Unilever 2006 Annual Report Download - page 35

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32 Unilever Annual Report and Accounts 2006
Report of the Directors (continued)
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 pension funds
also have a proportion of assets invested in property, bonds and
cash. The majority of the assets are managed by a number of
external fund managers with a small proportion managed in-
house. Unilever has a pooled investment vehicle (Univest) which
it believes offers its pension plans around the world a simplified
externally managed 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.
Significant changes after the balance sheet date
On 1 January 2007, Unilever completed the restructuring of its
Portuguese businesses. The result of the reorganisation is that
Unilever now has a 55% share of the consolidated Portuguese
entity, called Unilever Jerónimo Martins. The consolidated business
includes the foods and home and personal care businesses.
The remaining 45% interest is held by Jerónimo Martins Group.
The structureof 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.
Financial review (continued)
The key financial instruments used by Unilever are short- and
long-term borrowings, cash and cash equivalents and certain
straightforward derivative instruments, principally comprising
interest rate swaps and foreign exchange contracts. The
accounting for derivative instruments is discussed in note 1 on
page 74. The use of leveraged instruments is not permitted.
Other relevant disclosures are given in notes 15, 16 and 17 on
pages 95, 96 and 99.
Unilever Treasury manages a variety of market risks, including the
effects of changes in foreign exchange rates, interest rates and
liquidity. Further details of the management of these risks are
given in note 17 on pages 100 and 101.
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 arebased. 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