Unilever 2012 Annual Report Download

Download and view the complete annual report

Please find the complete 2012 Unilever annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 153

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153

DISCLAIMER
Notes to the Annual Report and Accounts
This PDF version of the Unilever Annual Report and Accounts 2012 is an exact copy* of the
printed document provided to Unilever’s shareholders.
Certain sections of the Unilever Annual Report and Accounts 2012 have been audited.
These are on pages 86 to 131, 133 to 136, 139 to 141, and those parts noted as audited within
the Directors’ Remuneration Report on pages 77 to 81.
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.
* IMPORTANT NOTICE:
Please note that within the Financial calendar section on page 144 of our printed
version of the 2012 Annual Report and Accounts and the PDF version published
on 8 March 2013, the payment date for the quarterly dividend announced with the
Quarter 1 2013 results was incorrectly stated as 2 June 2013. The correct payment
date for the interim dividend in respect of the first quarter of 2013 is 12 June 2013.
An amendment to this effect has been made in this PDF version.

Table of contents

  • Page 1
    ... Financial calendar section on page 144 of our printed version of the 2012 Annual Report and Accounts and the PDF version published on 8 March 2013, the payment date for the quarterly dividend announced with the Quarter 1 2013 results was incorrectly stated as 2 June 2013. The correct payment date...

  • Page 2
    ANNUAL REPORT AND ACCOUNTS 2012 MAKING SUSTAINABLE LIVING COMMONPLACE

  • Page 3
    ABOUT UNILEVER OUR PURPOSE TO MAKE SUSTAINABLE LIVING COMMONPLACE We work to create a better future every day, with brands and services that help people feel good, look good and get more out of life. Our first priority is to our consumers - then customers, employees, suppliers and communities. When ...

  • Page 4
    ...in equity Consolidated balance sheet Consolidated cash flow statement Notes to the consolidated financial statements Company accounts 144 144 145 145 145 148 SHAREHOLDER INFORMATION Financial calendar Contact details Website Share registration Publications Index Our Annual Report and Accounts 2012...

  • Page 5
    ... on the Boards and improve it further. Additional information on these directors and the succession planning process undertaken is given in the Corporate Governance report and their biographies will be included in the 2013 AGM Notices which will be available on our website at www.unilever.com/agm...

  • Page 6
    ... companies. Any references to the Board in this document mean the Boards of NV and PLC. Names are listed in alphabetical order with the exception of the Chairman, Vice-Chairman, Chief Executive Officer and Chief Financial Officer. Unilever Annual Report and Accounts 2012 Report of the Directors...

  • Page 7
    ... year by more than 11% and now accounting for 55% of total business. Growth was ahead of our markets, with approximately 60% of the business gaining share. Personal Care and Home Care showed double digit growth, in line with our strategic priorities. 4 Unilever Annual Report and Accounts 2012

  • Page 8
    ... Financial Officer Alan Jope North Asia Kees Kruythoff North America Dave Lewis Personal Care Harish Manwani Chief Operating Officer Antoine de Saint-Affrique Foods Pier Luigi Sigismondi Chief Supply Chain Officer Ritva Sotamaa Chief Legal Officer Keith Weed Chief Marketing and Communication Officer...

  • Page 9
    ... numbers measured by product (stock keeping unit). NAMET refers to North Africa, Middle East and Turkey; AMET refers to Africa, Middle East and Turkey; and RUB refers to Russia, Ukraine and Belarus. â-Š ††6 Report of the Directors About Unilever Unilever Annual Report and Accounts 2012

  • Page 10
    ...billion • Underlying sales growth 0.8% • Underlying volume growth 0.9% 173,000 190 employees at the end of 2012 Products sold in over countries worldwide FOR MORE: WWW.UNILEVER.COM/ INVESTORRELATIONS Unilever Annual Report and Accounts 2012 Unilever Report of the Directors About Unilever...

  • Page 11
    ...lead for responsible growth, inspiring people to take small everyday actions that will add up to a big difference. We will grow by winning shares and building markets everywhere. OUR COMPASS We wrote in our 2011 Annual Report and Accounts that the volatility and uncertainty facing the world was the...

  • Page 12
    ...and improved products are the result of investment in R&D and, together with effective marketing, strengthen our brand equity. This results in profitable volume growth, selfperpetuating the virtuous circle of growth. 9 Unilever Annual Report and Accounts 2012 Report of the Directors About Unilever

  • Page 13
    ... ACTION PROGRESS AGAINST OUR PLAN IS DETAILED IN THE SUSTAINABLE LIVING SECTION OF WWW.UNILEVER.COM/SUSTAINABLE-LIVING AND IN OUR UNILEVER SUSTAINABLE LIVING PLAN: PROGRESS REPORT 2012, TO BE PUBLISHED IN APRIL 2013. 10 Report of the Directors About Unilever Unilever Annual Report and Accounts 2012

  • Page 14
    ... to previously reported numbers measured by product (stock keeping unit). Measured July 2011-June 2012, compared to January-December 2010. In seven water-scarce countries representing around half the world's population. â-Š ‡ + SEE OUR UNILEVER SUSTAINABLE LIVING PLAN: PROGRESS REPORT 2012, TO...

