Unilever 2008 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 2008 is an exact copy of the document provided to Unilever’s shareholders.
Certain sections of the Unilever Annual Report and Accounts 2008 have been audited.
Sections that have been audited are set out on pages 81 to 136, 140 to 141, 143 to 145
and 148 to 150. The auditable part of the report of the Remuneration Committee as set
out on page 60 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
    ... 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...

  • Page 2
    Annual Report and Accounts 2008 Adding Vitality to Life

  • Page 3
    ...'s review Unilever Executive Vitality Board of Directors About Unilever Our business and our strategy Key indicators Organisation Operating environment Resources Laws and regulation Outlook and risks Performance review Financial Review Corporate governance Report of the Nomination Committee Report...

  • Page 4
    ... invested capital of 15.7% • Total shareholder return ranking 9th out of 21 • Earnings per share of â,¬1.79, including â,¬0.36 net benefit from disposals and restructuring • Total dividend increased to â,¬0.77 per Ordinary â,¬0.16 share of NV and 60.74p per Ordinary 31/9p share of PLC...

  • Page 5
    Report of the Directors Our brands and operations Our strong portfolio of foods, home and personal care brands is trusted by consumers the world over. 13 of our brands achieve annual sales of â,¬1 billion or more. Our top 25 brands account for over 70% of our sales. Operational achievements •...

  • Page 6
    ... tier managers Around 100 countries in which we operate â,¬91m invested in community programmes worldwide â,¬927m spent on R&D worldwide Around 270 manufacturing sites worldwide Home care • Turnover of â,¬7 214 million • Underlying sales growth of 9.8% Unilever Annual Report and Accounts...

  • Page 7
    ... for business all around the world. It was dominated by a banking crisis which started in the US sub-prime property market and which quickly spread to other asset classes and countries. These problems were exacerbated by the volatile price of mineral oil and, for companies like Unilever, record...

  • Page 8
    ... and values that help to make Unilever a special business: respect, humanity, integrity. It is for these reasons that he is liked and respected in equal measure, both inside the company and outside. We all wish Patrick a long and happy retirement. Michael Treschow Chairman Unilever Annual Report...

  • Page 9
    ... by centralising our supply chain management for the region in Singapore. • The brand portfolio was further strengthened and sharpened. This included the sale of the North American laundry business. We also divested some smaller, non-strategic parts of our portfolio, including Boursin cheese...

  • Page 10
    ... the Group's commitment to these issues publicly recognised and rewarded in 2008. For the tenth year running Unilever was named foods sector leader in the Dow Jones Sustainability Indexes - the only company ever to achieve such an accolade. And the award of Platinum standard in the UK's Business in...

  • Page 11
    ...Africa and Central & Eastern Europe Jim Lawrence Chief Financial Officer Sandy Ogg Chief HR Officer Michael Polk President, Americas Vindi Banga President, Foods, Home & Personal Care Geneviève Berger Chief R&D Officer Doug Baillie President, Western Europe 8 Unilever Annual Report and Accounts...

  • Page 12
    ... Unilever's first Chief R&D Officer. Secondly, our 6 000 plus R&D professionals came together in one unified organisation. With an integrated global research, product development and implementation programme, the new R&D structure aims to give us competitive advantage in the market through...

  • Page 13
    ... Self-Esteem Fund 3.5m 1 000 tonnes less plastic per year used in new Rexona roll-on 10 Unilever Annual Report and Accounts 2008 Every Child has the Right Unilever's laundry brands are making a positive social impact while continuing to grow sales. Dirt is Good, the unifying campaign for leading...

  • Page 14
    ...90% less oil. One of our key challenges is to ensure we make a positive impact on the world while continuing to grow sales. Our oral care team launched the next phase of Unilever's Night Brushing Campaign. This aims to reinforce the day and night brushing habit among four- to eight-year-old children...

  • Page 15
    ...that help consumers better understand our brands' health, environmental and ethical benefits. For example, Unilever is participating in four of Wal-Mart's 13 sustainability networks which aim to bring its suppliers together to share best practice. Unilever is taking the lead in water by developing...

  • Page 16
    ... occupy regional or global roles. 19% reduction in total recordable accident frequency rate in 2008* * 2008 data is preliminary. It will be independently assured and reported in our online Sustainable Development Report 2008 at www.unilever.com/sustainability Unilever Annual Report and Accounts...

  • Page 17
    ...yet many consumers see these products as unhealthy. During the year, we continued to roll out our Goodness of Margarine campaign to 12 countries to give consumers a more informed view of our products' contribution to public health. For mayonnaise, we continued our global communication that Hellmann...

  • Page 18
    .... By working with partners in government and non-government organisations we can extend our impact further. In 2008 the Lifebuoy brand, together with the United Nations and other partners, launched the first ever Global Handwashing Day. Lifebuoy brand teams in 23 countries helped raise awareness...

  • Page 19
    ...covering water, waste, sustainable sourcing and greenhouse gas emissions. This data will inform future development and innovation across our categories. Sourcing sustainably Unilever buys approximately 12% of the world's black tea, 7% of the world's tomatoes and 4% of its palm oil. We have developed...

