Unilever 2006 Annual Report Download

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Disclaimer
Notes to the Annual Report and Accounts This PDF version of the Unilever Annual Report
and Accounts 2006 is an exact copy of the document provided to Unilever’s shareholders.
Certain sections of the Unilever Annual Report and Accounts 2006 have been audited.
Sections that have been audited are set out on pages 70 to 123, 129 to 130, 132 to 134
and 137 to 139. The auditable part of the report of the Remuneration Committee as set
out on page 49 has also been audited.
The maintenance and integrity of the Unilever website is the responsibility of the Directors;
the work carried out by the auditors does not involve consideration of these matters.
Accordingly, the auditors accept no responsibility for any changes that may have occurred
to the financial statements since they were initially placed on the website.
Legislation in the United Kingdom and the Netherlands governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Disclaimer Except where you are a shareholder, this material is provided for information
purposes only and is not, in particular, intended to confer any legal rights on you.
This Annual Report and Accounts does not constitute an invitation to invest in Unilever
shares. Any decisions you make in reliance on this information are solely your responsibility.
The information is given as of the dates specified, is not updated, and any forward-looking
statements are made subject to the reservations specified on the final page of the Report.
Unilever accepts no responsibility for any information on other websites that may be
accessed from this site by hyperlinks.

Table of contents

  • Page 1
    .... Disclaimer Except where you are a shareholder, this material is provided for information purposes only and is not, in particular, intended to confer any legal rights on you. This Annual Report and Accounts does not constitute an invitation to invest in Unilever shares. Any decisions you make in...

  • Page 2
    Adding vitality to life 2006 Annual Report and Accounts

  • Page 3
    ... against the year in which they become payable. Actual dividends payable for 2006 on Unilever N.V. New York Registry Shares and American Depositary Receipts of Unilever PLC may differ from those shown above, which include final dividend values calculated using the rates of exchange ruling on...

  • Page 4
    ... Shareholder information Analysis of shareholding Exchange controls affecting security holders Nature of the trading market Dividend record Financial calendar Contact details Website Publications Share registration 142 143 145 146 146 147 147 147 141 Index 148 Unilever Annual Report and Accounts...

  • Page 5
    ...disposable income, we always remember that respect and reputation have to be earned. And retaining the trust and credibility that Unilever has built up over many years is critical to our success in helping people 'feel good, look good and get more out of life'. 2 Unilever Annual Report and Accounts...

  • Page 6
    ...like to report back to you on a number of issues concerning the dual structure, Board composition and Board evaluation. Dual structure In 2005 three proposals were put forward to change Unilever's constitutional arrangements. All were approved by shareholders at the two Annual General Meetings (AGMs...

  • Page 7
    ... both in terms of product portfolio and geographical spread. Our turnover in Western Europe has declined from 65% to 34% of Unilever sales. The expansion has been picked up by the developing countries which represent over 40% of our turnover. Moreover, 35 years ago 25% of Unilever sales were outside...

  • Page 8
    ... and innovation, including research and development. Categories also lead the strategic elements of the supply chain and are accountable for long-term value creation in the business, as measured by market share development, category growth, innovation metrics and brand health. For more information...

  • Page 9
    ... business opportunities that will help build our core business interests in Foods and Home and Personal Care. These activities include: • Unilever Technology Ventures, which invests in technology funds and start-up companies; • Unilever Ventures, which is an early-stage business development fund...

  • Page 10
    ...most of our senior leadership teams, such as Foods, Europe, The Americas and human resources include female leaders. Information technology Unilever IT is a global function headed by the Global Chief Information Officer with a strategy to deliver simpler, more cost effective IT solutions to support...

  • Page 11
    ... non-current investments on page 129 and 130 and details of property, plant and equipment in note 10 on page 90. 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. Laws and regulation Unilever businesses are...

  • Page 12
    ... an inquiry into potential competition law infringements in France involving a number of consumer goods companies in the home and personal care sector, including Unilever France and Lever Faberge France, both subsidiaries of the Unilever Group. To date, no statement of objections has been lodged...

  • Page 13
    ... prescribed in our Code of Business Principles. Unilever products carrying our well-known brand names are sold in over 100 countries. Should we fail to meet high product safety, social, environmental and ethical standards in all our operations and activities, Unilever's corporate reputation could be...

  • Page 14
    ... our innovation programme. The successful launch in the UK last year of AdeZ - a soya-based fruit drink - is a good example, one that can be traced directly to our Vitality mission and our determination to continue developing products with proven nutritional benefits. Unilever Annual Report and...

  • Page 15
    ... critical to the long-term success of the business - marketing, customer management, and research and development. We have made enormous strides in each of these areas in recent years, but really have the opportunity now in 2007 to accelerate the level of performance. 12 Unilever Annual Report and...

  • Page 16
    ... by region Report of the Directors (continued) Basis of reporting In this Operating review we comment on our changes in revenue on the basis of underlying sales growth (USG). This measure reï¬,ects the change in revenue at constant rates of exchange, (average exchange rates for the preceding year...

  • Page 17
    .... The sale of the majority of our European frozen foods businesses to Permira was successfully completed during the year. Our 2006 innovation programmes have resulted in our Foods brands wholeheartedly embracing the concept of Vitality, with new products designed to deliver the health benefits...

