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Notes to Accounts of 3M India Ltd.

Mar 31, 2017

Notes :

1. The discount rate is based on the prevailing market yield on Government securities as at the Balance Sheet date for the estimated term of obligations.

2. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3. As per the best estimate of the management, contribution of Rs. Nil (31 March 2016: Rs. Nil) is expected to be paid to the plans during the year ending 31 March 2018.

4 Related party transaction

Names of related parties and nature of relationship:

i) Holding Company 3M Company, USA

ii) Fellow subsidiaries 3M China Limited 3M Lanka Private Limited

3M Thailand Limited Dyneon B.V.

3M France S.A.S. 3M Belgium S.A./N.V

3M Gulf Limited 3M Mexico, S.A. de C.V.

3M Electro & Communication India Private Ltd Cogent Systems, Inc.

3M Asia Pacific Pte.Ltd 3M Singapore Pte. Ltd.

P.T. 3M Indonesia 3M Material Technology(Hefei) Co Limited

3M APAC RDC Pte Limited Sumitomo 3M Limited

3M Argentina S.A.C.I.F.I.A. 3M Film Construction(Shanghai) Co Limited

3M Australia Pty. Limited 3M Taiwan Limited

3M Canada Company 3M Technologies (S) Pte Ltd

3M Do Brasil Limitada 3M Philippines, Inc.

3M EMEA, GmbH 3M Health Care Sales Limited

3M Espana, S.A. 3M Pakistan Private Limited

3M Hong Kong Limited 3M Congent Systems (Shenzhen) Inc.

3M Innovation Singapore Pte Limited 3M Health Care Ltd, Japan

3M Italia S.P.A. 3M Japan Products Ltd.

3M Japan Ltd 3M International Trading (Shanghai) Co., Ltd

3M Malaysia Sdn. Bhn. 3M New Zealand

3M Nederland Holding B.V. 3M Panama S.A

3M Svenska AB 3M Speciality Materials

3M Sanayi AS Ticaret 3M Traffic Manufacturing (Shanghai) Co. Ltd.

3M Oesterreich GmbH 3M Rapphold Winterthur

3M Korea Limited 3M Vietnam Limited

3M Korea Health & Safety Ltd 3M Turkey

3M Korea High Tech, Korea 3M Hellas Limited

3M United Kingdom PLC 3M Kenya Ltd.

3M Deutschland GmbH 3M CN Shenzhen

3M ESPE Dental AG 3M Germany Hilden GmbH

EMFI SAS 3M Industrial Tapes Ltd.

3M Innovation Properties Company 3M Innovation (Thailand) Co. Ltd.

Dyneon GmbH 3M International Trading (Shanghai) Co. Ltd.

3M Unitek Corporation 3M LATIN AMERICA

3M International Trading (TJ) Co., Limited 3M Turkiye

3M Material Tech(Guangzhou) Co., Limited 3M UK Holdings Limited

3M Wroclaw SP. Z O.O. 3M Wendt GmbH

Biotrace Limited 3M Winterthur Technlogies AG

iii) Key management personnel Executive Directors

Amit Laroya (Resigned effective 31 May 2016 as Managing Director)

Debarati Sen (Appointed effective 1 June 2016 as Managing Director)

B V Shankaranarayana Rao (Director)

Non-executive Directors

Amit Laroya (Non-executive Director effective 1 June 2016)

Bharat D. Shah Biren Gabhawala

Radhika Rajan (Appointed effective 27 May 2016)

Albert C. Wang

Sadhana Kaul (Resigned effective 27 May 2016)

Ramesh Ramadurai Manuel B. Pardo

B. S. Iyer (Resigned effective 31 March 2016)

Others

Panagiotis Goulakos (Appointed effective 15 March 2016 as Chief Financial Officer) Sameer Agarwal (Resigned effective 31 March 2016 as Chief Financial Officer)

V. Srinivasan (Company Secretary)

In the annual general meeting held on 5 August 2016, the Company had obtained approval from its shareholders for the material related party transactions to be entered into with 3M Company, USA for the year ended 31 March 2017. As the actual transactions entered into with 3M Company, USA during the year ended 31 March 2017 exceeded the amount approved by the shareholders, the Company will seek approval from its shareholders in the ensuing annual general meeting to ratify the excess amount.

5 Segment Reporting

A. Basis for segmentation

Ind AS 108 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. Based on the "management approach" as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the significant accounting policies.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover. Accordingly, there are no reportable geographical segments. The Company has five reportable segments, as described below. For each of the segments, the Company''s Managing Director reviews internal management reports on at least a quarterly basis. Segment revenue, results, assets and liabilities figures include the respective amounts identifiable to each of the segments. Other unallowable income net off unallowable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

The following summary describes the products included in each of the Company''s reportable segment:

Reportable segments Products

Industrial Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives:

Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape, Functional and Decorative Graphics, Abrasion-Resistant Films, Masking Tapes and Other Specialty Materials.

Health care Major products include medical and surgical supplies, medical devices, skin & wound care and infection prevention

products & solutions, drug delivery systems, dental and orthodontic products and food safety products.

Safety and Graphics Major product under this segment include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial establishments, track and trace products, cleaning and hygiene products for the hospitality industry. Graphics business consists of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD products include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products. AMD products includes wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD products include projection systems, computer and ATM-screen privacy filters and brightness enhancement films for television, avionics and automotive displays.

Consumer Consumer and Office business includes products such as Scotch brand, addressing the Home & Office tapes,

Adhesives, Packaging protection platforms, Post-it brand with a product range of Note Pads, Dispensers, Flagging solution, Labels and Scotch guard brand addressing the stain protection market.

Energy Energy business includes products such as Fusion Bonded Epoxy coatings, Sun films and renewable energy.

Segment revenue, results, assets and liabilities figures include the respective amounts identifiable to each of the segments. Other unallowable income net off unallowable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

* The term ''Specified Bank Notes'' shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated 8 November 2016.