  • Page 20
    ...per year than previously. The time needed to make the cap was cut by 34% and the time to make the bottle was reduced by 8%, leading to significant energy savings. Rexona deodorants continued to do well, as sales grew rapidly in 2008. www.unilever.com/rexona Unilever Annual Report and Accounts 2008...

  • Page 21
    ...Bank and Chairman, UBS Limited. Director, UBS Securities Company Limited. Member, International Advisory Committee of Total. Member, European Commission and Vice-President 1989-1999. Member, UK Government 1979-1986. Home Secretary 1983-1985 and Secretary of State for Trade and Industry 1985-1986...

  • Page 22
    ... Chairman Nomination Committee Chairman Remuneration Committee Senior Independent Director Chairman Corporate Responsibility and Reputation Committee Member Audit Committee Member Corporate Responsibility and Reputation Committee Chairman Audit Committee Unilever Annual Report and Accounts 2008 19

  • Page 23
    ... and personal care with products that help people to feel good, look good and get more out of life. Unilever is a global business which achieves close to half of its turnover in developing and emerging markets in Asia, Africa, Central & Eastern Europe and Latin America. Unilever's portfolio includes...

  • Page 24
    ... productivity, and to deploy brands and innovations effectively, focused on excellent execution in the market place. The performance of the regions is measured in terms of in-year financial results, customer service levels and market positions. Key indicators - people and sustainability Unilever...

  • Page 25
    ... organisation. The global category team aims to develop winning category and brand strategies, to create exciting new brand communication, product innovation and renovation, and to provide strategic direction for the supply chain. The category team is responsible for medium-term value creation...

  • Page 26
    ... products sold in developing markets, including Annapurna and AdeS. Within these groups, we also include sales of Unilever Foodsolutions, which is a global food service business providing solutions for professional chefs and caterers. In personal care, six global brands are the core of our business...

  • Page 27
    ... regional supply chain organisations and the development of regional shared service centres, notably in Finance and Human Resources, which in some cases are outsourced. The IT function is a key enabler for the One Unilever transformation towards a globally aligned business through: • strategic...

  • Page 28
    ... consumers products that enable them to look good, feel good, and get more out of life); to grow the proportion of our total business that comes from Developing and Emerging (D&E) markets (currently nearly 50%); and to increase our presence in personal care markets. Outlook The progress Unilever...

  • Page 29
    ...exibility. The Group actively manages its banking exposures on a daily basis. Certain Unilever businesses have defined benefit pension plans. Falling interest rates and market values of investments coupled with increasing life expectancy could result in the cost of funding these schemes increasing...

  • Page 30
    ... environment, reviews and revisits its business continuity and disaster recovery plans, and continues to adapt its internal cost structures to deliver products at competitive costs. We continue to actively manage ï¬,uctuations in input costs and are accelerating our cost reduction programmes. Safety...

  • Page 31
    ...Disclosure Committee and the Board for their review. Internal audit The Corporate Audit function plays a key role in providing to both operating management and the Boards an objective view and reassurance of the effectiveness of the risk management and related control systems throughout Unilever. It...

  • Page 32
    ... strategic focus on the developing world. Our revised structure for management and reporting of financial performance is across the following three regions: • Western Europe • The Americas • Asia, Africa and Central & Eastern Europe (AACEE) Our segmental reporting information for prior years...

  • Page 33
    ... below at constant exchange rates. Underlying sales growth was 1.3% for the year with pricing contributing 3.8% and volume lower by 2.4%. Volume consumption in our markets has reduced and shoppers are increasingly looking to economise on their purchases. 30 Unilever Annual Report and Accounts 2008

  • Page 34
    ... exchange rates. The region sustained its improving trend in 2007 with underlying sales growth of 1.8% for the year. The improvement was driven by relentless focus on better in-market execution, rejuvenation of the quality and value of our core products, and an introduction of new innovations...

  • Page 35
    ... categories. Market growth in home care and personal care slowed somewhat in the second half of the year, but this was compensated for by robust demand in foods. Our own sales in the US grew solidly, up 3.2% for the year, despite lower sales of ice cream. Our business in Mexico made good progress in...

  • Page 36
    ... price tiers and from extensive micro-marketing tailored to faster growing areas and channels. Our business in China also grew well throughout the year. The One Unilever organisation is in place throughout the region and the move to a single SAP system is progressing to plan. Supply chain management...

  • Page 37
    Report of the Directors Performance Review continued Asia, Africa and Central & Eastern Europe (AACEE) (continued) We drove growth across all income levels, from highly affordable packs to premium positions. This was supported by new brands and products and excellent in-market execution. The ...

  • Page 38
    ... Unilever aims to be in the top third of a reference group including 20 other international consumer goods companies for Total Shareholder Return, as explained on page 43. The Group's financial strategy supports this objective and provides the financial ï¬,exibility to meet its strategic and day...

  • Page 39
    ...2008 and â,¬2.2 billion in 2007. In addition, â,¬1.5 billion was returned to shareholders in both 2007 and 2008 in the form of share buy-backs. At 31 December 2008, the net debt position was â,¬8.0 billion, a decrease of â,¬0.3 billion compared with 2007. 36 Unilever Annual Report and Accounts 2008

  • Page 40
    ...offers its pension plans around the world a simplified externally managed investment vehicle to implement their strategic asset allocation models currently for equities and hedge funds. The aim is to provide a high quality, well diversified risk controlled vehicle. Total cash costs of pensions are...

