008, April 28, 2008, July 25, 2008 and October 29, 2008. The attendance of the members at the Shareholders’ GrievanceCommittee Meeting held during the year was as follows:

Name of the No. of Meetings held No. of MeetingsCommittee Member during the tenure attended

Mr.D.J. Balaji Rao 4 4

Mr.Bert O’Donoghue* 3 3

Mr.Ajay Nanavati** 1 1

Mr.B.S. Iyer 4 4

Mr.B.C.Prabhakar 4 4

* Resigned as Member on September 30, 2008** Appointed as Member from October 1, 2008

Mr. D. J. Balaji Rao, Non-Executive and Independent Director is the Chairman of the Committee and Mr. K. Ramesh Chandra,Company Secretary is the Compliance Officer of the Company.

The Shareholders’ Grievance Committee is authorised to :

1. Monitor the system of share transfer transmission, sub-division, consolidation of share certificates and issue of duplicate certificates.

2. Deal with all investor related issues including redressal of complaints from shareholders relating to transfer of shares,non-receipt of annual report, etc.

3. To delegate such powers to Company’s officers, as may be necessary including powers to approve transfers, transmissions,authenticate share certificates and to take other actions in relation to Shareholders’ related matters.

The Company through its Registrar and Share Transfer Agents has resolved most of the investor grievances / correspondencewithin a period of 7 days from the date of their receipt except in cases that are constrained by disputes or legal impediments.The statistics of Shareholders complaints received / redressed, during the year 2008, furnished below :

No. of complaints relating to non-receipt of dividend warrants, Redemption /Interest warrants, Annual Reports, Share certificates, endorsement stickers & othersreceived during the year 35

No. of Shareholders complaints resolved during the year 35

No. of Shareholders complaints pending as on December 31, 2008 Nil

6. General Body Meeting :

Details of Annual General Meetings of the Company for the last three years:

Date Meeting Location Time

April 24, 2006 AGM Hotel Leela Palace 23, Kodihalli, Airport Road, Bangalore – 560 008 10.00 a.m.

April 27, 2007 AGM Hotel The Capitol, Raj Bhavan Road, Bangalore – 560 001 10.00 a.m.

April 28, 2008 AGM The Chancery Pavilion, 135, Resident Road, Bangalore – 560 025 10.00 a.m.

Details of Special Resolutions passed in the previous three AGMs : Nil

Postal Ballot

During the year 2008, there was no business, which had to be conducted through a postal ballot. At present, the Company does not haveany resolution to be decided by the Members by Postal Ballot.

7. DISCLOSURES

Related party transactions

The Company follows the following policy in disclosing the related party transactions to the Audit Committee :

• A statement in summary form of transactions with related parties at arm’s length price in the normal course of business.

• All material individual transactions with related parties, which are not in the normal course of business and which are not onan arm’s length basis.

MAnnual Report 2008

21

Disclosure of Accounting Treatment

The guidelines/accounting standards notified by Section 211(3C) of the Companies Act, 1956 and relevant provision of theCompanies Act, 1956 have been followed in preparation of the financial statements of the Company.

Risk Management

The Company has identified various risks and procedures to mitigate the same. The Audit Committee and the Board have reviewedthe same. When new risks are identified, the same would be then assessed, controls designed, put in place and enforced within afixed timeframe, as set.

Subsidiary Companies

The Company does not have any subsidiaries.

Capital Issues

The Company has not made any capital issues during the year 2008.

Details of non-compliance by the Company, penalties, and strictures imposed on the Company by Stock Exchange or SEBI or anystatutory authority, on any matter related to capital markets, during the last three years:

There have been no instances of non-compliance by the Company on any matter related to listing agreement with the stock exchanges.

Compliance with Mandatory Requirements

The Company has complied with all the mandatory requirements of this clause. As regards the non-mandatory requirements theextent of compliance has been stated in this report against each item.

8. MEANS OF COMMUNICATION :

Quarterly financial results, including the half year results are published in Business Standard and Financial Express;Samyukta Karnataka and The Times of India (Bangalore Edition). The annual audited accounts are likewise published. The half-yearly report is not separately sent to each household of the Shareholders. In accordance with the listing regulations, theCompany’s audited and unaudited quarterly / half yearly / annual results are also posted in the SEBI’s website under EDIFAR(Electronic Data Information Filing And Retrieval System). The Company’s financial results are also displayed in the Company’swebsite: www.3m.com\in

9. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis report on the Company’s activities during the year is published as part of theCompany’s Annual Report. This report has been placed to the Company’s Audit Committee.

10. SHAREHOLDERS

Details of the Directors seeking appointment/re-appointment at the ensuing AGM are provided in the Notice convening the AGM.

11. GENERAL SHAREHOLDER INFORMATION :

April 29, 2009 The Chancery Pavilion

Annual General Meeting 2009135, Residency Road, Bangalore - 560 025

Time 10.30 a.m.

Financial Calendar :

a) Date of Book Closure April 23, 2009 - April 29, 2009 (both days inclusive)

b) Dividend payment date N. A.

c) Financial results Third / Fourth week of April, 2009 - unaudited results for the quarter ended March 2009.

Third / Fourth week of July, 2009 - unaudited results for the quarter and halfyear ended June 2009.

Third / Fourth week of October, 2009 - unaudited results for the quarter and ninemonths ended September 2009.

Third / Fourth week of February, 2010 - Audited Results for the quarter and year endedDecember 31, 2009.

d) Listing on Stock Exchanges The National Stock Exchange Limited, Mumbai (Code - 3M INDIA)Bombay Stock Exchange Limited, Mumbai (Code - 523395)The Calcutta Stock Exchange Association, Calcutta (Code - 12027) *

* applied for voluntary delisting. Final Certificate of delisting is yet to be received.

33M India Limited

22

The Company has paid annual listing fees, as prescribed, to The National Stock Exchange Limited and Bombay Stock Exchange Limited,Mumbai for the financial year, 2008-2009.

Registrar & Share Transfer Agents :

Share registration and other investor related activities are carried out by our Registrar and Transfer Agents, M/s. Karvy ComputersharePrivate Limited for both Physical and Demat securities. Their address is appended below :

Karvy Computershare Private LimitedPlot no.17-24, Vithal Rao Nagar, Madhapur;Hyderabad - 500 034Tel: 040-23420816 / 824 Fax: 040-23420814E-mail : mailmanager@karvy.com Contact person : Mr. K. Subba Reddy

Share Transfer System :

Shares sent for transfer in physical form are registered and despatched within 15 days of receipt of the documents, if documents arefound to be in order. Shares under objection are returned within 15 days.

Monitoring of Share Transfers and other investor related matters are dealt with by the Shareholders’ Grievance Committee. TheCompany’s Registrars, M/s. Karvy Computershare Private Limited process the share transfers in respect of physical securities ona fortnightly basis and the processed transfers are approved by the authorized Executives of the Company also on afortnightly basis.

All requests for dematerialization of shares, which are in order are processed within 15 days and the confirmation isgiven to the respective depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL).

Bombay Stock Exchange (BSE) National Stock Exchange (NSE)(in Rs.) (in Rs.)

High Low High Low

January 2008 1,979.00 1,821.00 1,849.00 1,875.00

February 2008 1,974.00 1,858.55 1,795.00 1,964.00

March 2008 1,875.00 1,782.00 1,794.00 1,815.00

April 2008 1,899.20 1,756.05 1,853.00 1,853.10

May 2008 1,874.85 1,850.00 1,825.15 1,825.15

June 2008 1,717.00 1,650.00 1,631.00 1,670.00

July 2008 1,649.00 1,578.05 1,571.00 1,632.00

August 2008 1,625.00 1,583.00 1,564.00 1,618.00

September 2008 1,439.90 1,160.00 1,370.00 1,411.00

October 2008 983.00 920.00 925.00 946.00

November 2008 916.05 916.05 926.95 926.95

December 2008 990.00 920.00 920.00 932.90

Stock Price Data :

MAnnual Report 2008

23

Distribution of Shareholding as on December 31, 2008

Range of Shares No. of Shareholders % to total Shareholders No. of Shares held % to total Shares

1 to 5000 8,661 99.44 913,174 8.11

5001 to 10000 22 0.25 162,868 1.45

10001 to 20000 11 0.13 172,598 1.53

20001 to 30000 3 0.03 74,875 0.66

30001 to 40000 3 0.03 97,996 0.87

40001 to 50000 2 0.02 94,920 0.84

50001 to 100000 2 0.02 182,809 1.62

100001 and above 6 0.07 9,565,830 84.92

TOTAL 8,710 100.00 11,265,070 100.00

Stock Performance :BSE Sensex Vs. 3M Share Price(Monthly Closing Price)

Crisil Index : Not applicable

2,0001,9001,8001,7001,6001,5001,4001,3001,2001,1001,000

900800

20,00019,00018,00017,00016,00015,00014,00013,00012,00011,00010,0009,0008,000

Jan 08Feb 08

Mar 08Apr 08

May 08Jun 08

Jul 08Aug 08

Sep 08Oct 08

Nov 08Dec 08

Sensex 3M

33M India Limited

24

Number of Total Percentage of Category of Shareholder Shareholders Number of Shareholding