  • Page 18
    ...growth across all key categories apart from frozen foods. In Home and Personal Care we had a disappointing year and we have lost market share, particularly in the UK. New product launches in 2005 included Knorr Vie mini shots, extensions of the Becel/Flora pro•activ heart health range, soups forti...

  • Page 19
    ... highest level for many years. Sales in Mexico were lower for the year, affected by a combination of a decline in the traditional retail trade and local low-priced competition. In addition, there were several operational issues which have since been addressed. The business returned to growth in the...

  • Page 20
    ... than last year. Innovation-driven marketing mix, pricing and productivity offset high commodity costs. Advertising and promotions were increased to support major brand launches. Another strong Foods performance in the US was driven by further share gains in ice cream, continued good results from...

  • Page 21
    ... In South Africa, aggressive price promotions by a local competitor have reduced laundry sales, but there were strong growth and share gains in Foods. Innovation is increasingly being driven globally and regionally, rather than locally. The new Sunsilk range has been introduced in most major markets...

  • Page 22
    ... with market share gains, and significant contributions from China, which was up by over 20%, and from South East Asia, South Africa, Turkey and Arabia. Japan returned to growth. After a weak first half, Australia improved in the second half of the year. Unilever Annual Report and Accounts 2006...

  • Page 23
    ... to market brilliantly. Our Foods and Home and Personal Care teams invest heavily in world-class innovation in order to create global brand ideas that can be rolled out fast. This involves close collaboration between our marketing and research teams, in order to develop breakthrough ideas that meet...

  • Page 24
    ... and health. In 2006 Unilever Tea Kenya won a Global Business Coalition on HIV/AIDS award for its work on the education, prevention and treatment of HIV/AIDS in the workplace and beyond. The brand has shown consistent high growth over the past few years. Unilever Annual Report and Accounts 2006...

  • Page 25
    ..., the campaign promotes the brand through communityendorsed playgrounds, outdoor games and competitions involving both children and parents. The campaign's success has led to Omo becoming Unilever's first-ever billion RMB (Renminbi) sales brand in China. 22 Unilever Annual Report and Accounts 2006

  • Page 26
    ...cash ï¬,ows based on historical experience and planned growth rates and margins for this product group. No significant impairment losses have been identified in 2006. Please refer also to note 9 on page 88. Discount rate Inï¬,ation Expected long-term rate of return: Equities Bonds Property Others...

  • Page 27
    ... of long-term value creation Unilever's ambition for the creation of value for shareholders is measured by Total Shareholder Return over a rolling three-year period compared with a peer group of 20 other companies. Unilever believes that the contribution of the business to this objective can best be...

  • Page 28
    ... UFCF is used by Unilever to measure progress against our longer-term value creation goals as outlined to investors. UFCF is cash ï¬,ow from group operating activities, less capital expenditure, less charges to operating profit for share-based compensation and pensions, and less tax (adjusted to re...

  • Page 29
    ...) Report of the Directors (continued) Ungeared free cash ï¬,ow Net profit Taxation Share of net profit of joint ventures/associates and other income from non-current investments Net finance costs Depreciation, amortisation and impairment Changes in working capital Pensions charges in operating...

  • Page 30
    ... 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...

  • Page 31
    ... during the year, with supply chain savings programmes, pricing action and a positive mix fully offsetting around â,¬600 million of higher input costs. Investment in advertising and promotions increased by nearly â,¬300 million, from 12.8% to 13.1% of sales. An overview of performance by regions is...

  • Page 32
    ... Elais-Unilever S.A. is reported as a subsidiary and is Unilever's main foods business in Greece. The offer price was â,¬24.50 per share, with the public offer closing on 25 October 2006. A total of 2 234 692 shares were purchased by the end of 2006, increasing Unilever's ownership of Elais-Unilever...

  • Page 33
    ... details on Unilever's pension investment strategy. Total equity has increased by â,¬2.9 billion in the year. Net profit added â,¬5.0 billion and currency and fair value/actuarial gains added â,¬0.5 billion. Dividends paid in the year totalled â,¬2.7 billion. 30 Unilever Annual Report and Accounts...

  • Page 34
    ... from parent and group financing companies that is most appropriate to the particular country and business concerned. Unilever maintains access to global debt markets through an infrastructure of short-term debt programmes (principally US domestic and euro commercial paper programmes) and long-term...

  • Page 35
    ... the foods and home and personal care businesses. The remaining 45% interest is held by Jerónimo Martins Group. The structure of the agreement is such that there is joint control of the newly formed entity and so it will be accounted for by Unilever as a joint venture. Pensions investment strategy...

  • Page 36
    ... Unilever Share Dealing Code), the Risk Management Policy, the Corporate Pensions Policy and the Accounting and Reporting Policy. The Code of Business Principles is Unilever's statement of values and represents the standard of conduct we require from all of our employees. Our Code of Ethics applies...

  • Page 37
    ...on, among other things, Unilever's business, corporate governance, regulatory developments, and investor relations matters. In 2006, a Board meeting was held at Port Sunlight which included a visit to one of Unilever's Research and Development facilities. 34 Unilever Annual Report and Accounts 2006

  • Page 38
    ... the Group Chief Executive, the Chief Financial Officer, the President, Europe and the President, Home and Personal Care. Details on their responsibilities can be found in 'The Governance of Unilever'. The Executive Directors are full-time employees of Unilever. Information about their remuneration...

