Unilever 2005 Annual Report Download - page 28

Unilever Annual Report and Accounts 2005 25
Unilever’s TSR target is to be in the top third of a reference group
including 20 other international consumer goods companies on a
three-year rolling basis. At the end of 2004 we were positioned
13th, and at the end of 2005 the ranking was 14th. In 2005, the
following companies formed the peer group of comparative
companies:
Altria Kao
Avon Lion
Beiersdorf L’Oréal
Cadbury Schweppes Nestlé
Clorox Orkla
Coca-Cola Pepsico
Colgate Procter & Gamble
Danone Reckitt Benckiser
Gillette Sara Lee
Heinz Shiseido
From 2006, Kraft will replace Altria and Kimberly-Clark will
replace Gillette in the peer group.
Significant changes after the balance sheet date
We announced on 9 February 2006 our decision to put the
majority of the frozen foods businesses in Europe up for sale.
The intended sale includes the frozen food portfolio under the
Iglo and Birds Eye brands in Austria, Belgium, France, Germany,
Greece, Ireland, the Netherlands, Portugal, Spain and the
United Kingdom.
Unilever’s position relative to the TSR reference group
200520042001 2002 2003
7
14
21
The reference group, including Unilever, consists of 21 companies. Unilever’s position is
based on TSR over a three-year rolling period.
Financial review
(continued)
Pensions investment strategy
The Group’s investment strategy in respect of its funded
pension plans is implemented within the framework of the
various statutory requirements of the territories where the
plans are based. The Group has developed policy guidelines for
the allocation of assets to different classes with the objective of
controlling risk and maintaining the right balance between risk
and long-term returns in order to limit the cost to the company of
the benefits provided. To achieve this, investments are well
diversified, such that the failure of any single investment would
not have a material impact on the overall level of assets. The
plans invest the largest proportion of the assets in equities, which
the Group believes offer the best returns over the long term
commensurate with an acceptable level of risk. The Group also
keeps a proportion of assets invested in property, bonds and cash.
Most assets are managed by a number of external fund managers
with a small proportion managed in-house. In December 2005,
Unilever launched a pooled investment vehicle (Univest) which will
offer its pension plans around the world a simplified investment
solution to implement their strategic asset allocation models
initially for equities. The aim is to provide a high quality, well
diversified risk controlled solution.
Total Shareholder Return
Total Shareholder Return (TSR) measures the returns received by a
shareholder, capturing both the increase in share price and the
value of dividend income (assuming dividends are re-invested).
Unilever’s TSR performance is compared with a peer group of
competitors over a three-year rolling performance period. This
period is sensitive enough to reflect changes but long enough to
smooth out short-term volatility. The return is expressed in US
dollars, based on the equivalent US dollar share price for NV and
PLC. US dollars were chosen to facilitate comparison with
companies in Unilever’s chosen reference group. The choice of
currency affects the absolute TSR but not the relative ranking.
Report of the Directors