Unilever 2005 Annual Report Download - page 17

14 Unilever Annual Report and Accounts 2005
About Unilever
(continued)
Description of our properties
We have interests in properties in most of the countries where
there are Unilever operations. However, none is material in the
context of the Group as a whole. The properties are used
predominantly to house production and distribution activities
and as offices. There is a mixture of leased and owned property
throughout the Group. There are no environmental issues
affecting the properties which would have a material impact
upon the Group, and there are no material encumbrances on our
properties. Any difference between the market value of properties
held by the Group and the amount at which they are included in
the balance sheet is not significant. Please refer to the schedule of
principal group companies and non-current investments on page
167 and 168 and details of property, plant and equipment in
note 11 on page 100.
We currently have no plans to construct new facilities or expand
or improve our current facilities in a manner that is material to
the Group.
Legal and arbitration proceedings and regulatory matters
We are not involved in any legal or arbitration proceedings and
do not have any obligations under environmental legislation
which might lead to material loss or expenditure in the context of
the Group results. None of our Directors or Officers are involved
in any such material legal proceedings.
In 1999, NV issued 211 473 785 €0.05 (Fl.0.10) cumulative
preference shares, with a notional value of €6.58 (Fl.14.50), as an
alternative to a cash dividend. In March 2004, NV announced its
intention to convert part (€6.53 – equivalent to Fl.14.40) of the
notional value of the preference shares, in accordance with its
Articles of Association, into NV ordinary shares in the first quarter
of 2005. A number of holders of preference shares raised
objections to the conversion, claiming that NV is obliged to buy
the preference shares back for an amount of €6.58, the amount
of the cash dividend in 1999. A group of holders of preference
shares requested the Enterprise Chamber of the Amsterdam Court
of Appeal to conduct an inquiry into the course of affairs
surrounding the preference shares. On 21 December 2004, the
Enterprise Chamber decided to order an inquiry; an additional
request to forbid NV to convert the preference shares was
rejected. NV lodged an appeal with the Dutch Supreme Court
against the decision of the Enterprise Chamber, which was
dismissed. As at the date of this Report, the inquiry is ongoing.
On 15 February 2005, after close of trading, NV converted part of
the notional value of the preference shares into NV ordinary
shares. The value, which the holders of the preference shares
received upon conversion, was €4.55 for each preference share.
As a consequence of the conversion, the notional value of the
preference shares was reduced to €0.05 (Fl.0.10) and pursuant to
the Articles of Association of NV the preference shares could be
cancelled upon repayment of this remaining notional value. On
4 May 2005, the Enterprise Chamber of the Amsterdam Court
of Appeal rejected another request of a group of holders of
preference shares which was aimed to prohibit NV from cancelling
the preference shares. This group lodged an appeal to the Dutch
Supreme Court on 4 August 2005 against the decision given on
4 May 2005. The Dutch Supreme Court has not yet decided on
this case. On 10 May 2005, NV’s Annual General Meeting decided
to cancel the preference shares. Cancellation took effect as of
midnight on 13 July 2005.
Both groups of former preference shareholders have requested
the Rotterdam District Court to nullify the NV Board’s decision to
convert the preference shares, claiming that this decision was
unreasonable.
Unilever has businesses in many countries and from time to
time these are subject to investigation by competition and other
regulatory authorities. One such matter concerns ice cream
distribution in Europe, notably the issues of outlet and cabinet
exclusivity. In October 2003, the Court of First Instance in
Luxembourg ruled in favour of the European Commission’s
decision banning Unilever’s Irish ice cream business, HB Ice Cream,
from seeking freezer cabinet exclusivity for their products in the
Irish market. HB Ice Cream has submitted an appeal against the
decision of the Court of First Instance in Luxembourg. If
unsuccessful, then freezer exclusivity in Ireland will be
unenforceable in outlets which only have HB freezers. Similar
consequences may apply in specific European markets with
equivalent structures to those described in the decision.
During 2004 the Federal Supreme Court in Brazil (local acronym
STF) announced a review of certain cases that it had previously
decided in favour of taxpayers. Because of this action we
established a provision in 2004 of €169 million for the potential
repayment of sales tax credits in the event that the cases
establishing precedents in our favour are reversed.
Also during 2004 in Brazil, and in common with many other
businesses operating in that country, one of our Brazilian
subsidiaries received a notice of infringement from the Federal
Revenue Service. The notice alleges that a 2001 reorganisation
of our local corporate structure was undertaken without valid
business purpose. If upheld, the notice could result in a tax claim
in respect of prior years. The 2001 reorganisation was comparable
with that used by many companies in Brazil and we believe that
the likelihood of a successful challenge by the tax authorities is
remote. This view is supported by the opinion of outside counsel.
Government regulation
Unilever businesses are governed, in particular, by laws and
regulations designed to ensure that their products may be safely
used for their intended purpose and that their labelling and
advertising are truthful and not misleading. Unilever businesses
are further regulated by data protection and anti-trust legislation.
Important regulatory bodies in respect of our businesses include
the European Commission and the US Food and Drug
Administration.
We have processes in place to ensure that products, ingredients,
manufacturing processes, marketing materials and activities
comply with the above-mentioned laws and regulations.