  • Page 41
    ... Group. The structure of the agreement is such that there is joint control of the newly formed entity and therefore it is accounted for by Unilever as a joint venture. Other business disposals in 2007 involved the sale of local Brazilian margarine brands. To further develop our heart health brand...

  • Page 42
    ... life expectancy, plan experience and other relevant data. The assumptions are reviewed and updated as necessary as part of the periodic actuarial valuation of the pension plans. Mortality assumptions for the four largest plans are given in more detail in note 20 on page 117. Unilever Annual Report...

  • Page 43
    ... 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 international consumer goods companies. Unilever believes that the contribution of the business...

  • Page 44
    ... movement in 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 net capital expenditure, less charges to operating profit for share-based compensation and pensions, and less tax...

  • Page 45
    ...-term value creation goals outlined to investors. ROIC is profit after tax but excluding net interest on net debt and impairment of goodwill and indefinite-lived intangible assets both net of tax, divided by average invested capital for the year. Invested capital is the sum of property, plant...

  • Page 46
    ... to reï¬,ect 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...

  • Page 47
    ... run our business, in order to comply with applicable laws and regulations. Our internal risk management and control systems are described on page 28. Developments in corporate governance Patrick Cescau retired from Unilever at the end of 2008 and, following his appointment as a Director in October...

  • Page 48
    ... of the Annual Report and Accounts; declaration of dividends; agreement of quarterly results announcements convening of shareholders' meetings; nominations for Board appointments; approval of Board remuneration policy; and review of the functioning of the Boards and their Committees. The following...

  • Page 49
    ... key management personnel or Non-Executive Directors. None of our Executive Directors or other key management personnel are elected or appointed under any arrangement or understanding, either with any major shareholder, customer, supplier or otherwise. 46 Unilever Annual Report and Accounts 2008

  • Page 50
    ... and the Corporate Responsibility and Reputation Committee. The roles and membership of these key Board committees are described on pages 48 and 49. The profile set by the Boards for the Non-Executive Directors and the schedule used for orderly succession planning can be found on our website at www...

  • Page 51
    ... the Report of the Audit Committee to the shareholders. Nomination Committee The Nomination Committee recommends to the Boards candidates for the positions of Director. It also has responsibilities for succession planning and oversight of corporate governance matters. It is supplied with information...

  • Page 52
    ... NV 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 them to build and retain a personal shareholding in Unilever equal to at least 150% of their annual base pay. David Simon...

  • Page 53
    ... holders of NV preference shares (see page 54). PLC shareholders can cast one vote for each 31⁄ 9p nominal capital that they hold. This means shareholders can cast one vote for each PLC ordinary share, or PLC American Depositary Receipt of shares. Shareholders can vote in person at the meeting or...

  • Page 54
    Report of the Directors Corporate governance continued More information on the exercise of voting rights can be found in NV's and PLC's Articles of Association and in the respective Notices of Meetings. Holders of NV New York Registry Shares or PLC American Depositary Receipts of shares will ...

  • Page 55
    ... exchange rate, as the price for one new PLC share. Neither company can issue or reduce capital without the consent of the other. The Articles of Association of NV establish that any payment under the Equalisation Agreement will be credited or debited to the income statement for the financial year...

  • Page 56
    ..., in accordance with Article 98 of Book 2 of the Netherlands Civil Code, until 15 November 2009 to cause the Company to buy back its own shares and depositary receipts thereof, within the limits set by law, either through purchase on a stock exchange or otherwise, at a price, excluding expenses, not...

  • Page 57
    ... the UK Companies Act 2006 and rules of the US Securities and Exchange Commission, we are required to provide information on contracts and other arrangements essential or material to the business of the Group. We believe we do not have any such contracts or arrangements. 54 Unilever Annual Report...

  • Page 58
    ...that the risk management and control systems will not work properly in 2009; Requirements - European Union Following implementation of the EU Takeover Directive, certain information is required to be disclosed in relation to control and share structures and interests of NV and PLC. Such disclosures...

  • Page 59
    ... policy requires Executive Directors to build and retain a personal shareholding in Unilever equal to at least 150% of their annual base pay. The Board believes that this is in line with the spirit of the Dutch Code. Severance pay It is our policy to set the level of severance payments for Directors...

  • Page 60
    ... on the New York Stock Exchange. We also confirm that our shareholders have the opportunity to vote on equity compensation plans. Risk management and control Reference is made to the description of Unilever's risks on pages 25 to 27 and risk management, internal controls and disclosure controls and...

  • Page 61
    ... Middle East & Turkey (AMET) 2005, President, Africa Regional Group 2004, National Manager, Unilever South Africa, 2000, Managing Director Lever Pond's South Africa 1997, Vice President, Home and Personal Care for the Africa Business Group 1994, Sales Director 1988. Vindi Banga President Foods, Home...

  • Page 62
    ...a NonExecutive Director, to take up the position of Chief Research & Development Officer as a member of the Unilever Executive reporting to the Chief Executive Officer. The Committee, along with the Boards, reviewed the diversity within the Group and agreed with management that gender diversity is...

  • Page 63
    ...AGMs also marked the retirement from the Board of Kees van der Graaf, President, Europe, and Ralph Kugler, President, Home & Personal Care, each with over 28 years of service. Given our agreed policy framework, the Committee's aim has been to ensure that the remuneration arrangements for Paul Polman...