6 Corporate social responsibility

During the year, the amount required to be spent on corporate social responsibility activities amounted to Rs. 361.08 lakhs (31 March 2016: Rs. 205.88 lakhs) in accordance with Section 135 of the Companies Act, 2013. The following amounts were spent during the current and previous year:

Notes:

(i) Income tax matters mainly relate to intercompany charges.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of Rs.1,961.51 lakhs, contending the a ailment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognized in the books.

(iii) The Company has been issued with a Show Cause Notice dated 8 December 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of custom duty on inter-Company transactions for import of goods and services and hence proposing to demand differential duty of customs totally amounting to Rs. 8,007.49 lakhs under the provisions of Section 28(4) of the Customs Act, 1962 for import of goods through 13 ports. The proposal for demand of duty is for the period from 8 December 2011 to 7 February 2014 for goods imported from M/s 3M USA and its affiliates. The Company has already paid an amount of Rs. 50 lakhs under protest.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2005-06 to 2011-12. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

During the year ended 31 March 2017 no material foreseeable loss (previous year: nil) was incurred for any long-term contract including derivative contracts.

7 First time adoption of Ind AS

For the purposes of reporting as set out in note 2, we have transitioned our basis of accounting from Indian Generally Accepted Accounting Principles ("IGAAP") to Ind AS. The accounting policies set out in note 3 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS Balance Sheet as at 1 April 2015 (the "transition date").

In preparing our opening Ind AS Balance Sheet, we have adjusted amounts reported in financial statements prepared in accordance with IGAAP. An explanation of how the transition from IGAAP to Ind AS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables. On transition, we did not revise estimates previously made under IGAAP except where required by Ind AS.

* The previous GAAP figures have been reclassified to conform to Ind AS presentation requirements for the purpose of this note.

a. Property, plant and equipment

As per Ind AS 16, the cost of the item of Property, plant and equipment comprises the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Company had estimated the liability incurred for dismantling the assets and discounted the same using the remaining life of the leased assets. This is included in the cost of the lease hold asset and depreciated accordingly. Similarly, a provision for asset retirement obligation is created and shown under "Long-term provisions".

b. Other financial assets

Under the previous GAAP, interest free security deposits were recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at fair value. Accordingly, the Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognized as prepaid rent. The interest unwinding on the same is shown as "other income".

c. Deferred tax assets (net)

The (decrease) / increase in the deferred tax assets are on account of adjustments made on transition to Ind AS.

d. Trade receivables

On transition to Ind AS, the Company has recognized impairment loss on trade receivables based on expected credit loss model as required by ''Ind AS 109 "Financial Instruments". The Company measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables. Consequently trade receivables have been reduced with a corresponding decrease in the Statement of profit and loss for the year ended 31 March 2016.

f. Share based payment

The Company under the previous GAAP recognized costs in relation to share based payments on a straight-line basis. Under Ind AS, the Company is required to account for share based payments in a graded vesting manner under an accelerated amortization model. Accordingly, the Company has incurred an incremental charge due to such accelerated amortization of share options.

g. Other current liabilities

As per Ind AS 17 "Leases", if the Company has a rent escalation clause which is in line with inflationary conditions, there is no requirement for rent equalization. Since the rate of inflation is in line with the rent escalation, hence the adjustments towards rent equalization is reversed.

h. Provisions

Under Ind AS, the provision for warranty is present valued using the effective interest rate. The present value of the provision is shown in the Balance Sheet as a provision and the interest unwinding on the same is shown as an expense.

i. Revenue from operations

Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the Statement of profit and loss as part of expenses. This change has resulted in an increase in the revenue from operation and expenses for the year ended 31 March 2016. There is no impact on the total equity and profit.

j. Other comprehensive income

Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the Statement of profit and loss as ''other comprehensive income'' includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP.

k. Cash flow statement

There were no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind AS.

The fair value of financial assets and financial liabilities approximates to their carrying amount largely due to the short-term nature of these instruments.

B. Financial Risk Management

The Company has exposure to the following risk arising from financial instruments

- Credit risk

- Liquidity risk

- Market risk

i. Risk management framework

The Company''s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include trade and other receivables, cash and cash equivalents that are derived directly from its operations.

ii. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s receivables from customers.

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed half-yearly.

Expected credit loss assessment for the Company as at 1 April 2015, 31 March 2016 and 31 March 2017.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including forward looking information.

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of Rs. 40,791.66 lakhs (31 March 2016 : Rs. 31,848.84 lakhs, 1 April 2015 : 29,480.54 lakhs), the exposure considered for expected credit loss is Rs. 41,364.97 lakhs (31 March 2016 : Rs. 33,020.50 lakhs, 1 April 2015 : 29,933.87 lakhs). The balance which is not considered for impairment pertains to intercompany receivables and secured debtors.

The following table provides information about the exposure to credit risk and expected credit loss for trade and other receivables:

iii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

The table below provides details regarding the contractual maturities of significant financial liabilities -

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the US dollar or Euro against all other currencies at 31 March would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

9 The financial statements for the year ended 31 March 2016 and 31 March 2015 were audited by a firm other than B S R & Co. LLP.


Mar 31, 2014

1. GENERAL INFORMATION

3M India Limited (''the Company'') is the subsidiary of 3M Company, USA. The Company manages its operations in five operating segments: Industrial, Health Care, Safety and Graphics, Consumer and Energy. In India, the Company has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore.

With effect from April 1, 2013, the Company internally aligned its operating divisions to new segments viz., Industrial, Health Care, Safety and Graphics, Consumer and Energy from its old segments viz., Industrial and Transportation Business, Health Care Business, Safety, Security and Protection Services Business, Consumer and Office Business, Display and Graphics Business. 3M India''s five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE).

2. RESEARCH AND DEVELOPMENT

In the year 2012-13, the Company has received approval under section 35 (2AB) of the Income Tax Act 1961 for its recognised In- House Research and Development Center at Bangalore with effect from July 20, 2012 to March 31, 2015. Accordingly, total revenue expenditure (net of recoveries) on Research and Development for the year 2013-14 is proposed to be considered for certain Income Tax benefits.