Shares

A Shareholding of Promoter and promoter group

1 Indian

a Individuals/Hindu Undivided Family - -

b Central Government/State Governments - -

c Bodies Corporate - -

d Financial Institutions/Banks - -

e Any Other

Sub-Total (A)(1) - -

2 Foreign

a Individuals (Non-Resident Individuals/Foreign/Individuals) - -

b Bodies Corporate 1 8,562,000 76.00

c Institutions - -

d Any Other - -

Sub-Total (A)(2) 1 8,562,000 76.00

Total Shareholding of Promoter and Promoter Group*

A = (A)(1)+(A)(2) 1 8,562,000 76.00

B Public Shareholding

1 Institutions

a Mutual Funds/UTI 17 759,023 6.74

b Financial Institutions/Banks 1 20 0.00

c Central Government/State Governments - - -

d Venture Capital Funds - - -

e Insurance Companies 1 60 0.00

f Foreign Institutional Investors 12 531,553 4.72

g Foreign Venture Capital Investors - - -

h Any Other - - -

Sub-Total (B)(1) 31 1,290,656 11.46

2 Non-Institutions

a Bodies Corporate 229 369,683 3.28

b Individuals

1. Individual shareholders holding nominal share capital up to Rs.1 lakh 8,351 917,940 8.15

ii. Individual shareholders holding nominal share capital in excess of Rs.1 lakh 4 107,580 0.95

c Any Other

Trust 1 100 0.00

Non Resident Indians 83 16,551 0.15

Clearing Members 10 560 0.00

Sub-Total (B)(2) 8,678 1,412,414 12.54

Total Public Shareholding

B = (B)(1)+(B)(2) 8,709 2,703,070 24.00

Total (A)+(B) 8,710 11,265,070 100.00

C Shares held by Custodians and against which Depository Receipts have been issued - -

Grand Total (A)+(B)+(C) 8,710 11,265,070 100.00

* None of the Promoters have pledged their shares as on December 31, 2008

Shareholding pattern as on December 31, 2008

MAnnual Report 2008

25

Plant Locations :

Plot No. 48-51, Electronics City, Hosur Road, Bangalore – 560 100

Plot No.8, Moraiya Industrial Area; Tal Sanand,Sarkhej Bavla Highway, Ahmedabad – 382 213

Plot No.B-20, MIDC; Ranjangaon Industrial AreaTal:Shirur, Dist : Pune; Pin : 412 210

Address for correspondenceRegistered Office :

Plot No. 48-51, Electronics City, Hosur Road,Bangalore – 560 100

Corporate Office :

Concorde Block, UB City, 24, Vittal Mallya Road,Bangalore – 560 001

DEMATERIALISATION OF SHARES AND LIQUIDITY

22.68 % of the total equity capital was held in dematerialised form as on December 31, 2008.

Outstanding GDRs/Warrants, Convertible Bonds, conversion date and likely impact on equity: Not applicable

NON-MANDATORY REQUIREMENTS

The Company has a Non-Executive Chairman and his official expenses are reimbursed. However, no separate Chairman office ismaintained at the Company’s expense.

As on date, there is no Independent Director having term of office exceeding nine years on the Board of the Company.

Remuneration Committee

Presently, the Company does not have a Remuneration Committee.

Shareholders’ Rights

The Company’s half yearly results are published in English Newspaper having a circulation all over India and in Kannada newspaper(having circulation in Bangalore) the same are not sent to the shareholders of the Company. Significant events of the Company arebeing disclosed to the Stock Exchanges from time to time.

Audit qualifications

There were no qualifications by the Auditors in their report for the financial year ended December 31, 2008.

Training of Board Members

Presently, the Company does not have any training programme for the Board members.

Mechanism for evaluating non-executive Board Members

Presently, the Company does not have such a mechanism as contemplated for evaluating the performance of non-executive Boardmembers.

Whistle-Blower policy

Presently, the Company does not have a Whistle-Blower policy. No personnel of the Company has been denied access to any of theDirectors of the Company.

On behalf of the Board of Directors

Place : Bangalore Ajay Nanavati B.V. Shankaranarayana RaoDate : February 27, 2009 Managing Director Whole-time Director

33M India Limited

26

Certificate by Chief Executive Officer (CEO) and Chief Financial Officer (CFO)

We hereby certify that :

(a) We have reviewed financial statements and the cash flow statement for the year ended December 31, 2008 and that to the best of

our knowledge and belief:

(i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might

be misleading;

(ii) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting

standards, applicable laws and regulations.

(b) To the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal

or violative of the Company’s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the

effectiveness of internal control systems of the Company pertaining to financial reporting and we have disclosed to the Auditors

and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the

steps we have taken or propose to take to rectify these deficiencies.

(d) We further confirm that:

(i) there were no significant changes in internal control over financial reporting during the year;

(ii) there were no significant changes in accounting policies during the year and

(iii) there were no instances of significant fraud of which we are aware and the involvement therein, of the management or an employee

having a significant role in the company’s internal control system over financial reporting.

On behalf of the Board of Directors

Place : Bangalore Ajay Nanavati B.V. Shankaranarayana RaoDate : February 27, 2009 Managing Director Whole-time Director

MAnnual Report 2008

27

To the members of 3M India Limited

We have examined the compliance of conditions of corporate governance by 3M India Limited for the year ended December 31, 2008,

as stipulated in clause 49 of the Listing agreement(s) of the said company with the stock exchange(s) in India.

The compliance of conditions of corporate governance is the responsibility of the company’s management. Our examination was

carried out in accordance with the Guidance Note on Certification of Corporate Governance (as stipulated in Clause 49 of the Listing

Agreement), issued by the Institute of Chartered Accountants of India and was limited to procedures and implementation thereof,

adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an

expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has

complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement(s).

We state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness

with which the management has conducted the affairs of the company.

Usha A NarayananPartner

Membership Number 23997

For and on behalf ofPlace : Bangalore Lovelock & LewesDate : February 27, 2009 Chartered Accountants

AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCEUNDER CLAUSE 49 OF THE LISTING AGREEMENT(S)

33M India Limited

28

AUDITORS’ REPORT TO THE MEMBERS OF 3M INDIA LIMITED

1. We have audited the attached Balance Sheet of 3M India Limited as at December 31, 2008, and the related Profit and LossAccount and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference tothis report. These financial statements are the responsibility of the company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report) (Amendment)Order, 2004 (together ‘the Order’), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of ‘TheCompanies Act, 1956 of India (the ‘Act’) and on the basis of such checks of the books and records of the company as weconsidered appropriate and according to the information and explanations given to us, we give in the Annexure a statementon the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary forthe purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from ourexamination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with thebooks of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply withthe accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, as on December 31, 2008 and taken on record by theBoard of Directors, none of the directors is disqualified as on December 31, 2008 from being appointed as a director interms of clause (g) of sub-section (1) of Section 274 of the Act;

(f ) In our opinion and to the best of our information and according to the explanations given to us, the said financialstatements together with the notes thereon and attached thereto, give, in the prescribed manner, the information requiredby the Act and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the company as at December 31, 2008;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Usha A NarayananPartner

Membership Number 23997

For and on behalf ofPlace : Bangalore Lovelock & LewesDate : February 27, 2009 Chartered Accountants

MAnnual Report 2008

29

Referred to in paragraph 3 of the Auditors’ Report of even date to the members of 3M India Limited on the financial statements for the

year ended December 31, 2008

1. (a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed

assets.

(b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the

items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the

nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management

during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not

been disposed off by the company during the year.

2. (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year. In

respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency

of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and

adequate in relation to the size of the company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of

inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register

maintained under Section 301 of the Act and accordingly, paragraphs iii(b), iii(c) and iii(d) of the Order, are not applicable.

(b) The company has not taken any loans secured or unsecured, from companies, firms or other parties covered in the register

maintained under Section 301 of the Act and accordingly, paragraphs iii(f ) and iii(g) of the Order, are not applicable.

4. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain

items purchased are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations,

there is an adequate internal control system commensurate with the size of the company and the nature of its business for the

purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books

and records of the company, and according to the information and explanations given to us, we have neither come across nor

have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of

contracts or arrangements entered into the register in pursuance of Section 301 of the Act and exceeding the value of Rupees

Five Lakhs in respect of any party during the year, which have been made at prices which are not reasonable having regard to

the prevailing market prices at the relevant time.

6. The company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the

rules framed there under.

7. In our opinion, the company has an internal audit system commensurate with its size and nature of its business.

8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of

Section 209 of the Act for any of the products of the company.

9. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion,

the company is generally regular in depositing the undisputed statutory dues including provident fund, investor education

and protection fund, employees’ state insurance, income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty, cess

and other material statutory dues as applicable with the appropriate authorities

ANNEXURE TO AUDITORS’ REPORT

33M India Limited

30

(b) According to the information and explanations given to us and the records of the company examined by us, the particulars

of dues of income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess as at December 31, 2008 which

have not been deposited on account of a dispute, are as follows

Name of Nature of Amount Period to which Forum where thethe statute Dues Claimed the amount relates dispute is pending

Income Income Tax 23,124,330 Assessment year Additional CommissionerTax Act, 1961 2005-06 of Income Tax

10. The company has no accumulated losses as at December 31, 2008 and it has not incurred any cash losses in the financial year

ended on that date or in the immediately preceding financial year.

11. In our opinion, and according to the information and explanations given to us, the company has not given any guarantee for

loans taken by others from banks or financial institutions during the year.

12. During the course of our examination of the books and records of the company, carried out in accordance with the generally

accepted auditing practices in India, and according to the information and explanations given to us, we have neither come

across any instance of fraud on or by the company, noticed or reported during the year, nor have we been informed of such case

by the management.