  • Page 64
    ...-related pay. Towers Perrin also provides general consultancy advice to Unilever group companies on employee rewards, pension, communications and other human resource matters. The Group Secretary attends all Committee meetings and advises on matters of corporate governance. The Chief Executive...

  • Page 65
    ...to support consistent application of Unilever's executive reward policies. A significant proportion of the Executive Directors' total reward is linked to a number of key measures of Group performance to create alignment with strategy, business priorities, and shareholder value. Approximately 70% of...

  • Page 66
    ... Airways Plc and received an annual fee of £40 000. Future developments The Remuneration Committee continues to monitor trends and changes in the market. It keeps a watching brief on the continuing alignment between Unilever's strategic objectives and the reward policy for Executive Directors. Due...

  • Page 67
    ...value of the vesting of matching shares, vesting of other long-term incentives and exercise of options) for the Executive Directors as a group. 2008 â,¬ '000 2007 â,¬ '000 Annual emoluments Base salary Allowances and other payments Benefits Performance related payments (annual incentive) Sub-total...

  • Page 68
    ...Netherlands. (b) Includes benefits for company car; housing (for business use) instead of hotel; medical insurance and private use of chauffeur-driven cars. Included are benefits that are taxable in the country of residence. In addition, Unilever provides support to Executive Directors in relation...

  • Page 69
    ... of the Directors Report of the Remuneration Committee continued • TSR Plan In 2008 the conditional shares awarded in 2005 vested for 50%. Vesting was based on the TSR performance of Unilever (when ranked against its defined peer group with competitors) over the three-year performance period...

  • Page 70
    ...date of the award. Shares may vest between 0 and 200% of the orginally granted numbers. (b) In 2008 the conditional award, originally awarded in 2005, vested for 121%. (c) Total as at the end of May 2008. Both stepped down as Executive Directors at the 2008 AGMs. Unilever Annual Report and Accounts...

  • Page 71
    ... Report of the Remuneration Committee continued Executive Directors' conditional share awards under the TSR Long-Term Incentive Plan The following conditional shares were outstanding from grants made between 2004 and 2006. From 2007 onwards no new awards have been made under this Plan as the Global...

  • Page 72
    ...above market price at 31 December 2008 Weighted average exercise price Share type Number of options Number of options First exercisable date Final expiry date Patrick Cescau Executive Plan Executive Plan NL All-Employee Plan UK ShareSave Plan Kees van der Graaf(c) Executive Plan Executive Plan...

  • Page 73
    ... is a member of the Unilever International Pension Plan (IPP), a defined contribution arrangement. In line with current policy, the contribution structure is equivalent in value to the all-employee plan in the USA, his home country. The current rate of company contributions is 9% of base salary and...

  • Page 74
    ... contributions). (c) Pension service costs charged to operating profit. (d) Values shown are as at 31 May 2008, or the period ending at that date, as appropriate. Jim Lawrence is a member of Unilever's International Pension Plan (IPP), a defined contribution arrangement. The company contribution...

  • Page 75
    ... global companies based in Europe, excluding companies in the financial sector. The level of their fees reï¬,ects their commitment and contribution to Unilever. In 2007 the shareholders agreed to a total maximum limit of £2 000 000 (â,¬3 000 000). Non-Executive Directors' remuneration The total...

  • Page 76
    ... of shares in a broad-based equity index for the last five years. The Remuneration Committee has decided to show Unilever's performance against two indices, namely the FTSE 100 Index, London, and the Euronext, Amsterdam, as these are the most generally used indices in the UK and the Netherlands...

  • Page 77
    ... to internal controls over financial reporting; • review of the application of information and communication technology; • a review of the annual pension report and the impact of financial volatility on pensions; • annual review of anti-fraud arrangements; • a review of tax planning policy...

  • Page 78
    ... by the President Foods, Home and Personal Care and member of the Unilever Executive, Vindi Banga. The Corporate Responsibility and Reputation Committee's terms of reference and details of the Unilever Sustainable Development Group are available on our website at www.unilever.com/investorrelations...

  • Page 79
    ... the Directors Report of the Corporate Responsibility and Reputation Committee continued Sustainable sourcing of palm oil Unilever buys around 4% of world palm oil production for use across its portfolio, from soaps to spreads. In May 2008 Unilever announced its intention to source all its palm oil...

  • Page 80
    ... 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 81
    ...nancial resources together with established business relationships with many customers and suppliers in countries throughout the world. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain outlook. After making...

  • Page 82
    ... the consolidated accounts in accordance with International Financial Reporting Standards as adopted by the European Union and as issued by the International Accounting Standards Board and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the Report of the Directors in...

  • Page 83
    .... These consolidated accounts have been prepared under the accounting policies set out in note 1 on pages 84 to 88. We have reported separately on the parent company accounts of Unilever PLC for the year ended 31 December 2008 and on the information in the Report of the Remuneration Committee that...

  • Page 84
    ... Unilever Group Consolidated income statement for the year ended 31 December â,¬ million 2008 â,¬ million 2007 â,¬ million 2006 Continuing operations Turnover 2 Operating profit 2 After (charging)/crediting: Restructuring 3 Business disposals, impairments and other 3 Gain on US healthcare and UK...