3. EMPLOYEE BENEFITS

a) The Company has recognised, in the Statement of Profit and Loss account for the period ended March 31, 2014 an amount of Rs. 1,273.64 lakhs (2013: Rs. 1,550.06 lakhs) expenses under defined contribution plans.

4. The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulations for computing the taxable income and expenditure from ''international transactions'' between ''associated enterprises'' on an ''arm''s length'' basis. In addition to above, The Finance Act, 2012 has amended/inserted, with effect from assessment year 2013-14 (Effective April 01, 2013), Transfer Pricing Regulations for computing the taxable income and expenditure from ''Specified Domestic Transactions'' not being an international transaction between ''associated enterprises'' on an ''arm''s length'' basis. These regulations, inter-alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within due date of filing the Return of Income. For the year March 31, 2013 prescribed certificate of the Accountant has been obtained and this did not envisage any tax liability. For the fiscal year March 31, 2014, the Company is in the process of obtaining the certificate of the Accountant. The Company does not envisage any tax implication arising based out of such study. For the financial year ending March 31, 2012, the Company had undertaken a study to comply with the said transfer pricing regulations for which the prescribed certificate of the Accountant has been obtained and accordingly Company in the previous year had recognised an amount of Rs. 58.94 lakhs towards tax on voluntary Transfer Pricing adjustments relating to the financial year ended March 31, 2012 for Consumer and Office Business segment.

5. RELATED PARTY TRANSACTIONS: Names of related parties and nature of relationship: i) Holding Company 3M Company, USA

ii) Key Management personnel

Ajay Nanavati (up to 30th September, 2013) Amit Laroya (from 1st October, 2013) B.V. Shankaranarayana Rao Sadhana Kaul (up to 31st October, 2013)

6. ASSETS TAKEN ON LEASE Operating Lease:

The Company has taken office premises, warehouse, residential premises, vehicles and office equipment under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally for eleven months to ninety six months. The minimum rental payments under the operating leases under non- cancellable lease term as at March 31, 2014 is as under:

7. DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENY EXPOSURE

a. Derivatives outstanding as at the reporting date

Particulars Purpose

Forward Contracts to Sell USD Hedge of firm commitment and - highly profitable forecast transaction

Forward Contracts to buy USD Hedge of external commercial borrowings -

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organisation 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 segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a 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 total turnover.

Accordingly, there are no reportable geographical segments.

With effect from April 1, 2013, the Company internally aligned its operating divisions to new segments viz., Industrial, Health Care,

Safety and Graphics, Consumer and Energy from its old segments viz., Industrial and Transportation Business, Health Care

Business, Safety, Security and Protection Services Business, Consumer and Office Business, Display and Graphics Business.

The products included in each of the reported segments are as follows:

(a) Industrial: Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives: Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; Functional and Decorative Graphics; Abrasion- Resistant Films, Masking Tapes and Other Specialty Materials.

b) Health Care: Major products include medical and surgical supplies, medical devices, skin & wound care and infection preven- tion products & solutions, drug delivery systems, dental and orthodontic products and food safety products.

c) Safety and Graphics: Major product under this segment include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial establishments, track and trace products, cleaning and hygiene products for the hospitality industry.

Graphics Business consists of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD products include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products. AMD products includes wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD products include projection systems, computer and ATM-screen privacy filters and brightness enhancement films for televi- sion, avionics and automotive displays.

d) Consumer : Consumer and Office Business includes products such as Scotch brand, addressing the Home & Office tapes, Adhesives, Packaging protection platforms; Post-it brand with a product range of Note Pads, Dispensers, Flagging solution, Labels and Scotchguard brand addressing the stain protection market.

e) Energy: Energy includes products such as Fusion Bonded Epoxy coatings, Sun films and renewable energy.

8. STOCK OPTION

3M Company, USA (3M), the parent company has offered ''General Employees Stock Purchase Plan'' to all the employees of the company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 63.13 lakhs (2013:Rs. 49.31 lakhs) and cumulatively amounting to Rs. 373.51 lakhs (2013: Rs. 310.38 lakhs) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 5.87 lakhs (2013: Rs. 4.69 lakhs) is pending remittance to the holding company and the same is included under Other Current Liabilities (refer note 9).

3M Company, USA (3M) has established 3M Company Long Term Incentive Plan (LTIP) / Management Stock Ownership Program (MSOP). As a part of the plan, Executive Directors and Senior Executives of 3M India Limited (3M India) are eligible to acquire shares of 3M Company, USA via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs)/ restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan.

3M measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black – Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M USA on the date of Grant for respective countries including India. Accordingly, an amount of Rs. 615.38 lakhs (2013: Rs. 299.59 lakhs) has been debited to the Statement of Profit and Loss account for the year and included under Employee Benefit Expenses.

During the year the Company has granted to employees of the Company 14,621 stock appreciation rights (SARs) (2013: 16,600) and 4,847 restricted stock units (RSUs) (2013: 3,320) on various dates of which none are vested. However 14,978 stock appreciation rights (SARs) (2013: 3,917) and 3,151 restricted stock units (RSUs) (2013: 3,233) were settled on account of being fully vested and exercised/forfeited resulting in an outstanding balance of 43,826 stock appreciation rights (SARs) (2013: 44,283) and 12,626 restricted stock units (RSUs) (2013: 10,930) at the end of the year.

The above disclosure as per Guidance Note on Accounting for Employee Share based Payment issued by ICAI is made to the extent the necessary information is available with the Company.

9. INTERCOMPANY AGREEMENTS/ ARRANGEMENTS:

a) Intellectual property agreement – The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective July 1, 2013. Accordingly, the Company has incurred an expenditure of Rs. 1,375.71 lakhs (2013: Rs. 1,051.96 lakhs) for the period April 1, 2013 to March 31, 2014.

b) (i).Support services/ corporate management fees – The Company has entered into support services agreement with 3M Company., USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

The Company has also entered into support services agreement (MOU''s) with 3M Hong Kong Ltd with effect from January 1, 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical Assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated April 1, 2009.