13. The other clauses, xi, xii, xiii, xiv, xvi, xvii, xviii, xix and xx of paragraph 4 of the Order are not applicable in the case of the company

for the current year, since in our opinion there is no matter which arises to be reported in the aforesaid order.

Usha A NarayananPartner

Membership Number 23997

For and on behalf ofPlace : Bangalore Lovelock & LewesDate : February 27, 2009 Chartered Accountants

MAnnual Report 2008

31

Schedule 2008 2007Number Rs. Rs.

SOURCES OF FUNDS

Shareholder’s Funds

Capital 1 112,650,700 112,650,700

Reserves and Surplus 2 3,364,903,708 2,790,354,621

3,477,554,408 2,903,005,321

APPLICATION OF FUNDS

Fixed Assets

Gross Block 3 1,668,548,542 1,008,773,159

Less: Depreciation 508,598,909 442,095,349

Net Block 1,159,949,633 566,677,810

Capital Work in Progress 273,269,625 407,554,966

1,433,219,258 974,232,776

Net Deferred Tax Asset [Schedule 14, Note 18(b)] 51,248,757 43,255,607

Current Assets, loans and advances

Inventories 4 1,059,699,112 675,670,396

Sundry Debtors 5 1,085,957,006 837,204,487

Cash and Bank Balances 6 524,835,661 959,909,199

Other Current Assets 7 149,697 3,999,208

Loans and Advances 8 613,997,909 490,457,033

3,284,639,385 2,967,240,323

Less: Current Liabilities and Provisions

Liabilities 9 1,169,499,371 1,002,749,467

Provisions 10 122,053,621 78,973,918

1,291,552,992 1,081,723,385

Net Current Assets 1,993,086,393 1,885,516,938

3,477,554,408 2,903,005,321

Notes to Accounts 14

The schedules referred to above and Notes thereon form an integral part of the Accounts

This is the Balance Sheet referred to in our For and on behalf of the Boardreport of even date

Usha A Narayanan Ajay Nanavati B. V. Shankaranarayana Rao K. Ramesh ChandraPartner Managing Director Whole-time Director Company SecretaryMembership No: 23997For and on behalf ofLovelock & LewesChartered Accountants

Place : BangaloreDate : February 27, 2009

BALANCE SHEET AS AT DECEMBER 31, 2008

33M India Limited

32

Schedule 2008 2007Number Rs. Rs.

INCOME

Sales 7,800,789,363 6,466,963,575

Less: Excise Duty 374,197,645 361,385,189

7,426,591,718 6,105,578,386

Other income 11 97,455,820 84,968,901

7,524,047,538 6,190,547,287

EXPENDITURE

Materials 12 4,267,603,309 3,253,481,087

Manufacturing and Other Expenses 13 2,273,923,928 1,811,858,907

Depreciation 72,292,207 58,922,643

6,613,819,444 5,124,262,637

Profit for the year before taxation 910,228,094 1,066,284,650

Provision for Income Tax (Schedule 14, Note 18)

- Current Tax 317,099,409 375,313,650

- Deferred Tax (7,993,150) (6,747,403)

- Fringe Benefit Tax 26,572,748 20,890,568

Profit for the year after taxation 574,549,087 676,827,835

Profit brought forward from previous year 2,692,139,621 2,015,311,786

Profit carried to Balance Sheet 3,266,688,708 2,692,139,621

Earnings Per Share - Basic and diluted(Schedule 14, Note 20) 51.00 60.08

Notes to Accounts 14

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2008

The schedules referred to above and notes thereon form an integral part of the Accounts

This is the Profit and Loss Account referred to in our For and on behalf of the Boardreport of even date

Usha A Narayanan Ajay Nanavati B. V. Shankaranarayana Rao K. Ramesh ChandraPartner Managing Director Whole-time Director Company SecretaryMembership No: 23997For and on behalf ofLovelock & LewesChartered Accountants

Place : BangaloreDate : February 27, 2009

MAnnual Report 2008

33

2008 2007Rs. Rs.

SCHEDULE 1

SHARE CAPITAL

AUTHORISED

11,265,070 (2007 : 11,265,070) Equity Shares of Rs. 10 each 112,650,700 112,650,700

ISSUED, SUBSCRIBED AND PAID UP

11,265,070 (2007 : 11,265,070) Equity Shares of Rs. 10 each 112,650,700 112,650,700

Note: Of the above 8,562,000 equity shares (2007: 8,562,000 equity

shares) are held by 3M Company, USA, Holding Company

112,650,700 112,650,700

SCHEDULE 2

RESERVES AND SURPLUS

General Reserves 3,225,000 3,225,000

Profit and Loss Account 3,266,688,708 2,692,139,621

Securities Premium account 94,990,000 94,990,000

3,364,903,708 2,790,354,621

SCHEDULES TO ACCOUNTS

33M India Limited

34

GR

OSS

BLO

CK

AT

CO

STD

EPR

ECIA

TIO

N/A

MO

RTI

SATI

ON

NET

BLO

CK

Sal

e /

Sal

es /

200

7 A

dd

itio

ns

Del

etio

ns

200

8 2

007

Ad

dit

ion

sD

elet

ion

s20

0820

0820

07R

s.R

s.R

s.R

s.R

s.R

s.R

s.R

s. R

s.R

s.

Free

hold

Lan

d25

,153

,562

-2,

358,

420

22,7

95,1

42-

--

-22

,795

,142

25,1

53,5

62

Leas

ehol

d La

nd45

,809

,456

--

45,8

09,4

56-

--

-45

,809

,456

45,8

09,4

56

(Ref

er N

ote

belo

w)

Goo

dw

ill60

,017

,170

--

6

0,01

7,17

060

,017

,170

--

60,0

17,1

70-

-

Fact

ory

Build

ings

98,7

31,1

5131

8,02

6,57

09,

544,

109

407,

213,

612

24,6

00,1

364,

959,

751

2,62

0,74

926

,939

,138

380,

274,

474

74,1

31,0

15

Leas

ehol

d Im

pro

vem

ents

177,

289,

780

1,47

4,81

0-

178,

764,

590

14,2

66,8

6118

,328

,910

-32

,595

,771

146,

168,

819

163,

022,

919

Plan

t an

d M

achi

nery

434,

479,

816

274,

459,

570

3,08

0,08

870

5,85

9,29

819

9,03

4,19

739

,552

,910

2,44

9,78

623

6,13

7,32

146

9,72

1,97

723

5,44

5,61

9

Dat

a Pr

oces

sing

Equ

ipm

ents

and

Soft

war

e96

,130

,247

804,

740

24,7

0296

,910

,285

95,0

97,5

801,

152,

818

24,7

0296

,225

,696

684,

589

1,03

2,66

7

Furn

iture

, Fix

ture

s an

d

Offi

ce E

quip

men

ts68

,447

,723

80,8

33,0

291,

068,

047

148,

212,

705

47,1

90,8

258,

048,

833

693,

410

54,5

46,2

4893

,666

,457

21,2

56,8

98

Veh

icle

s2,

714,

254

252,

030

-2,

966,

284

1,88

8,58

024

8,98

5 -

2,13

7,56

582

8,71

982

5,67

4

1,00

8,77

3,15

967

5,85

0,74

916

,075

,366

1,66

8,54

8,54

244

2,09

5,34

972

,292

,207

5,78

8,64

750

8,59

8,90

91,

159,

949,

633

566,

677,

810

2007

793,

730,

647

312,

957,

996

97,9

15,4

841,

008,

773,

159

475,

370,

162

58,9

22,6

4392

,197

,456

442,

095,

349

Cap

ital

Wo

rk i

n P

rog

ress

[in

clu

din

g c

apit

al a

dva

nce

Rs.

22,

191,

849

(200

7: R

s. 3

8,53

0,25

9)]

273,

269,

625

407,

554,

966

1,43

3,21

9,25

897

4,23

2,77

6

No

te: L

ease

ho

ld la

nd

rep

rese

nts

am

ou

nt p

aid

to M

ahar

ash

tra

Ind

ust

rial

Dev

elo

pm

ent C

orp

ora

tio

n fo

r lan

d to

be

pu

rch

ased

on

95

year

s le

ase,

for w

hic

h c

om

plia

nce

wit

h c

erta

in c

on

dit

ion

s a

s m

enti

on

ed in

the

Lice

nse

Ag

reem

ent a

nd

reg

istr

atio

n is

pen

din

g a

s o

n d

ate.

SCH

EDU

LE T

O A

CC

OU

NT

S

SCH

EDU

LE 3

FIX

ED A

SSET

S [S

ched

ule

14,

No

te 1

(b) a

nd

(c)]

Par

ticu

lars

MAnnual Report 2008

35

2008 2007Rs. Rs.

SCHEDULE 4

INVENTORIES

[Schedule 14, Note 1(d)]

Raw Materials 412,820,169 245,648,651

[including in-transit Rs. 49,400,949 (2007: Rs.51,805,449)]

Packing Materials 15,594,856 10,490,759

Semi Finished Goods 30,225,132 19,487,755

Finished Goods 199,649,644 130,435,608

Traded Goods 398,223,143 265,418,737

[including in-transit Rs. 65,567,745 (2007 : Rs.54,159,459)]

Stores and Spares 3,186,168 4,188,886

1,059,699,112 675,670,396

SCHEDULE 5

SUNDRY DEBTORS

(Secured)

Over six months 3,953,843 4,437,118

Others 35,277,175 28,717,870

(Unsecured)

Over six months

- considered good 16,793,292 524,701

- considered doubtful 43,594,853 63,110,233

Others

- considered good 1,029,932,696 803,524,798

1,129,551,859 900,314,720

Less: Provision for doubtful debts 43,594,853 63,110,233

1,085,957,006 837,204,487

SCHEDULE 6

CASH AND BANK BALANCES

Cash on hand 161,856 115,900

With Scheduled Banks:

- Current Accounts 320,360,712 172,171,114

- Deposit Accounts* 203,204,000 786,700,000

- Margin Money Accounts** 1,109,093 922,185

524,835,661 959,909,199

* Includes deposit of Rs.3,100,000 (2007 : Rs. 10,200,000) under lien

** Held against guarantees issued

SCHEDULES TO ACCOUNTS

33M India Limited

36

SCHEDULES TO ACCOUNTS

2008 2007Rs. Rs.