  • Page 85
    ... Financial statements Unilever Group Consolidated balance sheet as at 31 December â,¬ million 2008 â,¬ million 2007 Goodwill 9 Intangible assets 9 Property, plant and equipment 10 Pension asset for funded schemes in surplus 20 Deferred tax assets 12 Other non-current assets 11 Total non-current...

  • Page 86
    ... 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 130. Unilever Annual Report and Accounts 2008 83

  • Page 87
    ...as Unilever or the Group). NV and PLC have the same Directors and are linked by a series of agreements, including an Equalisation Agreement, which are designed so that the position of the shareholders of both companies is as nearly as possible the same as if they held shares in a single company. The...

  • Page 88
    ...-for*or life of lease if less than 40 years sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement. Interest on Property, plant and equipment is subject to review for impairment available-for-sale securities calculated using the...

  • Page 89
    ...actuarial review using the projected unit method, either by external consultants or by actuaries employed by Unilever. Group policy is that the most important plans, representing approximately 80% of the defined benefit liabilities, are formally valued every year; other principal plans, accounting...

  • Page 90
    ...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 have been...

  • Page 91
    ... Notes to the consolidated accounts Unilever Group 1 Accounting information and policies (continued) Retirement benefits Pension accounting requires certain assumptions to be made in order to value our obligations and to determine the charges to be made to the income statement. These figures...

  • Page 92
    ...the developing world and the fact that these markets share many common characteristics. As at the end of 2008 our revised structure comprises the three operating regions of Western Europe, The Americas, and Asia, Africa and Central & Eastern Europe (AACEE). We are therefore now reporting segmentally...

  • Page 93
    Financial statements Notes to the consolidated accounts Unilever Group 2 Segment information (continued) Analysis by geographical segment Assets 2008 Segment assets Joint ventures/associates Total assets by geographical segment Corporate assets Total assets 2007 Segment assets Joint ventures/...

  • Page 94
    .... Ice cream and beverages - including sales of ice cream, tea-based beverages, weight management products, and nutritionally enhanced staples sold in developing markets. Personal care - including sales of skin care and hair care products, deodorants and anti-perspirants, and oral care products. Home...

  • Page 95
    ... consolidated accounts Unilever Group 2 Segment information (continued) â,¬ million Savoury, dressings and spreads â,¬ million Ice cream and beverages â,¬ million Personal â,¬ million Home care and â,¬ million Analysis by product area 2006 Turnover Operating profit Net finance costs Share of net...

  • Page 96
    ... of property, plant and equipment Advertising and promotions Exchange gains/(losses): On underlying transactions On covering forward contracts Lease rentals: Minimum operating lease payments Contingent operating lease payments Less: Sub-lease income relating to operating lease agreements (5 274...

  • Page 97
    ... and UK pension plans. Average number of employees during the year Western Europe The Americas Asia, Africa and Central & Eastern Europe '000 2008 '000 2007 '000 2006 32 42 100 174 35 44 96 175 38 46 105 189 Employee numbers for prior years have been restated following the change in our regional...

  • Page 98
    ... have been released following the favourable settlement of prior year tax audits in a number of countries, none of which is individually material. The reconciliation between the computed weighted average rate of income tax expense, which is generally applicable to Unilever companies, and the...

  • Page 99
    ... a group company which are convertible in the year 2038, as described in Corporate governance on page 54; and (ii) the effect of share-based compensation plans, details of which are set out in note 29 on pages 133 to 134. Calculation of average number of share units Average number of shares: NV PLC...

  • Page 100
    ... Notes to the consolidated accounts Unilever Group 8 Dividends on ordinary capital Dividends paid on ordinary capital during the year Final NV dividend for the prior year of â,¬0.50 per share (2007: â,¬0.47; 2006: â,¬0.44) Final PLC dividend for the prior year of 34.11p per share (2007: 32.04p...

  • Page 101
    ... strategic planning processes do not exceed the long-term average rates of growth for similar products. We have performed sensitivity analysis around the base case assumptions and have concluded that no reasonably possible changes in key assumptions would cause the recoverable amount of the global...

  • Page 102
    ... the consolidated accounts Unilever Group 10 Property, plant and equipment At cost less depreciation and impairment Land and buildings Plant and equipment â,¬ million 2008 â,¬ million 2007 1 859 4 098 5 957 1 989 4 295 6 284 207 321 â,¬ million Total Includes freehold land Commitments for capital...

  • Page 103
    ...â,¬ million Plant and equipment â,¬ million Total Net book value Gross book value Depreciation 31 December 2008 Gross book value Depreciation 31 December 2007 Buildings 177 (25) 152 223 (16) 207 243 (146) 97 342 (204) 138 420 (171) 249 565 (220) 345 100 Unilever Annual Report and Accounts 2008

  • Page 104
    ... Jerónimo Martins. The structure of the newly formed entity is such that there is joint control and it is therefore accounted for by Unilever as a joint venture. In December 2007 a capital contribution of â,¬103 million was made to Pepsi/Lipton International. (f) In relation to the extension of the...