The Company has accrued an amount of Rs. 1,550.00 lakhs (2013: Rs. 1,300.00 lakhs) in respect of estimated liability for the above services during period January 1, 2014 to March 31, 2014; the actual liability would be ascertained by December 2014.

(ii).The support service agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates consistent with 3M Company''s Global Financial Standard on FSEs. Accordingly the Company has recognised a receivable of Rs. 1,019.89 lakhs (2013: Rs. 702.98 lakhs).

c) Contract research agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognised an income of Rs. 2,424.62 lakhs (2013: Rs. 1,725.45 lakhs).

10. The company during the year has recognised incremental service tax input credit pertaining to previous years. Accordingly, an amount of Rs. 123 lakhs pertaining to financial year 2011-2012 and Rs. 461.27 lakhs pertaining financial year 2012-13 has been included under other income.

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


Mar 31, 2013

1. GENERAL INFORMATION

3M India Limited (''the Company'') is the subsidiary of 3M Company, USA. The Company markets several products in India in health care; industrial markets; display and graphics; consumer and office; safety, security and protection services; and transportation. In India, the Company has manufacturing facilities at Ahemdabad, Bangalore, Pune and has a R&D Center in Bangalore.

The Company manages its operations in five operating business segments: Industrial and Transportation Business; Health Care Business; Display and Graphics Business; Consumer and Office Business and Safety, Security and Protection Services Business. 3M India''s five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE).

2. RESEARCH AND DEVELOPMENT

During the year, the Company has received approval under section 35 (2AB) of the Income Tax Act 1961 for its recognised In- House Research and Development Center at Bangalore with effect from July 20, 2012 to March 31, 2015. Accordingly, total revenue expenditure (net of recoveries) on Research and Development for the period July 20, 2012 to March 31, 2013 is proposed to be considered for certain Income Tax benefits.

3. EMPLOYEE BENEFITS

a) The Company has recognised, in the Statement of Profit and Loss account for the period ended March 31, 2013 an amount of Rs. 1,550.06 (2012: Rs. 1,551.08) expenses under defined contribution plans.

4. The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulations for computing the taxable income and expenditure from ''international transactions'' between ''associated enterprises'' on an ''arm''s length'' basis. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within due date of filing the Return of Income. For the financial year ending March 31, 2012, the Company had undertaken a study to comply with the said transfer pricing regulations for which the prescribed certificate of the Accountant has been obtained and accordingly company has recognised an amount of Rs. 58.94 towards tax on voluntary Transfer Pricing adjustments relating to the financial year ended March 31, 2012 for Consumer and Office Business segment.

For the fiscal year March 31, 2013, the Company is in the process of updating the transfer pricing study to comply with the said regulation. The management do not envisage any tax implication arising based out of such study.

5. ASSETSTAKEN ON LEASE

Operating Lease:

The Company has taken office premises, warehouse, residential premises, vehicles and office equipment under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally for eleven months to ninety six months. The minimum rental payments under the operating leases under non- cancellable lease term as at March 31, 2013 is as under:

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organization 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 segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a 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 total turnover. Accordingly, there are no reportable geographical segments.

Presently, the Company''s operating results were managed on the basis of its existing segment structures viz., Industrial and Transportation, Health Care, Display and Graphics, Consumer and Office and Safety, Security and Protection Services through April 2012 to March 2013.

The products included in each of the reported segments are as follows:

(a) Industrial and Transportation Business: Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives: Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; Functional and Decorative Graphics; Abrasion-Resistant Films, Masking Tapes and Other Specialty Materials.

b) Health Care Business: Major products include medical and surgical supplies, medical devices, skin & wound care and infection prevention products & solutions, drug delivery systems, dental and orthodontic products and food safety products.

c) Safety, Security and Protection Services Business: Major product under this segment include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial estab- lishments, track and trace products, cleaning and hygiene roducts for the hospitality industry.

d) Consumer and Office Business: Consumer and Office Business includes products such as Scotch brand, addressing the Home & Office tapes, Adhesives, Packaging protection platforms; Post-it brand with a product range of Note Pads, Dispensers, Flagging solution, Labels and Scotchguard brand addressing the stain protection market.

e) Display and Graphics Business: Display & Graphics Business consists of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD products include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products. AMD products includes wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD products include projection systems, computer and ATM-screen privacy filters and bright- ness enhancement films for television, avionics and automotive displays.

Consistent with 3M''s global strategy of building relevance and presence in the marketplace, the Company will also align resources and management towards a new revised structure comprised of five business groups: Consumer; Industrial; Health Care; Safety and Graphics; and Energy, with the intention that results be managed under the new alignment once it is fully effective from April 1, 2013 onwards.

6. STOCK OPTION

3M Company, USA (3M), the parent company has offered ''General Employees Stock Purchase Plan''to all the employees of the Company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 49.31 (2012: Rs. 44.36) and cumulatively amounting to Rs. 310.38 (2012: Rs. 261.07) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 4.69 (2012: Rs. 3.42) is pending remittance to the holding company and the same is included under Other Current Liabilities (refer note 9).

3M Company, USA (3M) has established 3M Company Long Term Incentive Plan (LTIP) / Management Stock Ownership Program (MSOP). As a part of the plan, Executive Directors and Senior Executives of 3M India Limited (3M India) are eligible to acquire shares of 3M via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs)/ restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan.

3M measures compensation expense for stock appreciation rights (SARs) and restricted stock units (RSUs) at their fair value determined using Black - Scholes Model on the date of Grant for respective countries including India. Accordingly, an amount of Rs.299.59 (2012: Rs. 319.81 ) has been debited to the Statement of Profit and Loss account for the year and included under Employee benefit Expenses.