SCHEDULE 7

OTHER CURRENT ASSETS

Interest Accrued but not due 149,697 3,999,208

149,697 3,999,208

SCHEDULE 8

LOANS AND ADVANCES

(Unsecured, considered good unless otherwise stated)

Advances recoverable in cash or in kind or for value to be received* 258,375,783 263,072,344

Taxation (Net) 70,623,593 46,818,747

Deposits with Government departments and others* 173,191,833 151,377,023

Balances with Excise and Customs Authorities 125,946,889 37,205,608

628,138,098 498,473,722

Less: Provision for doubtful advances 14,140,189 8,016,689

613,997,909 490,457,033

* Includes doubtful advances and deposits of Rs. 14,140,189 (2007 : Rs. 8,016,689)

SCHEDULE 9

LIABILITIES

Sundry creditors for goods, expenses and services

- Dues to Micro, Small and Medium Enterprises (Schedule 14, Note 12) 1,498,148 928,748

- Others 1,007,702,685 852,978,586

Advance from customers/distributors 87,535,259 77,174,475

Other Liabilities 72,763,279 71,667,658

1,169,499,371 1,002,749,467

SCHEDULE 10

PROVISIONS

Employee Benefits

- Gratuity (Schedule 14, Note 14) 24,377,824 8,609,215

- Leave Encashment / Compensated Absences 70,064,283 46,194,959

Fringe Benefit Tax (Net) 4,471,320 997,550

Sales Tax (Schedule 14, Note 19) 22,247,194 17,472,194

Other Payables (Schedule 14, Note 19) 893,000 5,700,000

122,053,621 78,973,918

MAnnual Report 2008

37

2008 2007Rs. Rs.

SCHEDULE 11

OTHER INCOME

Interest - Gross [tax deducted at source Rs.11,290,780(2007: Rs.12,191,670)] 50,629,407 53,802,733

Exchange Gain (net) - 11,140,583

Provision for doubtful debts written back (net) 19,515,380 10,277,769

Income from Sub-lease [tax deducted at source Rs. 2,334,603(2007: Rs.387,486)] 10,302,750 1,710,000

Balances / Provisions no longer required 4,807,000 8,037,816

Profit on Sale of Fixed Assets (net) 12,201,283 -

97,455,820 84,968,901

SCHEDULE 12

MATERIALS

Raw materials Consumed 1,585,991,347 1,382,668,278

Traded Goods - Purchased 2,894,367,781 1,900,115,859

Movement in Inventory :

Opening Stock

- Semi Finished Goods 19,487,755 16,808,024

- Finished Goods 130,435,608 118,053,803

- Traded Goods 265,418,737 251,177,223

415,342,100 386,039,050

Less : Closing Stock

- Semi Finished Goods 30,225,132 19,487,755

- Finished Goods 199,649,644 130,435,608

- Traded Goods 398,223,143 265,418,737

628,097,919 415,342,100

(212,755,819) (29,303,050)

(Increase)/ Decrease in inventory (212,755,819) (29,303,050)

4,267,603,309 3,253,481,087

SCHEDULES TO ACCOUNTS

33M India Limited

38

SCHEDULES TO ACCOUNTS

SCHEDULE 13

MANUFACTURING AND OTHER EXPENSES

Employee Cost:

Salaries , wages and bonus [including provision for

Leave encashment Rs. 23,869,324 (2007: Rs. 8,823,700)] * 782,200,793 635,208,272

Contribution to Provident and other funds

[including provision for gratuity Rs. 29,604,695 (2007: Rs. 9,631,495)] 96,224,227 63,147,995

Staff welfare expenses * 67,524,586 57,385,790

945,949,606 755,742,057

Power, fuel and water * 57,063,751 48,868,936

Stores and spares consumed 30,141,072 26,444,284

Packing materials consumed 111,267,094 97,007,114

Excise Duty 6,389,585 21,486,371

Repairs and maintenance

- Building * 20,252,731 15,247,329

- Plant and machinery 27,575,213 23,371,860

- Others * 11,814,148 59,642,092 11,002,852 49,622,041

Lease rentals (Schedule 14, Note 17) * 176,798,898 144,738,548

Rates and taxes 13,730,355 17,952,695

Communication * 28,126,376 21,044,482

Travel and conveyance 124,837,592 111,530,308

Insurance 23,831,634 16,785,185

Legal and professional charges (Schedule 14, Note 5) 18,320,237 20,176,272

Selling, Distribution and Advertisement Expenses 337,374,809 242,497,295

Commission on sales 61,151,545 30,324,285

Freight outward (net) 11,950,606 15,810,393

Corporate Management Fees (Net) * 92,508,203 84,386,210

Interest to others 4,666,971 3,387,000

Directors’ sitting fees 780,000 780,000

Bad debts written off 10,414,693 8,649,274

Provision for doubtful advances and deposits 6,123,500 -

Loss on Sale of Fixed Assets (net) - 3,022,149

Exchange loss (net) 40,820,713 -

Miscellaneous expenses * 112,034,596 91,604,008

2,273,923,928 1,811,858,907

* Net of recoveries amounting to Rs. 20,087,168 (2007 : Rs. 18,632,524)recovered from 3M Electro & Communication India Private Limited,a subsidiary of 3M Company, St. Paul, USA.

2008 2007Rs. Rs.

MAnnual Report 2008

39

NOTES TO ACCOUNTS

SCHEDULE 14

1 Statement on Significant Accounting Policies

a Method of Accounting

The Company adopts the historical cost concept and accrual basis in accordance with generally accepted accountingprinciples (GAAP) in India for the preparation of its accounts. The Financial Statements are prepared to comply in all materialaspects with all the applicable accounting principles in India, the applicable accounting standards notified u/s 211(3C) of theCompanies Act, 1956 and the relevant provisions of the Companies Act, 1956.

b Fixed assets

Fixed assets are stated at original cost less accumulated depreciation. Cost includes invoice price and wherever applicablefreight, duties and taxes, related interest on specific borrowings upto the date of acquisition/installation and expensesincidental to acquisition and installation. Operating Software is capitalized along with fixed assets.

c Depreciation and amortisation

Depreciation on fixed assets other than leasehold improvements is provided on straight line method at the following ratesspecified which are equal to or higher than the principal rates specified in Schedule XIV to the Companies Act, 1956:

Per Annum

Buildings 3.34%

Plant and Machinery 10.00%

Data Processing Equipments and Software 20.00% to 33.33%

Office Equipments 20.00%

Furniture and Fixtures 6.67%

Vehicles 20.00%

Leasehold improvements are amortised over the period of lease as estimated by the management.

Application software are amortised over their useful life as determined by the management.

d Inventories

Inventories are valued at lower of cost and net realisable value except in case of stores and spares which are valued at cost.

The costs are, in general, ascertained as under:

Raw Materials :

- First in first out method based on actual cost.

Traded goods :

- First in first out method based on actual cost. Goods lying at bonded warehouse are valued inclusive of customs duty.

- Stock in transit is valued excluding customs duty.

Finished goods and Work in Progress :

- Material cost on weighted average method plus labour and appropriate overheads and, where applicable, excise duty.

Provision for obsolescence is made wherever considered necessary based on the age of the stocks.

e Foreign Currency Transactions

Transactions in foreign currency are recognised at the rates of exchange ruling on the dates of the transactions.

Liabilities/ assets in foreign currencies are reckoned in the accounts as per the following principles:

Foreign currency liabilities contracted for acquiring fixed assets are restated at the rates ruling at the year end and allexchange differences arising as a result of such restatement are adjusted to the profit and loss account.

All monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and allexchange gains/ losses arising there from are adjusted to the Profit and Loss Account, except those covered by forwardcontracted rates where the premium or discount arising at the inception of such forward exchange contract is amortised asexpense or income over the life of the contract.

Exchange differences on forward contracts are recognised in the Profit and Loss Account in the reporting period in whichthe exchange rates change. Any profit or loss arising on cancellation or renewal of such forward contracts is recognised asincome or expense for the year.

33M India Limited

40

f Employee Benefits

Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. TheCompany has an Employees Gratuity Fund managed by ICICI Prudential Life Insurance Company Limited. The Companyaccounts for the liability of Gratuity Benefits payable in future based on an independent actuarial valuation.

Superannuation

The Company makes contribution to the Superannuation Scheme, a defined contribution scheme, administered by ICICIPrudential Life Insurance Company Limited, based on a specified percentage of eligible employees salary. The Company’sobligation to the scheme is restricted to the contributions to the scheme.

Leave Encashment/ Compensated Absences

The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled toaccumulate leave subject to certain limits, for future encashment/ availment. The liability is provided based on the numberof days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation.