  • Page 105
    ... million) was utilised or released to the income statement from inventory provisions taken in earlier years. In 2008, inventories with a carrying amount of â,¬34 million were pledged as security for certain of the Group's borrowings (2007: â,¬4 million). 102 Unilever Annual Report and Accounts 2008

  • Page 106
    ... to the consolidated accounts Unilever Group 14 Trade and other receivables Trade and other receivables Due within one year Trade receivables Prepayments and accrued income Other receivables â,¬ million 2008 â,¬ million 2007 2 788 380 655 3 823 2 965 467 762 4 194 Credit terms for customers are...

  • Page 107
    ... again. The other leg of the currency is shown in note 16 on page 107 as part of the interest rate profile of financial liabilities. c) Includes fair value of financial liability-related derivatives amounting to â,¬597 million (2007: â,¬78 million). 104 Unilever Annual Report and Accounts 2008

  • Page 108
    ... and liquidation proceeds remains linked, using the official euro conversion rate, to the amount in Dutch guilders originally paid up on these shares. The euro conversion did not alter the dividend entitlements of the cumulative preference shares. Unilever Annual Report and Accounts 2008 105

  • Page 109
    ... 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 adjusted for the market value of the related derivative. (b) Wholly repayable in 2009. 106 Unilever Annual Report and Accounts...

  • Page 110
    Financial statements Notes to the consolidated accounts Unilever Group 16 Financial liabilities (continued) Interest rate The average interest rate on short-term borrowings in 2008 was 4.2% (2007: 4.5%). Interest rate profile and currency analysis of financial liabilities The table set out below ...

  • Page 111
    ... the business successfully managed year-end working capital positions, Unilever closed the year with a cash balance of around â,¬2.6 billion, including â,¬0.6 billion from proceeds of disposal of the Bertolli olive oil business received at the year end. Counterparty exposures: We regularly reviewed...

  • Page 112
    ...our credit rating and overall investor confidence and could restrict the Group's ability to raise funds. Operational cash ï¬,ow provides the funds to service the financing of financial liabilities and enhance shareholder return. Unilever manages the liquidity requirements by the use of short-term...

  • Page 113
    ...individual risk limits are set based on its financial position, credit ratings, past experience and other factors. The utilisation of credit limits is regularly monitored. To reduce the credit exposures, netting agreements are in place with Unilever's principal banks that allow Unilever, in case of...

  • Page 114
    ... Notes to the consolidated accounts Unilever Group 17 Financial instruments and treasury risk management (continued) Cash ï¬,ow hedges The fair values of derivatives hedging the risk on future foreign currency cash ï¬,ows, ï¬,oating interest rate cash ï¬,ows and the price risk on future purchases...

  • Page 115
    ... liabilities relating to the fair values of derivatives used as net investment hedges. The remaining balances are shown under trade and other receivables and other liabilities. Sensitivity to not applying hedge accounting Derivatives have to be reported at fair value. Those derivatives used for...

  • Page 116
    ... consumer goods companies for Total Shareholder Return, as explained on page 43. The key elements of the financial strategy are appropriate access to equity and debt markets; sufficient ï¬,exibility for acquisitions that we fund out of current cash ï¬,ows; A+/A1 long-term credit rating...

  • Page 117
    ... Disputed provision indirect taxes â,¬ million Net liability of associate 1 403 â,¬ million Other provisions Movements during 2008 1 January 2008 Disposal of group companies Income statement: New charges Releases Utilisation Currency retranslation 31 December 2008 Total 581 1 343 (54) (343) (24...

  • Page 118
    ... the consolidated accounts Unilever Group 20 Pensions and similar obligations Description of plans In many countries the Group operates defined benefit pension plans based on employee pensionable remuneration and length of service. The majority of these plans are externally funded. The Group also...

  • Page 119
    ... 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 8.8% to the long-term rate within the next five years. Assumed...

  • Page 120
    ... to the consolidated accounts Unilever Group 20 Pensions and similar obligations (continued) Demographic assumptions, such as mortality rates, are set having regard to the latest trends in life expectancy (including expectations for future improvements), plan experience and other relevant data. The...

  • Page 121
    ... 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 assets Total other finance income/(cost) Net...

  • Page 122
    ... Notes to the consolidated accounts Unilever Group 20 Pensions and similar obligations (continued) Significant Items on the face of the income statement During 2006 we updated certain terms of the defined benefit plan in the UK which resulted in a one-off credit to the income statement in 2006...

  • Page 123
    ... January Acquisitions/disposals Current service cost Employee contributions Special termination benefits Past service costs(b) Settlements/curtailments Expected returns on plan assets Interest on pension liabilities Actuarial gain/(loss) Employer contributions Benefit payments Reclassification of...

  • Page 124
    ... Consolidated statement of changes in equity 1 January 2006 Total recognised income and expense for the year Dividends on ordinary capital (Purchase)/sale/reduction of treasury stock(a) Share-based payment credit(b) Dividends paid to minority shareholders Currency retranslation gains/(losses) net...

  • Page 125
    ... to 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 133 and 134. 122 Unilever Annual Report and...

  • Page 126
    ...million Total 2008 â,¬ million Total 2007 â,¬ million Total 2006 Fair value reserves Cash ï¬,ow hedges Available-for-sale financial assets Currency retranslation of group companies Adjustment on translation of PLC's ordinary capital at 31/9p = â,¬0.16 Capital redemption reserve Book value treasury...