During the year the Company has granted to employees of the Company 16,600 stock appreciation rights (SARs) (2012: 8,858) and 3,320 restricted stock units (RSUs) (2012:1,968) on various dates of which none are vested. However 3,917 stock appreciation rights (SARs) (2012: 2,547) and 3,233 restricted stock units (RSUs) (2012: 2,848) were settled on account of being fully vested and exercised resulting in an outstanding balance of 44,283 stock appreciation rights (SARs) (2012:34,734) and 10,930 restricted stock units (RSUs) (2012:10,371) at the end of the year.

The above disclosure as per Guidance Note on Accounting for Employee Share based Payment issued by ICAI is made to the extent the necessary information is available with the Company.

7. INTERCOMPANY AGREEMENTS/ ARRANGEMENTS:

a) Intellectual Property Agreement - The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 1,051.96 (2012: Rs. 1,195.72) for the period April 1, 2012 to March 31, 2013.

b) (i). Support Services/Corporate Management Fees - The Company has entered into support services agreement with 3M Company., USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

The Company has also entered into support services agreement (MOU''s) with 3M Hong Kong Ltd with effect from January 1, 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical Assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated April 1, 2009.

The Company has accrued an amount of Rs. 1,300.00 (2012: Rs. 1,250.00) in respect of estimated liability for the above services during period January 1, 2013 to March 31, 2013; the actual liability would be ascertained by December 2013.

(ii).The Support Service Agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates consistent with 3M Company''s Global Financial Standard on FSEs. Accordingly the Company has recognized a receivable of Rs. 702.98 (2012: Rs. 696.44).

c) Contract Research Agreement - The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 1,725.45 (2012: Rs. 1,410.92).

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


Mar 31, 2012

1. GENERAL INFORMATION

3M India Limited ('the Company') is the subsidiary of 3M Company, USA. The Company markets about 7000 products in India in health care; industrial markets; display and graphics; consumer and office; safety, security and protection services; and transportation. In India, the Company has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore.

The Company manages its operations in five operating business segments: Industrial and Transportation Business; Health Care Business; Display and Graphics Business; Consumer and Office Business and Safety, Security and Protection Services Business. 3M India's five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE).

a) Rights, preferences and restrictions attached to shares

The Company has only one class of shares referred to as equity shares having a par value of Rs.10/-. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

Notes:

a) Warranty provisions (net of reimbursements) relates to the estimated outflow in respect of products sold by the Company which are generally covered under a warranty of one to five years.

b) Sales tax provision represents estimates made for probable liabilities arising out of pending disputes/ litigations with sales tax and other regulatory authorities. The timing of the outflow with these matters depends on the position of law and the settlement of which is not expected to exceed two-three years in most cases.

c) The Company sets up and maintains provisions for other payables when a reasonable estimate can be made. These provisions are made based on estimates made by the management that are reviewed periodically and involve quick settlements not exceeding a period of two-three years in most cases.

Contingent Liabilities not provided for

a) Guarantees:

- Issued by Company's Bankers 1,192.40 750.55

b) Claims against the Company not acknowledged as debts

- Income Tax matters [net of amount paid under protest Rs. 83.71 1,238.70 776.55 (2011: Rs. 83.71)

- Others (refer note 11) 181.77 -

c) Certain Industrial/ customer disputes are pending before various judicial authorities – amounts not ascertainable.

Note: Future cash outflow in respect of (b) above are determinable only on receipt of judgments/ decisions pending with various forums/authorities

Notes

a) Deposit from customers are towards sale of goods and services repayable on completion of contractual obligation with interest.

b) There are no amounts due for payment to the Investor Education and Protection Fund under Section 205C of the Companies Act, 1956 as at the year end.

The tax impact for the above purpose has been arrived by applying a tax rate of 32.445% (2011: 32.445%) being the prevailing tax rate for Indian Companies under the Income Tax Act, 1961.

Deferred Tax Assets and Deferred Tax Liabilities have been offset as they relate to the same governing taxation laws.

* Net of recoveries amounting to Rs. 191.68 (2011: Rs. 161.02) recovered from 3M Electro & Communication India Private Limited, a subsidiary of 3M Company, USA.

2. RESEARCH AND DEVELOPMENT

During the year, the Company has started a Research and Development Center (Innovation Center) in Bangalore. The Company has also made an application to Department of Scientific and Industrial Research (DSIR) for recognition of the said Innovation Center as a recognised In-House Research and Development Center.

3. EMPLOYEE BENEFITS

a) The Company has recognised, in the profit and loss account for the period ended March 31, 2012 an amount of Rs. 1,551.08 (2011: Rs. 1,144.86) expenses under defined contribution plans.

Notes:

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

b) As per management estimate, contribution of Rs. 200.00 (2011: Rs. 250.00) is expected to be paid to the plan during the year ending March 31, 2013.

Notes:

a) The above does not include related party transactions with retiral funds, as the key management personnel who are trustees of the funds cannot individually exercise significant influence on the retiral fund transactions.

b) The above information has been determined to the extent such parties have been identified on the basis of information available with the Company.

c) None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactions have been entered into during the period.

d) As gratuity and compensated absences are computed for all the employees in aggregate, the amounts relating to the Key Managerial Personnel cannot be individually identified.

e) Appointed as Director with effect from 31 October, 2011, subject to the approval from the Share holders in the ensuing Annual General Meeting.

f) Figures in brackets relates to the previous year.

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organization 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 segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a 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 total turnover. Accordingly, there are no reportable geographical segments.

4. STOCK OPTION

3M Company, USA (3M), the parent company has offered 'General Employees Stock Purchase Plan' to all the employees of the company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 44.36 (2011:Rs.35.40) and cumulatively amounting to Rs. 261.07 (2011: Rs. 216.71) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 3.42 (2011: Rs. 3.13) is pending remittance to the holding company and the same is included under Other Liabilities (refer note 9).