Provident Fund

Contributions payable in respect of Provident Fund, which is a defined contribution scheme, is charged to the Profit andLoss account. Refer Note 14 (i).

g Revenue Recognition

Sales are recognised when goods are despatched in accordance with the terms of sale and significant risks and rewards aretransferred and are recorded net of sales returns, trade discount, rebates and sales tax collected but includes excise duty,where applicable. Interest and other income is accounted for on accrual basis except items of non recurring nature whichare accounted when received.

h Expenditure

Expenses are accounted for, on accrual basis and provision is made for all known losses and liabilities.

Excise duty and customs duty are accrued on the goods lying in the bonded warehouse at the year end.

Revenue expenditure on Research and Development is charged against the profit of the year in which it is incurred. Capitalexpenditure on research and development is shown as an addition to fixed assets.

i Leases

A lease is classified as an Operating Lease, if it does not transfer substantially all the risks and rewards incident to ownership.Lease rentals are charged to Profit and Loss Account on straight-line basis over the lease term, estimated by the management.

j Taxation

Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961.

Deferred Tax is recognized on timing differences between the accounting income and the taxable income for the year andquantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred Tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficientfuture taxable income will be available against which such deferred tax asset can be realised.

Fringe Benefit Tax is determined at current applicable rates on expenses falling within the ambit of ‘Fringe Benefit’, asdefined under Income Tax Act, 1961.

k Provisions

Provisions are recognised when the company has a present obligation as a result of past events, it is probable that anoutflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where thecompany expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only whenreimbursement is virtually certain.

l Impairment

At the Balance Sheet date the company assesses whether there is any indication that an asset may be materially impaired.If such an indication exists, the company estimates the recoverable amount. If the carrying amount of the asset exceeds itsrecoverable amount, an impairment loss is recognised in the Profit and Loss Account to the extent carrying amount exceedsthe recoverable amount.

m Earnings per Share

Annualised Basic earning per equity share is arrived at based on net profit/(loss) after taxation to the basic/weightedaverage number of equity shares.

NOTES TO ACCOUNTS

SCHEDULE 14

MAnnual Report 2008

41

NOTES TO ACCOUNTS

SCHEDULE 14

2008 2007Rs. Rs.

2 Contingent Liabilities not provided for :

a) Guarantees:

- issued by Company’s Bankers 27,605,733 20,994,133

b) Letter of credit opened by banks for purchase of inventory / capital goods - 2,436,828

c) Claims against the Company not acknowledged as debts:

- Customs Demands 3,119,000 3,119,000

- Employees State Insurance claim - 1,940,000

- Income Tax matter 23,124,330 -

d) Sales Tax matters 83,052,912 60,590,250

3 Capital expenditure commitments (net of advances) 117,510,918 404,109,071

4 Quantitative Information in respect of goods manufactured and traded by the Company

A. Particulars of Capacity and Production:

Licensed Installed ProductionClass of Goods Unit Capacity Capacity

[Note (iii)] [Note (i)]

Self Adhesive Labels Nos NA 50,000,000 47,140,296(40,000,000) (33,596,758)

Epoxy Resin Kgs NA 23,000,000 3,704,564(23,000,000) (2,464,656)

Paper and Paper Tapes Nos NA NA 28,831,643(26,192,548)

Paint Polishes Nos NA NA 2,851,750(1,547,542)

Abrasives Nos NA NA 45,219,169(53,821,238)

Notes:

i) Installed capacity is as certified by the management and relied upon by the auditors without verification as this is a technicalmatter.

ii) Figures in brackets relate to the previous year.

iii) Includes products which are non standard having various sizes and measurement.

33M India Limited

42

NOTES TO ACCOUNTS

SCHEDULE 14

B. Particulars of Opening and Closing Stock of Stocks in Trade

Class of Goods Unit* Opening Stock Closing StockQuantity Value Quantity Value

Rs. Rs.

Manufactured

Self Adhesive Labels Nos 3,607,712 30,816,601 4,526,782 58,634,963(2,835,017) (20,539,092) (3,607,712) (30,816,601)

Epoxy Resin Kgs 21,723 2,772,147 7,726 1,079,238(54,857) (6,909,756) (21,723) (2,772,147)

Paper and Paper Tapes Nos 1,526,018 20,356,659 1,410,932 30,101,319(2,059,165) (20,131,146) (1,526,018) (20,356,659)

Paint Polishes Nos 224,484 10,788,358 199,099 12,329,690(325,443) (10,080,761) (224,484) (10,788,358)

Abrasives Nos 4,028,823 21,832,525 4,754,611 34,211,763(6,413,725) (32,647,441) (4,028,823) (21,832,525)

Others (individually less than 10% of the total stock) 43,869,318 63,292,671(27,745,607) (43,869,318)

130,435,608 199,649,644(118,053,803) (130,435,608)

Traded

Self Adhesive Labels Nos 13,835 84,945,177 102,247 92,508,104(9,683) (24,748,405) (13,835) (84,945,177)

Surgical and Dental Products Nos 273,269 62,345,953 341,526 91,588,476(156,658) (55,087,538) (273,269) (62,345,953)

Paint Polishes Nos 133,270 15,779,471 150,992 20,356,802(469,283) (29,055,187) (133,270) (15,779,471)

Abrasives Nos 8,193,022 57,396,047 7,419,731 88,609,244(2,479,403) (43,490,588) (8,193,022) (57,396,047)

Others (individually less than 10% of the total stock) 44,952,089 105,160,517(98,795,505) (44,952,089)

265,418,737 398,223,143(251,177,223) (265,418,737)

Note: Figures in brackets relate to the previous year

* includes products which are non standard having various sizes and measurement

MAnnual Report 2008

43

NOTES TO ACCOUNTS

SCHEDULE 14

C. Particulars of turnover

Class of Goods Unit* TurnoverQuantity Value

Rs.

Self Adhesive Labels Nos 46,628,856 1,889,155,530(33,007,225) (1,758,767,450)

Surgical and Dental Products Nos 12,453,564 1,118,938,618(1,338,946) (806,265,955)

Epoxy Resin Kgs 3,718,561 552,733,193(2,497,790) (523,374,547)

Paper and Paper Tapes Nos 28,946,729 856,955,576(26,725,695) (698,224,467)

Paint Polishes Nos 3,985,823 484,676,280(2,321,968 ) (340,666,188 )

Abrasives Nos 97,618,945 1,275,865,164(81,836,228) (1,130,405,231)

Others (individually less than 10% of the total turnover) 1,248,267,357(847,874,548)

7,426,591,718(6,105,578,386)

D. Particulars of Purchase of Traded Goods

Class of Goods Unit* Quantity ValueRs.

Self Adhesive Labels Nos 496,044 518,042,502(187,314) (502,780,313)

Surgical and Dental Products Nos 12,521,821 758,486,266(1,455,557) (427,392,336)

Paint Polishes Nos 1,126,410 128,818,118(337,454 ) (80,175,306)

Abrasives Nos 52,352,273 418,851,037(31,343,707) (311,994,538)

Others (individually less than 10% of the total turnover) 1,070,169,858(577,773,366)

2,894,367,781(1,900,115,859)

Note: Figures in brackets relate to the previous year* includes products which are non standard having various sizes and measurement

2008 2007Rs. Rs.

5 Auditors Remuneration*(Included under legal and professional charges in schedule 13)(excluding service tax)

- Audit fees 2,050,000 1,700,000- Tax Audit Fees 600,000 600,000- Certification and other services 1,160,000 1,450,000- Reimbursement of expenses 57,814 89,325

* excluding service tax

33M India Limited

44

innovate, grow, deliver

2008 2007Rs. Rs.

6 Value of imports on C.I.F basis:(excluding Goods in transit)- Raw Materials 1,173,318,639 796,288,428

- Traded Goods 1,959,093,221 1,173,926,394

- Stores and Spares 5,376,364 6,293,297- Capital Goods 151,051,275 32,310,008

7 Expenditure in Foreign Currency

- Travelling Expenses 14,411,059 17,693,710

- Others (net of tax) 97,957,946 74,904,748

8 Raw Materials Consumed

2008 2007Class of Goods Unit Quantity Value Quantity Value

Rs Rs

Abrasives Linear Yard 413,908 128,412,337 380,424 78,407,883

Films Linear Yard 673,777 171,714,632 916,846 225,036,240

Films Rolls 43,974 195,778,064 32,288 161,440,402

Inks Gallons 41,228 78,602,732 110,591 115,696,202

Tapes Numbers 5,779,325 353,557,320 3,615,201 187,758,151

Epoxy Kilograms 2,731,791 281,160,579 2,786,563 354,311,372

Paint Polishes Gallon 198,260 35,298,947 125,499 38,076,397

Dyneon Sq Mtr 349,305 60,189,460 93,293 30,374,378

Others (individually less than 10% ofthe total material consumed) 281,277,276 191,567,253

1,585,991,347 1,382,668,278

NOTES TO ACCOUNTS

SCHEDULE 14

2008 2007% Value % Value

Rs. Rs.

9 Value of Imported and Indigenous Raw Materialand Stores and Spares consumed(As certified by the Management)Raw Materials- Imported 83% 1,316,372,818 71% 981,694,478- Indigenous 17% 269,618,529 29% 400,973,800

100% 1,585,991,347 100% 1,382,668,278

Stores and Spares- Imported 25% 7,535,268 9% 2,379,986- Indigenous 75% 22,605,804 91% 24,064,298

100% 30,141,072 100% 26,444,284

2008 2007Rs. Rs.

10 Earnings in Foreign Exchange :

- Export of goods calculated on FOB basis 42,284,005 39,140,519

- Freight and Insurance on exports 1,599,144 1,753,162

MAnnual Report 2008

45

NOTES TO ACCOUNTS

SCHEDULE 14

2008 2007Rs. Rs.