  • Page 39
    ...le set by the Boards for the Non-Executive Directors and the chart used for orderly succession planning can be seen on our website at www.unilever.com/investorcentre/corpgovernance. Meetings The Non-Executive Directors meet as a group, without the Executive Directors present, under the chairmanship...

  • Page 40
    ... for Non-Executive Directors and the remuneration of the tier of management directly below the Boards. The Committee is supplied with information by Jan van der Bijl, Joint Secretary of Unilever. The detailed report of the Remuneration Committee to shareholders on Directors' remuneration is on...

  • Page 41
    ...and PLC do not require Directors of NV or Directors of PLC to hold shares in NV or PLC. However, the remuneration arrangements applicable to our Executive Directors require our Executive Directors to build and retain a personal shareholding in Unilever equal to at least 150% of their annual base pay...

  • Page 42
    ...Board of Directors or by shareholders in the manner permitted under the United Kingdom Companies Act 1985. Proposals to alter the provisions in the Articles of Association of NV and PLC relating to the unity of management require the prior approval of meetings of the holders of the NV special shares...

  • Page 43
    ... control laws applicable at that time. Under the Equalisation Agreement, the two companies are permitted to pay different dividends in the following exceptional circumstances: • If the average annual sterling/euro exchange rate changed so substantially from one year to the next that to pay equal...

  • Page 44
    ... These depositary receipts are listed on Euronext Amsterdam, as are the NV ordinary and 7% preference shares themselves. Holders of depositary receipts can under all circumstances exchange their depositary receipts for the underlying shares (and vice versa). Unilever Annual Report and Accounts 2006...

  • Page 45
    Corporate governance (continued) Report of the Directors (continued) Holders of depositary receipts are entitled to dividends that are paid on the underlying shares held by the Foundation. Foundation Unilever NV Trust Office's board The members of the board are Mr J H Schraven (Chairman), Mr P P ...

  • Page 46
    ...included elsewhere in this Annual Report and Accounts. Board and Committee structures NV is a multinational company with activities and shareholders located all over the world. It has a one-tier board, consisting of both Executive and, as a majority, Non-Executive Directors. We achieve compliance of...

  • Page 47
    ...for a period of at least five years (bpp II.2.3). In 2001 we introduced a new remuneration policy with shareholder approval which requires our Executive Directors to build and retain a personal shareholding in Unilever equal to at least 150% of their annual base pay. We believe that this is in line...

  • Page 48
    ... those followed by US companies listed on the New York Stock Exchange. We would also confirm that it is our practice, in accordance with our home country laws and practices, to give our shareholders the opportunity to vote on equity compensation plans. Unilever Annual Report and Accounts 2006 45

  • Page 49
    ... Personal Care Europe 2001. Business Group President, Latin America 1999. Chairman, Unilever Thai Holdings 1995. Chairman, Unilever Malaysia 1992. External appointments include: Non-Executive Director, InterContinental Hotels Group PLC. Rudy Markham 1996-2006. Non-Executive Director, Clarian Health...

  • Page 50
    ...Human Resources Officer President Foods Nationality: Indian. Aged 52. Appointed President Foods April 2005. Joined Unilever 1977. Previous posts include: Business Group President Home and Personal Care Asia 2004 in addition to Non-Executive Chairman, Hindustan Lever 2004-2005. Chairman and Managing...

  • Page 51
    ...le of potential Non-Executive Directors, which takes into account the roles of Non-Executive Directors set out in the Dutch Corporate Governance Code and the UK Combined Code. Under the terms of the Governance of Unilever the Boards should comprise a majority of Non-Executive Directors and the Pro...

  • Page 52
    ...the return on investment from the reward system for Unilever's leadership group. It is also our aim to manage the differing elements of total remuneration in a fully integrated manner. The five principles will from 2007 provide the foundation of some important changes to executive remuneration that...

  • Page 53
    ... (continued) Unilever reward policy table 2006 Indicative levels at face value as % of base pay Element Payment vehicle Plan objectives/Key drivers Performance measures Short-term (one year) Base salary Annual incentive Cash Cash (75%) Shares (25%) Market competitive Executive Director: 60...

  • Page 54
    ... by taking account of market conditions and internal financial planning. Total Shareholder Return (TSR) Long-Term Incentive Plan This plan rewards Executive Directors for creating more value for Unilever's shareholders when compared with the investment returns generated by competitors. Under this...

  • Page 55
    ... price of NV and PLC will be inï¬,uenced by the performance of Unilever. This, in turn, will affect the ultimate value of the matching shares on vesting. Executive Directors' pensions The Remuneration Committee has decided that from 2007 new Executive Directors will be members of the all-employee...

  • Page 56
    ...Directors of the appropriate calibre and standing. The current fee levels are set out below: Non-Executive Role Fees payable by PLC Fees payable by NV 130 120 110 100 90 80 70 60 Growth in the value of a hypothetical investment over five years AEX comparison based on 30 day average values Unilever...

  • Page 57
    ...) on market data, reward trends and performancerelated pay. Towers Perrin also provides general consultancy advice to Unilever group companies on employee rewards, pension, communications and other human resource matters. The Group Chief Executive can be invited to attend Committee meetings to...

  • Page 58
    ... section contains detailed information on the Executive Directors' annual remuneration, long-term incentives, pension benefits and share interests in respect of 2006. Aggregate remuneration for Executive Directors The following table gives details of the aggregate remuneration (including value of...