3M Company, USA (3M) has established 3M Company Long Term Incentive Plan (LTIP) / Management Stock Ownership Program (MSOP). As a part of the plan, Executive Directors and Senior Executives of 3M India Limited (3M India) are eligible to acquire shares of 3M via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs)/ restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan

3M measures compensation expense for stock appreciation rights (SARs) and restricted stock units (RSUs) at their fair value determined using Black – Scholes Model on the date of Grant for respective countries including India. Accordingly, an amount of Rs. 319.81 (2011: Rs. Nil) has been debited to the profit and loss account for the year and included under Employee benefit Expenses.

During the year the Company has granted to employees of the Company 8,858 stock appreciation rights (SARs) (2011: 9,333) and 1,968 restricted stock units (RSUs) (2011: 6,664) on various dates of which none are vested. However 2,547 stock appreciation rights (SARs) (2011: 129) and 2,848 restricted stock units (RSUs) (2011: 696) were settled on account of being fully vested and exercised resulting in an outstanding balance of 34,734 stock appreciation rights (SARs) (2011: 28,423) and 10,371 restricted stock units (RSUs) (2011: 11,251) at the end of the year.

The above disclosure as per Guidance Note on Accounting for Employee Share based Payment issued by ICAI is made to the extent the necessary information is available with the Company.

5. INTERCOMPANY AGREEMENTS/ ARRANGEMENTS:

a) Intellectual Property Agreement – The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 1,195.72 (2011: Rs. 897.84) for the period April 1, 2011 to March 31, 2012.

b)(i). Support Services/Corporate Management Fees – The Company has entered into support services agreement with 3M Company., USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

The Company has also entered into support services agreement (MOU's) with 3M Hong Kong Ltd with effect from January 1, 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical Assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated April 1, 2009.

The Company has accrued an amount of Rs. 1,250.00 (2011: Rs. 1,000.00) in respect of estimated liability for the above services during period January 1, 2012 to March 31, 2012; the actual liability would be ascertained by December 2012.

(ii).The Support Service Agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates consistent with 3M Company's Global Financial Standard on FSEs. Accordingly the Company has recognized a receivable of Rs. 696.44 (2011: 636.48).

c) Contract Research Agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 1,410.92 (2011: Rs. 738.86).

6. The financial statements for the year ended March 31, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended March 31,2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.


Mar 31, 2011

2010-11 2009-10 (12 Months) (15 Months) Rs. Rs.

1 Contingent Liabilities not provided for :

a) Guarantees:

- issued by Companys Bankers 7,50,54,953 6,68,41,922

b) Claims against the Company not acknowledged as debts:

- Pending Sales Tax matters - 4,17,59,219

- Income Tax matter 8,60,25,606 4,69,17,100

c) Certain Industrial / customer disputes are pending before various judicial authorities – amounts not ascertainable.

Note: Future cash outflow in respect of (b) above are determinable only on receipt of judgments / decisions pending with various forums/authorities

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

(i) Parties where control exists Holding Company

3M Company, St. Paul, USA

(ii) Fellow Subsidiaries

3M A/S

3M Ait Ltd

3M Argentina S.A.C.I.F.I.A.

3M Asset Management S.a.r.l.

3M Australia Pty. Limited

3M Algeria

3M Austin

3M Aycliffe

3M AUST BIOTRACE

3M Alaska

3M Asia Pacific Pte Limited

3M Belgium S.A./N.V.

3M Bolivia

3M BRCKNELL

3M Canada Company

3M China Limited

3M Chile SA

3M Corporate Services B.V.

3M Columbia S.A

3M Cesko

3M Cuno Ltd UK

3M Costa Rica S.A

3M Deutschland GmbH

3M Dominicana S.A

3M do Brasil Ltda

3M (East) A.G.

3M E Wood Manufacturer

3M Ecc Europa B.V.

3M Electro & Communication India Private Ltd

3M Espana, S.A.

3M ESPE A.G.

3M Europe S.A.

3M Ecaudor A.V

3M El Salvador

3M Egypt Trading Ltd

3M Financial Management Company

3M France, S.A.

3M Filtrete B.V

3M Film Construction (Shangai) Company Ltd.

3M German Holdings GmbH

3M Global Capital S.a.r.l.

3M Gulf Ltd.

3M Guatemala S.A

3M Health Care Ltd.

3M Health Information Systems, Inc.

3M Hellas Ltd

3M Hong Kong Limited

3M Hillington UK

3M Hawaii

3M Hungaria Kft

3M Indonesia PT

3M Innovative Properties Company

3M International Group B.V

3M International Trading (Shanghai) Co., Ltd.

3M Investment Management Corporation

3M Italia S.p.A.

3M International Trading (Shenzhen) Company Limited

3M International Trading (Tianjin) Company Limited

3M Philipines Inc

3M Poland Sp z.o.o.

3M Precision Optics, Inc.

3M Puerto Rico, Inc.

3M Pakistan (Pvt) Limited

3M Pharmaceuticals Pty Ltd

3M Portugal

3M Panama S.A

3M Peru S.A

3M Russia

3M Romania SRL

3M Sanayi VE Ticaret AS

3M Sante

3M Sanvetec

3M Singapore Pte Limited

3M Spain

3M Svenska AB

3M Sweden

3M South Africa (Pty) Limited

3M Seremban (M) SYD BHD

3M (Schweiz) A.G.

3M Taiwan Limited

3M Taiwan Optronics Corp.

3M Technologies Private Limited

3M Telecommunications, Pouyet

3M Thailand Limited

3M Touch Systems, Inc.

3M Traffic Safety Material

3M Traffic Mfg Shanghai Co Ltd

3M Turkey

3M United Kingdom Holdings PLC

3M United Kingdom PLC

3M Unitek Corporation

3M Unitek GmbH

3M Ukraine, kiev

3M Uruguay S.A

3M Vietnam Ltd

3M Venezuela Final AV

3M Wroclaw Sp. Z.o.o

ABRASIVOS S.A, Peru

Aearo Holding Corp

Alltech Solutions, Canada

Aplha Beta Enterprises Co. Ltd, Taiwan

Arizant Inc.,Minnesota

Attenti Holdings S.A, Israel

Cogent Inc, California

Cogent Systems India Private Limited

CUNO Engineered Products, Inc

CUNO Filtration Asia Pte. Ltd.