  • Page 127
    ... value of share options and awards granted to employees. (c) As part of the review of Unilever's corporate structure, and in the light of the constitutional and operational arrangements which enable Unilever N.V. and Unilever PLC to operate as nearly as practicable as a single company, the Directors...

  • Page 128
    ... to the consolidated accounts Unilever Group 25 Commitments and contingent liabilities â,¬ million Future minimum lease payments 2008 â,¬ million â,¬ million â,¬ million Future minimum lease payments 2007 â,¬ million â,¬ million Long-term finance lease commitments Buildings(a) Plant and machinery...

  • Page 129
    ... 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 Fabergé France, both subsidiaries of the Unilever Group. Interviews have been conducted with present and former members of...

  • Page 130
    ... from the Federal Revenue Service. The notice alleges that a 2001 reorganisation of our local corporate structure was undertaken without valid business purpose. The dispute is in court and if upheld, will result in a tax payment relating to years from 2001 to the present day. The 2001 reorganisation...

  • Page 131
    ... shareholdings in the Unilever businesses in South Africa and Israel. In the reorganised shareholding Unilever has a majority share in a single South African business and fully owns the Unilever Israel foods and home and personal care business. As a result of this transaction, Unilever reported...

  • Page 132
    ...) (91) - 349 - 1 528 1 877 1 870 - (5) 12 151 60 211 94 334 428 42 60 102 In 2007, consideration consisted of â,¬214 million cash, principally relating to acquisitions of minority interest, and â,¬214 million fair value economic swap in South Africa. Unilever Annual Report and Accounts 2008 129

  • Page 133
    ... â,¬ million 2007 â,¬ million 2006 - - - - 1 033 - - 1 033 1 033 - 1 033 170 - - 170 164 6 170 Foods Personal care - - - Operating profit Western Europe The Americas Asia, Africa and Central & Eastern Europe - - - - Foods Personal care - - - 130 Unilever Annual Report and Accounts 2008

  • Page 134
    ... Americas â,¬32 million; and Asia, Africa and Central & Eastern Europe â,¬3 million. Liabilities classified as held for sale (part of disposal groups) Trade payables and other liabilities Deferred taxation â,¬ million 2008 â,¬ million 2007 - - - (10) (3) (13) Unilever Annual Report and Accounts...

  • Page 135
    ... in UK was signed during 2007. During 2006 the Group took a provision of â,¬300 million for possible compensation payments relating to the 2005 conversion of preference shares, issued by Unilever N.V. in 1999. See note 25 on page 127 for further details. 132 Unilever Annual Report and Accounts 2008

  • Page 136
    ... were made under the Global Share Incentive Plan (GSIP), except in North America where awards were made under the Unilever North America 2002 Omnibus Equity Compensation Plan. The numbers in this note include those for Executive Directors shown in the report of the Remuneration Committee on pages 60...

  • Page 137
    ... Notes to the consolidated accounts Unilever Group 29 Share-based compensation plans (continued) Additional information At 31 December 2008, there were options outstanding to purchase 53 373 170 (2007: 61 579 485) ordinary shares in NV or PLC in respect of share-based compensation plans of NV and...

  • Page 138
    ... Unilever branded products through their channels amounted to approximately â,¬24 million in 2008 (2007: â,¬67 million). Langholm Capital Partners invests in private European companies with above-average longer-term growth prospects. Its investments include: Lumene, a Finnish personal care business...

  • Page 139
    ...(b) for the audit of accounts of subsidiaries of Unilever N.V. and Unilever PLC pursuant to the legislation Total statutory audit fees(c) Other services supplied pursuant to such legislation(d) Other services relevant to taxation Services relating to corporate finance transactions(e) All other...

  • Page 140
    ... earnings per share see note 7 on page 96. Net profit margin is expressed as net profit attributable to shareholders' equity as a percentage of turnover from continuing operations. Ungeared free cash ï¬,ow is a non-GAAP measure and is defined and described on page 41. Return on invested capital...

  • Page 141
    ... 25 382 6 059 5 417 36 858 588 511 1 099 Operating profit Foods Home and Personal Care 4 131 3 036 7 167 Total assets Foods Home and Personal Care Corporate 23 019 7 298 5 825 36 142 Capital expenditure Foods Home and Personal Care 878 602 1 480 138 Unilever Annual Report and Accounts 2008

  • Page 142
    ... Buying Rates in New York for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York were as follows: 2008 2007 2006 2005 2004 Year end â,¬1 = US $ Annual average â,¬1 = US $ High â,¬1 = US $ Low â,¬1 = US $ High and low exchange rate values...

  • Page 143
    ... assets shown in the Unilever Group accounts. The Directors consider that those companies not listed are not significant in relation to Unilever as a whole. Full information as required by Articles 379 and 414 of Book 2 of the Civil Code in the Netherlands has been filed by Unilever N.V. with the...

  • Page 144
    ... Unilever Group as at 31 December 2008 Group companies (continued) % Turkey Unilever Sanayi ve Ticaret Türk A.S ,. United Kingdom Unilever UK Ltd. Unilever PLC(a) Unilever UK Holdings Ltd. Unilever UK & CN Holdings Ltd. United States of America Conopco, Inc. Unilever Capital Corporation Unilever...

  • Page 145
    ... for the preparation of the Report of the Directors in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the company accounts that are free from...