  • Page 59
    ... the share split and share consolidation which took place on 22 May 2006. (b) The conditional shares awarded in 2003 lapsed in March 2006. In his capacity as a Non-Executive Chairman, Antony Burgmans does not participate in any share-based remuneration. 56 Unilever Annual Report and Accounts 2006

  • Page 60
    ...Executive Directors' conditional share awards under the TSR Long-Term Incentive Plan (continued) Unilever's position relative to the TSR reference group 2004 2005 2006 7 14 21 The reference group, including Unilever, consists of 21 companies. Unilever's position is based on TSR over a three-year...

  • Page 61
    ...2006 to the current Executive Directors was as follows: Patrick Cescau â,¬6 155; Kees van der Graaf â,¬432; Ralph Kugler â,¬432; and Rudy Markham â,¬432. The term 'Executive Plan' refers to options granted under the PLC or NV Executive Option Plans. The closing market prices of ordinary shares at 31...

  • Page 62
    ... for other Netherlands-based employees, the increase in pension accrued during the year includes the impact of the changes to the Unilever Netherlands pension plan. The Listing Rules of the Financial Services Authority are different from the Directors' Remuneration Report Regulations 2002 and...

  • Page 63
    ...Option Plans and the UK Employee ShareSave Plan). Further information, including details of the NV and PLC ordinary shares acquired by certain group companies in connection with other share-based compensation plans, is given in note 29 on pages 117 to 121. The voting rights of the Directors who hold...

  • Page 64
    .... Chairman of the Corporate Responsibility and Reputation Committee. Member of the Audit Committee. Appointed at 2006 AGMs. Total fees include â,¬29 167 allowance for travel from outside Europe. Senior Independent Director, Vice Chairman and Chairman of the Remuneration and Nomination Committees as...

  • Page 65
    ... of the Remuneration Committee (continued) Report of the Directors (continued) Non-Executive Directors' interests - share capital The interests in the share capitals of NV and PLC and their group companies of those who were Non-Executive Directors as at 31 December 2006 (including those of their...

  • Page 66
    ... to internal controls over financial reporting; • review of the application of information and communication technology; • a review of the annual pension report and pensions related accounting and proposals; • annual review of anti-fraud arrangements; • a review of tax planning policy; and...

  • Page 67
    ... brands have on the health and prosperity of the communities Unilever serve was discussed and the CEO leadership role recognised (Social Innovation: How values-led brands are helping to drive business strategy, speech by Patrick Cescau, available on Unilever's website at www.unilever.com). Policy...

  • Page 68
    ... to the consolidated accounts 1 Accounting information and policies 2 Segment information 3 Gross profit and operating costs 4 Staff costs 5 Net finance costs 6 Taxation 7 Combined earnings per share 8 Dividends on ordinary capital 9 Goodwill and intangible assets 10 Property, plant and equipment...

  • Page 69
    ... Financial Reporting Standards as adopted by the EU (in the case of the consolidated accounts) and United Kingdom accounting standards (in the case of the parent company accounts) which they consider to be applicable have been followed. The Directors have responsibility for ensuring that NV and PLC...

  • Page 70
    ... of the effectiveness of the risk management and related control systems throughout Unilever to both operating management and the Boards. The Group has an independent Audit Committee, comprised entirely of Independent Non-Executive Directors. This Committee meets regularly with the Chief Auditor and...

  • Page 71
    .... We have reported separately on the company accounts of Unilever N.V. for the year ended 31 December 2006. Directors' responsibility The Directors are responsible for the preparation and fair presentation of the consolidated accounts in accordance with International Financial Reporting Standards as...

  • Page 72
    ... the information in the Report of the Remuneration Committee that is described as having been audited. Respective responsibilities of Directors and auditors The Directors' responsibilities for preparing the consolidated accounts in accordance with applicable law and International Financial Reporting...

  • Page 73
    ...Finance income Finance costs Preference shares provision Pensions and similar obligations Share of net profit/(loss) of joint ventures Share of net profit/(loss) of associates Other income from non-current investments 11 Profit before taxation Taxation 6 Net profit from continuing operations Net...

  • Page 74
    ... statement of recognised income and expense Unilever Group for the year ended 31 December â,¬ million 2006 â,¬ million 2005 â,¬ million 2004 Fair value gains/(losses) net of tax: On cash ï¬,ow hedges On available-for-sale financial assets Actuarial gains/(losses) on pension schemes net of...

  • Page 75
    ... Unilever Group as at 31 December â,¬ million 2006 â,¬ million 2005 Goodwill 9 Intangible assets 9 Property, plant and equipment 10 Pension asset for funded schemes in surplus 20 Trade and other receivables due after more than one year 14 Deferred tax assets 12 Other non-current assets 11 Total...

  • Page 76
    ... funds (other than contributions and other direct payments made by the Group in respect of pensions and similar obligations) are not included in the consolidated cash ï¬,ow statement. Cash ï¬,ows relating to discontinued operations included above are set out in note 27 on page 114. Unilever Annual...

  • Page 77
    ... and accounting standards'. Unilever The two parent companies, NV and PLC, together with their group companies, operate as a single economic entity (the Unilever Group, also referred to as Unilever or the Group). NV and PLC have the same Directors and are linked by a series of agreements, including...