CUNO Filtration SAS

CUNO Incorporated

CUNO Pacific Pty Ltd.

Dailys Ltd, UK

Dedication to Detail Inc

Dyneon GmbH & Co. KG

EMFI S.A, France

Grafoplast Burgienne, France

Hangzhou ORJ Medical Instruements & Material Co. Ltd, China

3M Israel Ltd

3M Ireland

3M Interamerica Inc

3M Korea Health and Safety Limited

3M Korea Limited

3M Korea Hightech Limited

3M Kenya Ltd

3M Limited

3M Lietuva, Lithuania

3M Lanka (Private) Limited

3M Latvija S.A

3M Malaysia SDN. BHD

3M Manufacturera Venezuela, S.A.

3M Material Technology Co., Ltd.

3M Mexico, S.A. de C.V.

3M MarocLa Coline

3M Netherland B.V.

3M New Zealand Ltd

3M Neotechnic Ltd

3M Nevada

3M Norge A/S

3M (New Zealand) Limited

3M Oesterreich GmbH

3M Optical System Mfg. Co.

IMTEC Corp.

Incavas Industria de Cabose Vassouras Ltd, Brazil

Iwate 3M LTD

J.R. Phoenix Ltd, Canada

K&H Surface Technologies Pty Ltd, Australia

Kolors Kevarkian S.A, Argentina

Kyuno Kabushiki Kaisha Sumitomo

Laboratories 3M Sante SAS

Les Entreprises Solumed Inc.,

Ligacon AG, Switzerland

Meguiars Inc

Meguiars International, UK

MTI PolyFab Inc., Canada

Nadco Japan Limited

Polyfoam Products Inc.,

Quest Technologies Inc.,

Riker Laboratories, Inc.

SAPO SAS, France

Seaside Insurance Limited

Security Printing and Systems Ltd.

Sumitomo 3M Ltd

Suomen 3M Oy

Top-Service Fuer Lingualtechnik GmbH, Germany

Yamagata 3M Limited

(iii) Key Management Personnel

Mr. Ajay Nanavati, Managing Director

Mr. B.V. Shankaranarayana Rao, Whole-time Director

Mrs. Sadhana Kaul, Whole-time Director

Notes: i. None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactions have 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 information provided by the Company, which has been relied upon by the auditors.

iii. The above does not include related party transactions with retiral funds, as Key Management Personnel who are trustees of the fund cannot individually exercise significant influence on the retiral fund transactions.

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

The Company during the period has reassessed its operations based on the nature of products / risk-return profile of individual market segments and revised the business segment into five market segments. Accordingly, the previous year/ period figures have been regrouped, wherever considered necessary, to conform with the current period disclosures.

Segment revenue, results and Capital employed figures include the respective amounts identifiable to each of the segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a 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 total turnover. Accordingly, there are no reportable geographical segments.

2. The Company does not have a scheme for grant of its stock options either to the Directors or employees for the shares issued in India.

However, the Executive Directors and some senior employees of the Company are entitled to Restricted Stock Options plans of 3M Company, USA.

Further, 3M Company, USA the Holding Company has offered ‘General Employees Stock Purchase Plan to all the employees of the Company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs.35,40,487 (2009-10: Rs. 41,26,116) and cumulatively amounting to Rs. 2,16,70,898 (2009-10: Rs. 1,81,30,411) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 3,12,584 (2009-10: Rs. 3,39,193) is pending remittance to the Holding Company and the same is included under Other Liabilities (Schedule 10).

With respect to the above plans no cross charges/debits have been made by 3M Company, USA.

3. Inter-Company Agreements / Arrangements :

a. Intellectual Property Agreement – The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 8,97,84,479 (2009-10: Rs. 5,41,41,934) for the year April 1, 2010 to March 31, 2011.

b (i). Support Services/Corporate Management Fees – The Company has entered into support services agreement with 3M Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company would be charged a comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

c. Contract Research Agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year under review, Company has recognised a receivable of Rs.7,38,86,089 (2009-10: Rs. 12,32,33,781).

4. (i) The financial statements for the previous period are for 15 months from January 1, 2009 to March 31, 2010, while those for the current period are for 12 months period from April 1, 2010 to March 31, 2011. Accordingly, the figures in the Profit and Loss Account for the two periods are not comparable.

5. Previous periods figures have been regrouped / reclassified wherever necessary to conform to current year classification.


Mar 31, 2010

2010 2008 Rs. Rs.

1 Contingent Liabilities not provided for :

a) Guarantees:

- issued by Company’s Bankers 4,28,84,565 2,76,05,733

b) Letter of credit opened by banks for purchase of inventory / capital goods 47,70,794 -

c) Bills discounted with banks 1,91,86,563 -

d) Claims against the Company not acknowledged as debts:

- Customs Demands - 31,19,000

- Pending Sales Tax matters 4,17,59,219 8,30,52,912

- Income Tax matter 4,69,17,100 2,31,24,330

e) Certain industrial / customer disputes are pending before various judicial authorities – amounts not ascertainable.

Note: Future cash outflow in respect of (d) above are determinable only on receipt of judgments / decisions pending with various forums/authorities

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

(i) Parties where control exists Holding Company

(ii) Fellow Subsidiaries

3M (East) A.G.

3M New Zealand Limited

3M (Schweiz) A.G.

3M A/S

3M Ait Ltd

3M Argentina S.A.C.I.F.I.A.

3M Asset Management S.a.r.l.

3M Australia Pty. Limited

3M Algeria

3M Austin

3M Aycliffe

3M Belgium S.A./N.V.

3M Canada Company

3M China Limited

3M Chile SA

3M Corporate Services B.V.