11 Research and Development Expenses :

Recurring Expenses 7,036,465 3,928,330Capital Expenditure 14,757,362 13,241,302

12 Disclosure of dues / payments to Micro, Small and Medium enterprises to the extent suchenterprises are identified by the company.

(a) (i) The principal amount remaining unpaid as at year end 1,208,164 742,147

(ii) Interest due thereon remaining unpaid as at year end 289,984 186,601

(b) The amount of interest paid by the buyer in terms of section 16 of the Micro, Smalland Medium Enterprises Development Act, 2006, along with the amount of thepayment made to the supplier beyond the appointed day during each accounting year:

(i) Delayed payment of principal amount paid beyond the appointed date duringthe entire accounting year.

(ii) Interest actually paid under Section 16 of the act, during the entire accounting year. - -

(c) The amount of interest due and payable for the period of delay in making payment(which have been paid but beyond the appointed day during the year) but withoutadding the interest specified under the Micro, Small and Medium EnterprisesDevelopment Act, 2006 - -

(d) The amount of interest accrued and remaining unpaid as at year end

(i ) Total interest accrued during the year 180,177 143,319

(ii )Total Interest remaining unpaid out of the above as at year end. - -

(e) The amount of further interest remaining due and payable even in the succeedingyears, until such date when the interest dues as above are actually paid to thesmall enterprise, for the purpose of disallowance as a deductible expenditureunder section 23 of the Micro, Small and Medium Enterprises Development Act, 2006. 109,807 43,282

Notes : The above information has been determined based on vendors identified by thecompany and confirmed by the vendors, which have been relied upon by the auditors.

13. The Company has not made provision for warranty in respect of certain goods consideringthat the company can claim the warranty cost from the original supplier.

14. Employee Benefits

i) The company has recognised, in the profit and loss account for the year endedDecember 31,2008 an amount of Rs. 66,619,532 (2007: Rs.53,516,500) under definedcontribution plans.

Benefits (Contribution to)

Provident Fund 31,144,302 25,102,958Superannuation Fund 34,650,248 27,804,381

Employee State Insurance Corporation 824,982 609,161

Total 66,619,532 53,516,500

ii) The company operates post retirement defined benefit plan for retirementgratuity which is funded.

iii) Details of the post retirement gratuity plan are as follows:

I Reconciliation of opening and closing balances of obligationa. Obligation as at the beginning of the year 47,620,641 37,325,535b. Current Service Cost 6,885,210 5,291,544c. Interest Cost 4,286,227 2,883,631d. Actuarial (Gain)/Loss 21,087,476 3,632,777e. Benefits Paid (7,743,571) (1,512,846)

f. Obligation as at the end of the year 72,135,983 47,620,641

33M India Limited

46

NOTES TO ACCOUNTS

SCHEDULE 14

II Change in Plan Assets (Reconciliation of opening and closing balances)

a. Fair Value of Plan Assets as at the beginning of the year 39,011,426 26,076,379

b. Expected return on Plan Assets 3,119,799 2,030,426

c. Actuarial Gain/(Loss) (465,581) 146,031

d. Contributions 13,836,086 12,271,436

e. Benefits Paid (7,743,571) (1,512,846)

f. Fair Value of Plan Assets as at the end of the year 47,758,159 39,011,426

III Reconciliation of fair value of assets and obligations

a. Present Value of Obligation as at the beginning of the year 72,135,983 47,620,641

b. Fair value of Plan Assets as at the end of the year (47,758,159) (39,011,426)

c. Amount recognised in the Balance Sheet 24,377,824 8,609,215

IV Expense recognised during the year

a. Current Service Cost 6,885,210 5,291,544

b. Interest Cost 4,286,227 2,883,631

c. Expected return on Plan Assets (3,119,799) (2,030,426)

d. Actuarial (Gain)/Loss 21,553,057 3,486,746

e. Expense recognised during the year 29,604,695 9,631,495

The expense is disclosed in the line item-Contribution to provident and other funds.

V Assumptions

a. Discount Rate (per annum) 5.70% 8.15%

b. Interest Rate (per annum) 7.50 % 7.50%

c. Estimated Rate of return on Plan Assets (per annum) 7.50% 7.50%

d. Rate of Escalation in Salary (per annum) 5.00% 5.00%

Note: 1) The estimates of future salary increases, considered in actuarial valuation take account of inflation, seniority, promotionand other relevant factors such as supply and demand in the employment market.

2) As per management estimate, contribution of Rs. 15,000,000 is expected to be paid to the plan during the year endingDecember 31, 2009.

15. (a) Managerial Remuneration paid by the Company *

Salary and Allowances 12,963,170 14,061,712

Contribution to Provident and other funds 742,037 543,416

Estimated value of benefits 2,858,780 3,432,562

16,563,987 18,037,690

* Excluding contribution to gratuity fund and provision for leave encashment

b) Computation of profit in accordance with Section 198(1) read with Sec 309(5) of the

Companies Act, 1956 for calculation of Managerial Remuneration

Profit before Taxation (as per books) 910,228,094 1,066,284,650

Add: 1. Managerial Remuneration 16,563,987 18,037,690

2. Depreciation charged in the accounts 72,292,207 58,922,643

3. Provision for doubtful debts 6,123,500 -

4. Loss on sale of Fixed Assets (net) - 3,022,149

5. Directors sitting fees 780,000 780,000

1,005,987,788 1,147,047,132

2008 2007Rs. Rs.

MAnnual Report 2008

47

NOTES TO ACCOUNTS

SCHEDULE 14

Note : Mr. Ajay Nanavati was appointed as Managing Director on October 1, 2008 and the Company has applied for approval from Central Governmentwith respect to residential status as per Part 1 (e) of Schedule XIII of the Companies Act, 1956 and the approval is awaited. The above saidappointment is subject to approval from Shareholders in the ensuing Annual General Meeting.

Less: 1. Depreciation as per Section 350 of the Companies Act, 1956 72,292,207 58,922,643

2. Profit on sale of Fixed Assets (net) 6,412,634 -

3. Provision for doubtful debts and advances written back 24,322,380 18,315,585

103,027,221 77,238,228

Profit as per Section 198 of the Companies Act, 1956 902,960,567 1,069,808,904

10% of the above (2007: 10%) 90,296,057 106,980,890

Remuneration paid during the year 16,563,987 18,037,690

16. Related Party Transactions

(A) Summary of the monetary value of the transactions with the related parties are as follows:

Holding Fellow Key TotalCompany Subsidiaries Management

[B(i)] [B(ii)] [B(iii)]Rs. Rs. Rs. Rs.

I. Expenses:

ia. Purchase of Materials 911,331,818 1,782,181,081 - 2,693,512,899(822,618,365) (909,609,171) - (1,732,227,536)

ib. Sales promotion expenses 448,606 559,613 - 1,008,219(205,194) (283,462) - (488,656)

ic. Remuneration to Directors - - 16,563,987 16,563,987- - (18,037,690) (18,037,690)

id. Other Services - 92,619,690 - 92,619,690- (74,195,023) - (74,195,023)

II. Income

iia. Sale of Goods 204,588 42,079,417 - 42,284,005(508,932) ( 38,017,618) - (38,526,550)

iib. Reimbursement of Cross Charges / Expenses - 20,087,168 - 20,087,168- (18,632,524) - (18,632,524)

III. Purchase of Capital Goods 22,869,364 14,845,752 - 37,715,116(202,871) (182,413) - (385,284)

IV. Balances

iva. Advance Received 76,675,093 - - 76,675,093(76,675,093) - - (76,675,093)

ivb. Outstanding receivables 667,055 35,161,635 - 35,828,690(1,098,479) ( 29,777,906) - (30,876,385)

ivc. Outstanding payables 103,468,261 180,878,972 - 284,347,233(99,797,852) (200,414,522) - (300,212,374)

ivd. Capital Advances Paid - - - -(5,915,400) - - (5,915,400)

Notes:1. The above does not include related party transactions with retiral funds, as key management personnel who are

trustees of the funds cannot individually exercise significant influence on the retiral funds transactions.2. The above information has been determined to the extent such parties have been identified on the basis of

information available with the Company and relied upon by the auditors.3. Figures in brackets relates to the previous year.

2008 2007Rs. Rs.

33M India Limited

48

NOTES TO ACCOUNTS

SCHEDULE 14

Relationship 2008 2007Rs. Rs.

Sale of Goods

3M Italy Fellow Subsidiary 15,429,408 138,409

3M Gulf Ltd Fellow Subsidiary 9,689,729 27,650,180

3M Lanka Ltd Fellow Subsidiary 7,420,842 6,956,880

3M Indonesia Ltd Fellow Subsidiary 4,673,505 1,233,233

Reimbursement of Cross Charges / Expenses

3M Electro & Communication India Private Ltd Fellow Subsidiary 20,087,168 18,632,524

Sales Promotion Expenses

3M Taiwan Ltd Fellow Subsidiary 307,461 195,391

Sumitomo 3M Ltd Fellow Subsidiary 248,231 50,433

Remuneration to Directors

Mr. Bert O’ Donoghue Key Management Personnel 8,030,566 11,999,713

Mr. Ajay Nanavati Key Management Personnel 2,371,015 -

Mr. B.V. Shankaranarayana Rao Key Management Personnel 6,162,406 6,037,977

Purchase of Capital Goods

3M Taiwan Limited Fellow Subsidiary 5,669,336 182,413

3M Canada Company Fellow Subsidiary 9,070,093 -

Outstanding receivables

3M Italia S.p.A. Fellow Subsidiary 3,977,073 -

3M Gulf Ltd Fellow Subsidiary 10,058,407 -

3M Electro & Communication India Private Ltd Fellow Subsidiary 19,434,815 28,437,152

Outstanding Payables

Sumitomo 3M Ltd Fellow Subsidiary 31,628,243 32,235,708

3M United Kingdom PLC Fellow Subsidiary 51,665,047 1,696,630

Purchase of Materials

3M Asia Pacific Pte Ltd Fellow Subsidiary 228,940,518 98,830,570

3M Health Care Ltd - Japan Fellow Subsidiary 198,627,146 -

3M Korea Fellow Subsidiary 202,150,093 122,061,233

Sumitomo 3M Ltd Fellow Subsidiary 312,408,481 191,334,419

Other Services

3M Asia Pacific Pte Ltd Fellow Subsidiary 92,619,690 74,195,023

Disclosure of transactions which are more than 10% of the total transactions of the same type with related parties during the year.