  • Page 78
    ...net assets and liabilities. The Group's share of the profit or loss after tax of joint ventures and associates is included in the Group's consolidated profit before taxation. Biological assets are stated at fair value less estimated point-of-sale costs. Unilever Annual Report and Accounts 2006 75

  • Page 79
    ... are not closely related to those of host contracts and the host contracts are carried at fair value with unrealised gains or losses reported in the income statement. Valuation principles The fair values of quoted investments are based on current bid prices. For unlisted and for listed securities...

  • Page 80
    ... taxes. It does not include sales between group companies. Discounts given by Unilever include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs. Turnover is recognised when the risks and rewards of the underlying products and services...

  • Page 81
    .... The information reported would be that which management uses internally for evaluating the performance of operating segments and allocating resources to those segments. It replaces disclosure requirements in IAS 14 'Segment Reporting' and its impact is currently being assessed by the Group. The...

  • Page 82
    Notes to the consolidated accounts Unilever Group 2 Segment information Our primary reporting segments are geographic, comprising our three operating regions of Europe, The Americas and Asia Africa. The home countries of the Unilever Group are the Netherlands and the United Kingdom. Turnover for ...

  • Page 83
    ... consolidated accounts Unilever Group 2 Segment information (continued) â,¬ million Analysis by geographical segment Assets 2006 Segment assets Joint ventures/associates Total assets by geographical segment Corporate assets Total assets 2005 Segment assets(a) Joint ventures/associates Total assets...

  • Page 84
    ... operations are managed on a geographical basis, the two Foods and Home and Personal Care categories manage brands which we group into our principal product areas; these are our secondary reporting segments and are listed below. In 2006, we reviewed the structure of our secondary reporting segments...

  • Page 85
    ...Share of net profit/(loss) of associates Other income from non-current investments Profit before taxation Taxation Net profit from continuing operations Net profit from discontinued operations Net profit Assets 2006 Segment assets Joint ventures/associates Total assets by product area Corporate...

  • Page 86
    ... goods purchased for resale Amortisation of finite-lived intangible assets and software Depreciation of property, plant and equipment Advertising and promotions Exchange gains/(losses) Lease rentals Minimum operating lease payments Contingent operating lease payments Less: Sub-lease income relating...

  • Page 87
    ... and UK pension plans. Average number of employees during the year Europe The Americas Asia Africa Financial Statements (continued) '000 2006 '000 2005 '000 2004 47 46 96 189 51 46 115 212 53 48 126 227 5 Net finance costs Finance costs Finance costs Bank loans and overdrafts Bonds and other...

  • Page 88
    Notes to the consolidated accounts Unilever Group 6 Taxation Tax charge in income statement Current tax Current year Over/(under) provided in prior years(a) Deferred tax Origination and reversal of temporary differences Changes in tax rates Utilisation of unrecognised losses brought forward â,¬ ...

  • Page 89
    ... consolidated accounts Unilever Group 6 Taxation (continued) The following tables analyse profit before taxation and actual taxation charges between those arising in Europe and elsewhere. â,¬ million 2006 â,¬ million 2005 â,¬ million 2004 Profit before taxation Europe Parent and group companies...

  • Page 90
    ... divided by the average number of share units representing the combined ordinary capital of NV and PLC in issue during the year, after deducting shares held as treasury stock. Earnings per share are calculated on the basis of the revised nominal share values which have been applied since 22 May 2006...

  • Page 91
    ... approved by shareholders at the Annual General Meetings. In accordance with IFRS, no provision for the amount of this dividend, estimated at â,¬1 358 million, has been recognised in the financial statements for the year ended 31 December 2006. Full details of dividends per share for the years 2002...

  • Page 92
    ... (CGUs). Impairments charges in the year The impairments charged in 2006 principally relate to planned business disposals that will be completed during 2007. In 2006, Slim•Fast was fully integrated into The Americas business as part of the North American beverage operations. As a result of the...

  • Page 93
    Notes to the consolidated accounts Unilever Group 10 Property, plant and equipment At cost less depreciation and impairment Land and buildings Plant and equipment â,¬ million 2006 â,¬ million 2005 1 944 4 332 6 276 1 994 4 498 6 492 224 263 â,¬ million Total Includes freehold land Commitments for...

  • Page 94
    ...(c) Includes â,¬(22) million relating to discontinued operations. Included in the above is property, plant and equipment under a number of finance lease agreements, for which the book values are as follows: â,¬ million â,¬ million Plant and equipment â,¬ million Total â,¬ million Land and buildings...

  • Page 95
    ...ficant contingent liabilities in relation to its interest in the joint ventures and associates. The Group has no outstanding capital commitments to joint ventures. Outstanding balances with joint ventures and associates are shown in note 30 on page 122. 92 Unilever Annual Report and Accounts 2006

  • Page 96
    ... â,¬25 million credit reported under discontinued operations in the income statement. (b) Of the total movement in equity of â,¬372 million, â,¬39 million arises as a result of currency retranslation. Financial Statements (continued) At the balance sheet date, the Group has unused tax losses of...