  • Page 146
    ...investments after taxation and other income and expenses after taxes. The company accounts of Unilever N.V. do not contain a cash ï¬,ow statement as this is not required by Book 2 of the Civil Code in the Netherlands. The Board of Directors 3 March 2009 Unilever Annual Report and Accounts 2008 143

  • Page 147
    ... until after the balance sheet date. This holds for external dividends as well as intra-group dividends paid to the parent company. Taxation Unilever N.V, together with certain of its subsidiaries, is part of a tax grouping for Dutch corporate income tax purposes. The members of the fiscal entity...

  • Page 148
    ... to the consolidated accounts on page 105. Creditors due after five years amount to â,¬1 103 million (2007: â,¬870 million) (Article 375.2 of Book 2 of the Civil Code in the Netherlands). Ordinary share capital Shares numbered 1 to 2 400 are held by a subsidiary of NV and a subsidiary of PLC, each...

  • Page 149
    ...50 per share (totalling â,¬779 million) was paid in respect of the dividend declared for the year ended 31 December 2007. Special controlling rights under the Articles of Association See note 22 to the consolidated accounts on page 122. Auditors A resolution will be proposed at the Annual General...

  • Page 150
    ... parent company accounts have been prepared under the accounting policies set out therein. We have also audited the information in the Report of the Remuneration Committee that is described as having been audited. We have reported separately on the consolidated accounts of the Unilever Group for...

  • Page 151
    ... one year Total current assets Creditors due within one year Net current assets/(liabilities) Total assets less current liabilities Provision for liabilities and charges (excluding pensions and similar obligations) Capital and reserves Called up share capital Share premium account Capital redemption...

  • Page 152
    .... Therefore, we do not recognise a liability in any period for dividends that have been proposed but will not be approved until after the balance sheet date. This holds for external dividends as well as intra-group dividends paid to the parent company. Unilever Annual Report and Accounts 2008 149

  • Page 153
    ... shareholders' equity as an appropriation of retained earnings in the year ending 31 December 2009. During 2008, a final dividend of 34.11p per share (totalling £439 million) was paid in respect of the dividend declared for the year ended 31 December 2007. 150 Unilever Annual Report and Accounts...

  • Page 154
    ...terms and conditions under which business transactions with their suppliers are conducted. The directors' reports of the United Kingdom operating companies give information about their supplier payment policies as required by the UK Companies Act 1985. PLC, as a holding company, does not itself make...

  • Page 155
    ...a material fact, but would not otherwise be liable. Business review The UK Companies Act 2006 requires Unilever PLC to set out in this report a fair review of the business of the Group during the financial year ended 31 December 2008 including a description of the principal risks and uncertainties...

  • Page 156
    ...owned or controlled, directly or indirectly, by another corporation, any foreign government or by any other legal or natural person. We are not aware of any arrangements the operation of which may at a subsequent date result in a change of control of us. Unilever Annual Report and Accounts 2008 153

  • Page 157
    ... a prohibition to perform any of the actions indicated in those regulations without a licence. To date no regulations of this type have been issued which are applicable to Unilever N.V. There are currently no exchange controls affecting PLC shareholders. 154 Unilever Annual Report and Accounts 2008

  • Page 158
    ... Group. These changes will result in more frequent payments to shareholders, and better align with the cash ï¬,ow generation of the business. The high and low trading prices for the separate stock exchange listings are shown in the tables on the following page. Unilever Annual Report and Accounts...

  • Page 159
    ...We make no representation that ordinary shares or American Depositary Receipts could have been sold at the above prices at any time during 2008 or at any time in the future. Our stock prices ï¬,uctuate based on market and other factors. See 'Outlook and risks' on pages 25 to 28. 156 Unilever Annual...

  • Page 160
    ... holders of NV and PLC shares are the result of changes in exchange rate between the equalisation of the dividends and the date of payment. The interim dividend is normally 35% of the previous year's total normal dividend per share, based on the stronger of our two parent currencies over the first...

  • Page 161
    ... frequent payments to shareholders, and better align with the cash ï¬,ow generation of the business. Contact details Rotterdam London Unilever N.V. Investor Relations Department Weena 455, PO Box 760 3000 DK Rotterdam The Netherlands Unilever PLC Investor Relations Department Unilever House 100...

  • Page 162
    ... of information about Unilever. Any information on or linked from the website is not incorporated by reference into this Annual Report and Accounts. There is a section designed specifically for investors at www.unilever.com/investorrelations It includes detailed coverage of the Unilever share price...

  • Page 163
    ...fit 93 Group structure Inside front cover Home care 23, 91-92 Ice cream and beverages 23, 91-92 Impairment 87, 98 Income statement 81 Information technology 24 Innovation 9 Intangible assets 38, 85, 97-98 Intellectual property 24 Internal and disclosure controls 28 International Financial Reporting...

  • Page 164
    ..., including, among others, competitive pricing and activities, consumption levels, costs, the ability to maintain and manage key customer relationships and supply chain sources, currency values, interest rates, the ability to integrate acquisitions and complete planned divestitures, the ability to...

  • Page 165
    ... Unilever PLC Unilever House 100 Victoria Embankment London EC4Y 0DY 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 United Kingdom Registered in England and Wales Company Number: 41424 www.unilever...