MAnnual Report 2008

49

NOTES TO ACCOUNTS

SCHEDULE 14

(B) Names of related parties and description of the relationship:

(i) Parties where control existsHolding Company 3M Company, St Paul, USA

(ii) Fellow Subsidiaries:3M (East) A.G. 3M Optical System Mfg. Co.3M (New Zealand) Ltd 3M Philipines Inc3M (Schweiz) A.G. 3M Poland Sp z.o.o.3M A/S 3M Precision Optics, Inc.3M Ait Ltd 3M Puerto Rico, Inc.3M Argentina S.A.C.I.F.I.A. 3M Russia3M Asset Management S.a.r.l. 3M Sanayi VE Ticaret AS3M Australia Pty. Ltd 3M Sante3M Belgium S.A./N.V. 3M Sanvetec3M Canada Company 3M Singapore Private Ltd3M China Ltd 3M South Africa (Proprietary) Ltd3M Corporate Services B.V. 3M Spain3M Deutschland GmbH 3M Svenska AB3M do Brasil Ltd 3M Sweden3M Ecc Europa B V 3M Taiwan Ltd3M Electro & Communication India Private Ltd 3M Taiwan Optronics Corp.3M Espana, S.A. 3M Technologies Private Ltd3M ESPE AG 3M Telecommunications, Pouyet3M Europe S.A. 3M Thailand Ltd3M Financial Management Company 3M Touch Systems, Inc.3M France, S.A. 3M Traffic Safety Material3M German Holdings GmbH 3M Turkey3M Global Capital S.a.r.l. 3M United Kingdom Holdings PLC3M Gulf Ltd. 3M United Kingdom PLC3M Health Care Ltd. 3M Unitek Corporation3M Health Information Systems, Inc. 3M Vietnam3M Hellas Ltd 3MUnitek GmbH3M Hong Kong Ltd CUNO Engineered Products, Inc.3M Indonesia Kbyt CUNO Filtration Asia Pte. Ltd.3M Innovative Properties Company CUNO Filtration SAS3M International Group B.V CUNO Incorporated3M International Trading (Shanghai) Co., Ltd. CUNO Pacific Pty Ltd.3M Investment Management Corporation Dyneon GmbH & Co. KG3M Italia S.p.A. Dyneon LLC3M Korea Health and Safety Ltd HighJump Software, LLC3M Korea Ltd Kyuno Kabushiki Kaisha Sumitomo3M Limited Laboratories 3M Sante SAS3M Malaysia SDN. BHD Nadco Japan Ltd3M Manufacturera Venezuela, S.A. Riker Laboratories, Inc.3M Material Technology Co., Ltd. Seaside Insurance Limited3M Mexico, S.A. de C.V. Security Printing and Systems Ltd.3M Netherland B.V. Sumitomo 3M Ltd3M New Zealand Ltd Suomen 3M Oy3M Norge A/S Yamagata 3M Ltd3M Oesterreich GmbH 3M Asia Pacific Pte Ltd3M AUST BIOTRACE 3M BRCKNELL3M Film Construction (Shangai) Company Ltd 3M Korea Hightech Ltd3M International Trading (Shenzen) Company Ltd 3M Lanka Private Ltd3M International Trading (Tianjin) Company Ltd 3M Pakistan (Private) Ltd3M South Africa (Proprietary) Ltd 3M Pharmaceuticals Pty Ltd

(iii) Key Management Personnel Mr. Bert O’ Donoghue (up to September 30, 2008)

Mr. Ajay Nanavati (w.e.f October 1, 2008)

Mr. B.V. Shankaranarayana Rao

Notes: i. None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactionshave been entered into during the year.

ii. The above information has been determined to the extent such parties have been identified on the basis of informationprovided by the Company, which has been relied upon by the auditors.

33M India Limited

50

17. Assets taken on lease

The company has taken office premises, warehouse, residential premises, vehicles and office equipment under operating leaseagreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease isgenerally for eleven months to ninety six months. The minimum rental payments under the operating leases undernon-cancellable lease term as at December 31, 2008 is as under :

2008 2007Rs. Rs.

Lease rental charged to profit and loss account 176,798,898 144,738,548Minimum lease payments not later than one year 107,725,848 101,051,568Minimum lease payments later than one year but not later than five years 332,860,769 318,567,960Minimum lease payments later than 5 years 105,736,400 182,349,456

The company has entered in an agreement for sublease of office premises.The sublease is for a term of three years, expiring on October 31, 2010. The futureminimum lease under this sub-lease agreement is as under:

Minimum lease rentals upto one year 10,817,886 10,302,750Minimum lease rentals later than one year but not later than five years 10,368,996 21,186,882

Minimum lease rentals later than five years - -

18. Taxation

a) The tax year for the Company being March 31, the provision for taxation for the year is the aggregate of the provision madefor the 3 months ending March 31, 2008 and the provision based on the figures for the remaining 9 months upto December31, 2008. The ultimate tax liability will be determined on the basis of the figures for the period April 1, 2008 to March 31, 2009.

b) Accounting for taxes on Income disclosure as per Accounting Standard 22. Major components of Deferred tax assets andliabilities on account of timing differences as at December 31, 2008 are :

Asset Liability2008 2007 2008 2007

Rs. Rs. Rs. Rs.

Depreciation – – 31,264,567 15,281,309Provision for doubtful debts 14,817,890 21,196,133 – –Provisions allowed on payments, write off 67,695,434 37,340,783 – –

82,513,324 58,536,916 31,264,567 15,058,309

Net Deferred Tax Asset 51,248,757 43,255,607

Net Deferred Tax (Credit) / Debit for the year (7,993,150) (6,747,403)

The tax impact for the above purpose has been arrived by applying a tax rate of 33.99% (2007 : 33.99%) being the prevailing taxrate for Indian companies under the Income Tax Act, 1961.

19. In accordance with Accounting Standard -29 on Provisions, Contingent Liabilities and Contingent Assets, as notified u/s 211(3C) of theCompanies Act, 1956, certain classes of liabilities have been identified as provision and accordingly regrouped separately as under:

Particulars 2007 Additions Reversals 2008Rs. Rs. Rs. Rs.

Sales Tax 17,472,194 4,775,000 – 22,247,194

Other Payables 5,700,000 – 4,807,000 893,000

The company sets up and maintains provisions for other trade payables when a reasonable estimate can be made. Theseprovisions are made based on estimates made by the management that are reviewed periodically and involve quick settlementsnot exceeding a period of two-three years in most cases.

20. Earnings Per Share (EPS)Profit attributable to Equity Shareholders 574,549,087 676,827,835Weighted Average number of equity shares outstanding during the year 11,265,070 11,265,070Nominal value of Equity share 10 10Basic and Diluted Earnings Per Share 51.00 60.08

NOTES TO ACCOUNTS

SCHEDULE 14

MAnnual Report 2008

51

SCHEDULE 14

NOTES TO ACCOUNTS

2008 2007Rs Rs

21. Segment Report :Segment Revenue (net sale / income)a Industrial Markets 1,361,568,024 1,131,426,260b Automotive and Specialty Materials Markets 2,490,229,067 2,164,636,710c Health Care Markets 1,212,849,372 810,088,900d Traffic and Safety Markets 1,467,560,960 1,222,028,624e Consumer and Office, Construction Markets 852,100,290 737,638,342f Others * 42,284,005 39,759,550Total Segment Revenue 7,426,591,718 6,105,578,386Less : Inter segment revenue - -Net Sales / income from operations 7,426,591,718 6,105,578,386

Segment Results (Profit before interest and tax)a Industrial Markets 116,828,474 192,423,609b Automotive and Specialty Materials Markets 319,944,581 346,544,136c Health Care Markets 43,040,479 29,496,688d Traffic and Safety Markets 319,161,508 337,298,274e Consumer and Office, Construction Markets 48,388,124 92,786,662f Others 6,599,742 4,468,966Total Segment Results 853,962,908 1,003,018,335Less : Interest expense 4,666,971 3,387,000Add: Other un-allocable income net off unallocable expenditure 60,932,157 66,653,315Total Profit Before Taxation 910,228,094 1,066,284,650

Capital Employed (Segment Assets-Segment Liabilities)a Industrial Markets 463,158,402 225,990,469b Automotive and Specialty Materials Markets 1,356,837,534 766,094,294c Health Care Markets 209,587,656 113,255,648d Traffic and Safety Markets 424,995,526 267,803,944e Consumer and Office, Construction Markets 53,028,510 78,787,328f Others - -Total Capital Employed in segments 2,507,607,628 1,451,931,683Add: Unallocable corporate assets less corporate liabilities 969,946,780 1,451,073,638Total Capital Employed by the Company 3,477,554,408 2,903,005,321*includesDomestic Sales/ Income - 619,031Export Sales 42,284,005 39,140,519

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account theorganisation structure as well as the differential risks and returns of these segments.