  • Page 97
    .... Impairment provision for trade receivables - movements during the year 1 January Charged to current year income statement Reductions/releases Currency retranslation 31 December â,¬ million 2006 â,¬ million 2005 258 38 (107) (9) 180 232 39 (33) 20 258 94 Unilever Annual Report and Accounts 2006

  • Page 98
    ...restated to reï¬,ect the amount of fixing and related average interest rate for the following year. (c) Includes fair value of borrowing-related derivatives amounting to â,¬250 million. For further information please refer to note 17 on pages 99 and 100. Unilever Annual Report and Accounts 2006 95

  • Page 99
    ... remains linked, using the official euro conversion rate, to the amount in Dutch guilders originally paid up on these shares. As a consequence the amount paid out as preference dividends will remain the same euro amount as paid out in previous years. 96 Unilever Annual Report and Accounts 2006

  • Page 100
    ...(Thai baht) South Africa 10.200% Bonds 2008 (South African rand) Commercial paper (South African rand) Other countries Total other group companies Total bonds and other loans (a) As required by fair value hedge accounting, the fair value of the bonds and other loans is based on their amortised cost...

  • Page 101
    ... the consolidated accounts Unilever Group 16 Borrowings (continued) Undrawn committed facilities Unilever had the following undrawn committed facilities at 31 December 2006 revolving 364-day bilateral credit facilities of in aggregate US $4 263 million (2005: US $3 958 million) with a 364-day term...

  • Page 102
    ...Details of the instruments used for interest rate and foreign exchange exposure management, together with information on related exposures, are given below. Unilever's interest rate management policy is described below. The Group's exposure to interest rates is mainly fixed by fixed rate long-term...

  • Page 103
    ... believes that most currencies of major countries in which it operates will equalise against the euro over time. Unilever does have a foreign exchange policy that requires operating companies to manage trading and financial foreign exchange exposures within prescribed limits. This is achieved...

  • Page 104
    ... the consolidated accounts Unilever Group 17 Financial instruments and treasury risk management (continued) Liquidity risk is managed by maintaining access to global debt markets through an infrastructure of short-term and long-term debt programmes. In addition to this, Unilever has committed credit...

  • Page 105
    ... with the main parties in the legal dispute over its 1999 Unilever N.V. preference shares. The terms of the agreement are that NV will pay an amount of â,¬1.38 plus interest of â,¬0.16 compensation per preference share held at the beginning of 24 March 2004, the day on which NV announced its...

  • Page 106
    ... plans Financial Statements (continued) Discount rate Inï¬,ation Rate of increase in salaries Rate of increase for pensions in payment Rate of increase for pensions in deferment (where provided) Long-term medical cost inï¬,ation Expected long-term rates of return: Equities Bonds Property Others...

  • Page 107
    ... to the consolidated accounts Unilever Group 20 Pensions and similar obligations (continued) The valuations of other post-employment benefit plans generally assume a higher initial level of medical cost inï¬,ation, which falls from 9.9% to the long-term rate within the next five years. Assumed...

  • Page 108
    ...to the consolidated accounts Unilever Group 20 Pensions and similar obligations (continued) Balance Sheet The assets, liabilities and surplus/(deficit) position of the pension and other post-employment benefit plans and the expected rates of return on the plan assets at the balance sheet date were...

  • Page 109
    ...benefit pension and other benefit plans Current service cost Employee contributions Special termination benefits Past service cost Settlements/curtailments Defined contribution plans Total operating cost Charged to other finance income/(cost): Interest on retirement benefits Expected return on...

  • Page 110
    ...beginning of year Total actuarial gain/(loss) (â,¬ million) As % of present value of plan liabilities at beginning of year 533 3.3% 51 0.2% 474 2.2% 1 058 4.9% 1 592 11.9% 27 0.1% (1 706) (9.1)% (87) (0.5)% 369 2.9% (47) (0.3)% (1 047) (5.9)% (725) (4.1)% Unilever Annual Report and Accounts 2006...

  • Page 111
    ...(184) (6) (2) 11 672 Financial Statements (continued) (a) The share-based payment credit relates to the reversal of the non-cash charge recorded against operating profit in respect of the fair value of share options and awards granted to employees. (b) From 1 January 2005, Unilever adopted IAS 32...

  • Page 112
    ... dividends on their ordinary shares in NV. Share-based compensation The Group operates a number of share-based compensation plans involving options and awards of ordinary shares of NV and PLC. Full details of these plans are given in note 29 on pages 117 to 121. Unilever Annual Report and Accounts...

  • Page 113
    ... income statement Transfers to inventories/non-current assets 31 December Financial Statements (continued) (5) 12 (4) (2) 1 (19) 9 1 4 (5) Unilever acquired 3 010 666 ordinary shares of NV and 3 010 465 ordinary shares of PLC through purchases on the stock exchanges during the year. These shares...

  • Page 114
    ... was not restated. (c) The share-based compensation credit relates to the reversal of the non-cash charge recorded against operating profit in respect of the fair value of share options and awards granted to employees. (d) As part of the review of Unilever's corporate structure, and in the light of...

  • Page 115
    ... not have a material effect on the Group's financial condition or results of operations. Guarantees given by parent or group companies that relate to liabilities already included in these consolidated accounts are excluded from this total. The total value of guarantees which arose or were revised...

  • Page 116
    ... included in the consolidated accounts up to their date of disposal. On 3 November 2006, Unilever announced that it had reached a final agreement with Permira Funds to sell the majority of its European frozen foods business for â,¬1.7 billion. The Unilever businesses being sold in this transaction...

  • Page 117
    Notes to the consolidated accounts Unilever Group 27 Assets held for sale and discontinued operations Following the announcement on 9 February 2006 of the intention to dispose of the majority of Unilever's European frozen foods businesses, the results of these businesses have been presented as ...