3M Deutschland GmbH

3M E Wood Manufacturer

3M DO Brasil Limitada

3M Ecc Europa B V

3M Electro & Communication India Private Ltd

3M Espana, S.A.

3M ESPE AG

3M Europe S.A.

3M Financial Management Company

3M France, S.A.

3M German Holdings GmbH

3M Global Capital S.a.r.l.

3M Gulf Ltd.

3M Health Care Ltd-UK.

3M Health Information Systems, Inc.

3M Hellas Ltd

3M Hong Kong Limited

3M Hillington UK

3M Indonesia Kbyt

3 M Innovative Properties Company

3M International Group B.V

3M International Trading (Shanghai) Co., Ltd.

3M Investment Management Corporation

3M Italia S.p.A.

3M Korea Health and Safety Limited

3M Korea Limited

3M Limited

3M Malaysia SDN. BHD

3M Manufacturera Venezuela, S.A.

3M Material Technology Co., Ltd.

3M Mexico, S.A. de C.V.

3M Netherland B.V.

3M Health Care Ltd-Japan.

3M Neotechnic Ltd

3M Nevada

3M Norge A/S

3M Oesterreich GmbH

3M AUST BIOTRACE

3M Film Construction (Shangai) Company Limited

(iii) Key Management Personnel

3M Company, USA

3M International Trading (Tianjin) Company Limited

3M South Africa (Proprietary) Limited

3M Seremban (M) Syd Bhd

3M Optical System Mfg. Co.

3M Philipines Inc

3M Poland Sp z.o.o.

3M Precision Optics, Inc.

3M Puerto Rico, Inc.

3M Russia

3M Sanayi VE Ticaret AS

3M Sante

3M Sanvetec

3M Singapore Private Limited

3M Spain

3M Svenska AB

3M Sweden

3M Taiwan Limited

3M Taiwan Optronics Corp.

3M Technologies Private Limited

3M Telecommunications, Pouyet

3M Thailand Limited

3M Touch Systems, Inc.

3M Traffic Safety Material

3M Traffic Mfg Shanghai Co Ltd

3M Turkey

3M United Kingdom Holdings PLC

3M United Kingdom PLC

3M Unitek Corporation

3M Vietnam

3MUnitek GmbH

CUNO Engineered Products, Inc.

CUNO Filtration Asia Pte. Ltd.

CUNO Filtration SAS

CUNO Incorporated

CUNO Pacific Pty Ltd.

Dyneon GmbH & Co. KG

HighJump Software, LLC

Kyuno Kabushiki Kaisha Sumitomo

Laboratories 3M Sante SAS

Nadco Japan Limited

Riker Laboratories, Inc.

Seaside Insurance Limited

Security Printing and Systems Ltd.

Sumitomo 3M Ltd

Suomen 3M Oy

Yamagata 3M Limited

3M Asia Pacific Pte Limited

3M BRCKNELL

3M Korea Hightech Limited

3M Lanka Private Limited

3M Pakistan (Private) Limited

3M Pharmaceuticals Pty Ltd

3M Wroclaw Sp. Z.o.o

Iwate 3M LTD

3M International Trading (Shenzen) Company Limited

Ajay Nanavati

B.V. Shankaranarayana Rao

Sadhana Kaul (w.e.f October 9, 2009)

Notes: i. None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactions have been entered into during the period. ii. The above information has been determined to the extent such parties have been identified on the basis of information provided by the Company, which has been relied upon by the auditors.

2. Taxation

a) The tax year for the Company being March 31, the provision for taxation for the period is the aggregate of the provision made for the 3 months ending March 31, 2009 and the provision based on the figures for the remaining 12 months upto March 31, 2010. The ultimate tax liability will be determined on the basis of the figures for the period April 1, 2009 to March 31, 2010.

3. The Company does not have a scheme for grant of its stock options either to the Executive Directors or employees for the shares issued in India.

However, the Executive Directors and some senior employees of the Company are entitled to Restricted Stock Options plans of 3M Company, USA.

Further, 3M Company, USA the holding Company has offered a ‘General Employees Stock Purchase Plan’ to all the employees of the Company. In accordance with the plan, the Company during the period has deducted for remittance a sum of Rs. 41,26,116 (2008: Rs. 41,39,045) and cumulatively amounting to Rs. 1,81,30,411 (2008: Rs.1,40,04,295) from the salary of the employees who have opted for the plan. As of the period end a sum of Rs. 3,39,193 (2008: Rs. 2,65,773) is pending remittance to the holding Company and the same is included under Other Liabilities (Schedule 9).

With respect to the above plans no cross charges/debits have been made by 3M Company, USA.

4. Inter-Company Agreements / Arrangements

a. Intellectual Property Agreement – The Company had entered into Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 5,41,41,934 for the period July 1, 2009 to March 31, 2010.

b. Support Services/Corporate Management Fees – Company entered into support services agreement with 3M Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company would be charged a comprehensive support services charges by 3M Company, USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

c. Contract Research Agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the period under review, Company has received an amount of Rs.12,32,33,781 (including an amount of Rs. 6,06,97,941 for earlier years).

5. The Company’s manufacturing plant at Ahmedabad had a breakout of fire on March 20, 2010. On the basis of evaluation by surveyor/assessor and internal technical evaluations it was ascertained that there was damage to raw materials, intermediaries, finished goods , plant and machinery and civil structure. The Company has put a provisional insurance claim for Rs.2,02,90,738. As the Company is still in the process of ascertaining the entire damage, there is no loss envisaged by the Management in the Company’s books.

6. (i) Previous year’s figures have been regrouped / reclassified wherever necessary to conform to current period classification.

(ii) The Company has changed its accounting year from calendar year (January–December) to financial year (April–March) with effect from January 1 , 2009. Accordingly the current year’s financial statements are for fifteen months from January 1, 2009 to March 31, 2010. The previous year’s figures relate to 12 months ended December 31, 2008.

(iii) In view of the above, the current period figures are accordingly, not comparable to those of the previous year.

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