Segment revenue, results and Capital employed figures include the respective amounts identifiable to each of the segmentsand also amounts allocated on a reasonable basis. Other unallocable expenditure includes expenses incurred on commonservices provided to the segments which are not directly identifiable to the individual segments as well as expenses incurred ata corporate level which relate to the Company as a whole.The Company operates mainly to the needs of domestic market and export turnover is not significant in context of totalturnover. Accordingly, there are no reportable geographical segments.

22. 3M Company, USA the holding company has offered an ‘General Employees Stock Purchase Plan’ to the employees of thecompany. In accordance with the plan, the company during the year has deducted for remittance a sum of Rs 4,139,045(2007: Rs. 6,748,341) and cumulatively amounting to Rs. 14,004,295 (2007 Rs: 9,865,250) from the salary of the employees who haveopted for the plan. As of the year end a sum of Rs. 265,773 (2007: Rs. 348,322) is pending remittance to the holding company and thesame is included under Other Liabilities (Schedule 9).The company has considered the same for necessary Fringe Benefit Tax.

23. Previous year’s figures have been regrouped / reclassified wherever necessary to conform to current year classification.

For and on behalf of the board

Place : Bangalore Ajay Nanavati B. V. Shankaranarayana Rao K. Ramesh ChandraDate : February 27, 2009 Managing Director Whole-time Director Company Secretary

33M India Limited

52

CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 20082008 2007

Rs. Rs.A. Cashflow from Operating Activities

Profit before Taxation 910,228,094 1,066,284,650

Adjustment for

Depreciation 72,292,207 58,922,643

Provision for doubtful Advances 6,123,500 -

Provision for doubtful debts written back (net) (19,515,380) (10,277,769)

Balances / Provisions no longer requried (4,807,000) (8,037,816)

Unrealised Foreign Exchange Loss/(Gain) (8,460,830) 173,482

Profit on sale of Fixed Assets (net) (12,201,283) -

Loss on sale of Fixed Assets (net) - 3,022,149

Interest income (50,629,407) (53,802,733)

Interest expenses 4,666,971 3,387,000

Operating Profit Before Working Capital changes 897,696,872 1,059,671,606

Adjustment for

(Increase)/ Decrease in Inventories (384,028,716) (13,987,223)

(Increase)/ Decrease in Debtors (227,488,728) (195,480,009)

(Increase)/ Decrease in Loans and Advances (104,188,662) (98,360,020)

Increase/ (Decrease) in Current Liabilities and Provisions 190,072,264 161,079,913

Cash Generated from Operations 372,063,030 912,924,267

Direct Taxes paid (net of refund) (364,003,233) (419,496,919)

Net Cash flow from Operating Activities 8,059,797 493,427,348

B. Cash flow from investing activities

Purchase of Fixed Assets (516,378,743) (584,018,351)

Proceeds from Sale of Fixed Assets 22,488,002 2,695,879

Interest Received 54,478,918 54,013,483

Net cash from / (used in) investing activities (439,411,823) (527,308,989)

C. Cash flow from financing activities

Interest Paid (3,721,512) (2,751,069)

Net cash from / (used in) financing activities (3,721,512) (2,751,069)

Net cash flows during the year (A+B+C) (435,073,538) (36,632,710)

Cash and cash equivalents (Opening Balance) 959,909,199 996,541,909

Cash and cash equivalents (Closing Balance) 524,835,661 959,909,199

Notes:1 The above Cash Flow Statement has been compiled from and is based on the Balance Sheet as at December 31, 2008 and the

related Profit and Loss Account for the year ended on that date.2 The above Cash Flow Statement has been prepared under indirect method in accordance with the Accounting Standard 3 as

notified u/s 211(3C) of the Companies Act, 1956.3 Cash and cash equivalent comprise of Cash and Bank Balance including a deposit under lien of Rs. 3,100,000 (2007 : Rs. 10,200,000)4 Previous year’s figures have been regrouped wherever necessary to confirm to current year’s presentation.

This is the Cash Flow Statement referred to in our For and on behalf of the Boardreport of even date

Usha A Narayanan Ajay Nanavati B. V. Shankaranarayana Rao K. Ramesh ChandraPartner Managing Director Whole-time Director Company SecretaryMembership No: 23997For and on behalf ofLovelock & LewesChartered Accountants

Place : BangaloreDate : February 27, 2009

MAnnual Report 2008

53

Information pursuant to Part IV of Schedule VI to the Companies Act, 1956

Balance Sheet Abstract and Company’s General Business Profile

I. Registration Details

Registration No. 13543 State Code 08

Balance Sheet Date 31 12 2009

Date Month Year

II. Capital raised during the year (Amount in Rs. Thousands)

Public Issue Rights Issue

NIL NIL

Bonus Issue Private Placement

NIL NIL

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities 3477554 Total Assets 3477554

Sources of Funds

Paid-up Capital 112651 Reserves & Surplus 3364903

Secured Loans NIL Unsecured Loans NIL

Application of Funds

Net Fixed Assets* 1433219 Investments NIL

Net Current Assets** 1993086 Net Deffered Tax Assets 51249

* Includes capital work-in-progress

** Net of current liabilities and provisions

IV. Performance of Company (Amount in Rs. Thousands)

Income 7524047 Total Expenditure 6613819

Profit / (Loss) Before Tax 910228 Profit / (Loss) After Tax 57549

Earning per Share (in Rs.) 51 Dividend Rate (%) NIL

V. Generic Names of Three Principal Products / Services of Company(as per monetary terms)

Item Code. No. (ITC Code) 68052090

Product Description COATED ABRASIVES

Item Code. No. (ITC Code) 48239090

Product Description MASKING TAPES

Item Code. No. (ITC Code) 48239090

Product Description PRESSURE SENSITIVE TAPES

Signature to Schedules 1 to 14For and on behalf of the Board

Place : Bangalore Ajay Nanavati B. V. Shankaranarayana Rao K. Ramesh ChandraDate : February 27, 2009 Managing Director Whole-time Director Company Secretary

33M India Limited

54

3M INDIA LIMITEDRegd Office: 48-51, Electronics City, Hosur Road,

Bangalore - 560 100

ATTENDANCE SLIP

................................................................................................................................................................

.................................................................................................................................................................

.................................................................................................................................................................

I hereby record my presence at the Annual General Meeting ofthe Company at The Chancery Pavilion, 135 Residency Road,Bangalore 560 025, at 10.30 a.m. on Wednesday, April, 29, 2009

.................................................................................................................................................................

Signature of the attending Member / Proxy :

..................................................................................................................................................................

NOTE:

1. Shareholders / Proxyholders wishing to attend the meetingmust bring the Attendence Slip to the meeting and handoverat the entrance, duly signed.

2. Shareholders / Proxyholders desiring to attend the meetingshould bring their copy of the Annual Report for referenceat the meeting.

3M INDIA LIMITEDRegd Office: 48-51, Electronics City, Hosur Road,

Bangalore - 560 100

PROXY FORM

I/ We.................................................................................................................of

........................................................................................................................................being a

Member/Members of above Company, hereby appoint

.....................................................................................................................of

.......................................................or failing him .........................................................of

as my/our Proxy to attend and vote for me/us and on my/ourbehalf at the Annual General Meeting of the Company,to be held on Wednesday, April, 29, 2009 and at The ChanceryPavilion, 135 Residency Road, Bangalore 560 025, at 10.30 a.m.any adjournment thereof.

Signed ................................................................................................................

day of ................................................................................. 2009.

Reference Folio

No. of shares ............................................................

NOTES:

The Proxy must be returned so as to reach the RegisteredOffice of the Company, 48-51, Electronics City, Hosur Road,Bangalore - 560 100, in not less than FORTY-EIGHT HOURSbefore the time for holding the aforesiad meeting.

Re. 1Revenue

Stamp

✄✄M

Annual Report 2008

55

Dematerialisation of Shares

Dear Shareholder,

We wish to inform that the shares of our Company., 3M INDIA LTD have been admitted for dematerialisation with Depositories.

The ISIN Number allocated to the Company’s equity shares is INE470A01017. You may like to convert the shares now held by

you in physical form into electronic / demat form through any of the SEBI registered Depository Participants (DP’s) any where in

India. The Following are the advantages of holding shares in electronic/demat form:

★ No bad deliveries.

★ Transfer of shares from one account to other account.

★ Reduced Paper work.

★ No risk of loss, mutilation or theft of share certificates.

★ No stamp duty for transfer of shares in electronic mode.

★ Regular account status updates available from the DP at any point of time.

In view of the above, you are requested to open depository account with any of the SEBI registered DP if not opened earlier and

submit your physical share certificate’s through your DP for the purpose of converting from physical form to electronic form.

You may please, feel free to contact or write to our Registrar and Transfer Agents at the below mentioned address for any queries

or clarifications in this regard:

Karvy Computershare Private Limited

Plot no.17-24, Vithal Rao Nagar, Madhapur;

Hyderabad - 500 034

Tel: 040-23420816 / 824 Fax: 040-23420814

E-mail : mailmanager@karvy.com Contact person: Mr. K. Subba Reddy

K.Ramesh ChandraCompany Secretary

✄M