  • Page 118
    ... Pension liability for unfunded schemes Deferred taxation - - - - - (16) - (1) (9) (26) Total assets at 31 December 2006 are included in the geographical segments as follows: Europe â,¬9 million; The Americas â,¬4 million; and Asia Africa â,¬1 million. Unilever Annual Report and Accounts...

  • Page 119
    ... consolidated accounts Unilever Group 28 Reconciliation of net profit to cash ï¬,ow from operating activities Cash ï¬,ow from operating activities Net profit Taxation Share of net profit of joint ventures/associates and other income from non-current investments Net finance costs Finance income...

  • Page 120
    ..., it will potentially award top executives on the vesting date three years later with between 0% and 200% of the original conditional award. (v) North America Performance Share Programme A long-term incentive plan for North American managers, awarding Unilever shares if company targets are met over...

  • Page 121
    ... 2005 2004 Option value information Fair value per option Valuation assumptions: Expected option term Expected volatility Expected dividend yield Risk-free interest rate â,¬3.10 3.5 years 27.5% 3.8% 3.8% â,¬3.01 3.5 years 27.5% 3.6% 2.9% â,¬3.18 3.4 years 27.5% 3.3% 3.5% The exercise prices and...

  • Page 122
    ...shares of Unilever PLC, at a price not lower than the market value on the day the options are granted. These options become exercisable over a three-year period from the date of grant and have a maximum term of ten years. Managers working in India can participate in an Executive Option Plan relating...

  • Page 123
    ... 2006 no share awards vested. (iv) TSR Long-Term Incentive Plan Under this plan, introduced in 2001, grants are made to Executive Directors and some senior executives. The level of share award which will vest three years later will vary in accordance with the Total Shareholder Return in comparison...

  • Page 124
    ... the consolidated accounts Unilever Group 29 Share-based compensation plans (continued) (v) North America Performance Share Programme This long-term incentive plan for North American managers, introduced in 2001, awards Unilever shares if company performance targets are met over a three-year period...

  • Page 125
    ..., President Asia Africa and member of the Unilever Executive Team, and his wife purchased an apartment from Hindustan Lever Limited, a group company ultimately owned by PLC, for Rs.118 million (â,¬2 042 255). The purchase was made at full market value via an open bidding/tendering process managed by...

  • Page 126
    ... the foods and home and personal care businesses. The remaining 45% interest is held by Jerónimo Martins Group. The structure of the agreement is such that there is joint control of the newly formed entity and so it will be accounted for by Unilever as a joint venture. Unilever Annual Report and...

  • Page 127
    ... operations which is applicable for our 2006 reporting. This classification differs from that which would have applied under our reporting basis for 2005. Consolidated income statement Continuing operations: Turnover Operating profit Net finance costs Income from non-current investments...

  • Page 128
    ... 25 382 6 059 5 417 36 858 588 511 1 099 Operating profit Foods Home and Personal Care 2 893 2 515 5 408 Total assets Foods Home and Personal Care Corporate 24 972 7 001 5 099 37 072 Capital expenditure Foods Home and Personal Care 714 487 1 201 Unilever Annual Report and Accounts 2006 125

  • Page 129
    ... policies which the Group applied prior to its adoption of IFRS. These were based on United Kingdom accounting standards and applicable Dutch and UK law. Further information can be found in the 'Accounting information and policies' sections of the Report and Accounts for the years in question...

  • Page 130
    ... 924 5 007 25 156 3 031 28 187 805 493 1 298 Group operating profit Foods Home and Personal Care 1 267 2 144 3 411 Net operating assets Foods Home and Personal Care 19 014 1 897 20 911 Capital expenditure Foods Home and Personal Care 532 473 1 005 Unilever Annual Report and Accounts 2006 127

  • Page 131
    Financial record (continued) Unilever Group Financial record under previous GAAP (continued) Consolidated cash ï¬,ow statement Cash ï¬,ow from operating activities Dividends from joint ventures Returns on investments and servicing of finance Taxation Capital expenditure and financial investment ...

  • Page 132
    ...Africa Foods (Pty) Limited Unilever South Africa Home and Personal Care (Pty) Ltd. Spain Unilever España S.A. Unilever Foods España S.A. Sweden Unilever Sverige AB Switzerland Unilever Supply Chain Company AG Unilever Schweiz GmbH Thailand Unilever Thai Trading Ltd. (a) See 'Basis of consolidation...

  • Page 133
    ... 2006 Group companies (continued) Turkey Unilever Sanayi ve Ticaret Türk A.S ,. United Kingdom Lever Fabergé Ltd. Unilever Bestfoods UK Ltd. Unilever PLC(a) Unilever UK Holdings Ltd. Unilever UK & CN Holdings Ltd. United States of America Conopco, Inc. Unilever Capital Corporation Unilever United...

  • Page 134
    ...accounting policies set out therein. We have reported separately on the consolidated accounts of the Unilever Group for the year ended 31 December 2006. Directors' responsibility The Directors are responsible for the preparation and fair presentation of the company accounts in accordance with United...

  • Page 135
    ...the consolidated accounts of the Unilever Group. Therefore, and in accordance with Article 402 of Book 2 of the Civil Code in the Netherlands, the profit and loss account only reï¬,ects the income from fixed investments after taxation and other income and expenses after taxes. The company accounts...

  • Page 136
    ... Force abstract 37 'Purchases and sale of own shares' (UITF 37) which would require these amounts to be included within fixed investments. Financial instruments and derivative financial instruments The company's accounting policies under United Kingdom generally accepted accounting principles (UK...

  • Page 137
    ...to meet employee share options Changes in present value of net pension liability 31 December â,¬ million 2006 â,¬ million 2005 Movements during the year: 1 January PLC shares held in connection with share options NV shares held by group companies Additions Decreases 31 December Financial Statements...

  • Page 138
    ... share (totalling â,¬729 million) was paid in respect of the dividend declared for the year ended 31 December 2005. Special controlling rights under the Articles of Association See note 22 to the consolidated accounts on page 109. Auditors A resolution will be proposed at the Annual General Meeting...

  • Page 139
    ...have reported separately on the consolidated accounts of the Unilever Group for the year ended 31 December 2006. Respective responsibilities of Directors and auditors The Directors' responsibilities for preparing the parent company accounts in accordance with applicable United Kingdom law and United...

  • Page 140
    ... company accounts for PLC. Under the terms of Financial Reporting Standard 1 (revised 1996) 'Cash Flow Statements' (FRS 1) a cash ï¬,ow statement is not included, as the cash ï¬,ows are included in the consolidated cash ï¬,ow statement of the Unilever Group. On behalf of the Board of Directors...

  • Page 141
    ... rates have been enacted or substantively enacted. Deferred tax assets and liabilities have not been discounted. Shares held by employee share trusts Shares held to satisfy options are accounted for in accordance with United Kingdom law and Urgent Issues Task Force abstract 37 'Purchase and sale...

  • Page 142
    ...capital Information on the consolidation of ordinary shares is given in note 22 to the consolidated accounts on page 109. Other reserves 1 January Change in book value of shares 31 December £ million 2006 £ million 2005 (a) Intra-group dividends included in the profit for the year as reported in...

  • Page 143
    ...the United Kingdom group companies contain more details about how they have communicated with their employees during 2006. Equal opportunities and diversity The heads of all operating companies and units in the UK have committed their businesses to achieving greater diversity. Every Unilever company...

  • Page 144
    ... PLC, The Capital Group Companies, inc., Fidelity Management and Research Company, and Legal & General Group plc have held more than 3% of, or 3% of voting rights attributable to, PLC's ordinary shares. During this period, and as notified, certain of these holdings reduced to below the reporting...

  • Page 145
    ... 2003 (the 'RR 2003'). Unilever N.V. has been appointed by the Central Bank as an institution subject to the reporting obligations and Unilever N.V. complies with such obligations. There are currently no exchange controls affecting PLC shareholders. 142 Unilever Annual Report and Accounts 2006

  • Page 146
    ... markets upon which Unilever shares are listed are Euronext Amsterdam for NV ordinary and preference shares and the London Stock Exchange for PLC ordinary shares. NV ordinary shares mainly trade in the form of depositary receipts for shares. In the United States, NV ordinary shares and PLC American...

  • Page 147
    ... 2006 The share price of the ordinary shares at the end of the year were as follows: NV per â,¬0.16 ordinary share in Amsterdam NV per â,¬0.16 ordinary share in New York PLC per 31⁄ 9p ordinary share in London â,¬20.70 $27.25 £14.28 $27.82 PLC per American Depositary Receipt in New York Monthly...

  • Page 148
    ... Annual General Meetings, paid in June. The following tables show the dividends paid by NV and PLC for the last five years, expressed in terms of the revised share denominations which became effective from 22 May 2006. Dividends have been translated into US dollars at the exchange rates prevailing...

  • Page 149
    ... Quarter Final for Year 1 November 2007 7 February 2008 Final ordinary dividends for 2006 Announced 8 February 2007 and to be declared 15 May 2007 (NV) and 16 May 2007 (PLC). Ex-dividend date Record date Payment date NV PLC NV - New York Registry Shares PLC - American Depositary Receipts 17 23 17...

  • Page 150
    ... financial news and investor relations speeches and presentations. It also includes conference and investor/analyst presentations. You can also view this year's and prior years' Annual Review and Annual Report and Accounts documents at www.unilever.com/investorcentre. PLC shareholders can elect not...

  • Page 151
    ...128 Financial review 23-32 Foods 6, 81-82 Functions 5 Goodwill 23, 75, 88-89 Gross profit 83 Group Chief Executive 11-12, 35 Group structure 1 Home and Personal Care 6, 81-82 Home care 6, 81-82 Ice cream and beverages 6, 81-82 Impairment 88-89 Income statement 70 Information technology 7 Innovation...

  • Page 152
    ... manage regulatory, tax and legal matters and resolve pending matters within current estimates, legislative, fiscal and regulatory developments, political, economic and social conditions in the geographic markets where the Group operates and new or changed priorities of the Boards. Further details...

  • Page 153
    ... 217 4000 F +31 (0)10 217 4798 Commercial Register Rotterdam Number: 24051830 Unilever PLC PO Box 68, Unilever House 100 Victoria Embankment London EC4P 4BQ United Kingdom T +44 (0)20 7822 5252 F +44 (0)20 7822 5951 Unilever PLC registered office Unilever PLC Port Sunlight Wirral Merseyside CH62 4ZD...