  • Page 15
    WINNING WITH BRANDS AND INNOVATION 12 Report of the Directors About Unilever Unilever Annual Report and Accounts 2012

  • Page 16
    ...-2012 WINNING IN BRAZIL Brazilian consumers care about their hair and, inspired by the salons and hair professionals that are a part of national life, are prepared to 'trade up' for a new product they believe in. We saw a great opportunity in the market for the TRESemmé brand and, in November 2011...

  • Page 17
    ... idea through to market, informed at every step by consumer benefit and value. Our six major laboratories across the world are complemented by a network of regional centres that give us the strength to deliver innovations globally and apply regional variants that consumers value. At the same time as...

  • Page 18
    ... months, this new technology will be rolled out in another 18 countries in 2013. Winning market share Big, fast, ambitious projects can have significant results, provided they are attuned to consumer needs. When we launched the TRESemmé brand into one of the world's largest hair markets, Brazil, it...

  • Page 19
    WINNING IN THE MARKET PLACE 16 Report of the Directors About Unilever Unilever Annual Report and Accounts 2012

  • Page 20
    ... Asia, Africa and Latin America by 2015 and reduce diarrhoea and respiratory disease. OUR CUSTOMERS TO FIND OUT HOW WE WORK WITH CUSTOMERS SO OUR PRODUCTS REACH SHOPPERS GO TO WWW.UNILEVER.COM/SUSTAINABLE-LIVING/CUSTOMERS-SUPPLIERS. Unilever U nilever Annual Report and Accounts 2012 Report of the...

  • Page 21
    ... value-for-money food products to tap into consumer needs. Our supply chain, customer, finance, sales and marketing teams collaborated swiftly to develop and launch - within six months - eight new economy products from olive oil to mayonnaise. At launch, the range was stocked in promotional displays...

  • Page 22
    ... orders. We will continue to innovate and grow sustainably with our customers, whether they're a small-scale distributor in rural India or a global retailer. 11% Rated growth through drug stores No. 1 supplier across seven markets in Asia, Africa and the Middle East RINGING THE SALES IN INDIA...

  • Page 23
    WINNING THROUGH CONTINUOUS IMPROVEMENT 20 Report of the Directors About Unilever Unilever Annual Report and Accounts 2012

  • Page 24
    ... promotions, and pricing - we can use our global scale to add value, reach new markets and meet our sustainability targets. Working with global scale and local agility Our procurement organisation now buys the majority of all materials and services centrally - some â,¬35 billion in 2012. This scale...

  • Page 25
    ... takes to launch key innovations into the market place. New capabilities and centralised processes are making it possible to almost halve the time it takes to build new factories. Unilever's Global Engineering Services uses 'cookie cutter' templates for factories, design and suppliers, helping us to...

  • Page 26
    ... of emerging markets. This is the heart of our global shared services operations, and will support our end-to-end IT, Finance and Information Management across the whole of Unilever. MAKING WHEEL SPIN As part of our low-cost business model strategy, we analysed every link in the value chain for...

  • Page 27
    WINNING WITH PEOPLE I AM EXCITED TO SEE THE TEA PICKERS USING MY DESIGN IN THE FIELD Samwel Nyagucha, tea picker, Kenya 24 Report of the Directors About Unilever Unilever Annual Report and Accounts 2012

  • Page 28
    ...recognise a number of employees as 'Unilever heroes' for work that brings our values to life (see page 26). Samwel Nyagucha was picking tea on our Kaptien estate in Kenya when he saw a way to make pickers' work more efficient. Inspired by baskets he'd seen on other estates, he designed a new picking...

  • Page 29
    ...Through better recruitment, family-friendly working conditions, a culture of accountability, and initiatives like employee networks and mentoring, our business is becoming increasingly gender-balanced. By the end of 2012, 41% of our management headcount were women, compared to 39% at the end of 2011...

  • Page 30
    ... FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Our 2012 heroes include people such as Samwel Nyagucha (pictured on page 24), a tea picker on the Kaptien estate in Kenya, whose initiative has transformed the working life of colleagues on his plantation; Koray Kezer, a customer development manager...

  • Page 31
    ... the continued success of the global rollout of our ice cream brands and innovations, as well as improved growth momentum in tea, especially in emerging markets. Solid progress in core operating margin Despite further increases in input costs and adverse currency changes, gross margin improved by...

  • Page 32
    ... UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Financial overview 2012 Consolidated income statement (highlights) for the year ended 31 December 2012 2011 % change 2012 2011 2010 Financial overview 2012 Key performance indicators* Turnover (â,¬ million) Operating profit...

  • Page 33
    ... the rollout of new and improved products, driving strong growth momentum for our global brands Domestos, Cif and Sunlight. • Core operating margin was up by 0.5%, benefiting from successful new business models. 30 Report of the Directors About Unilever Unilever Annual Report and Accounts 2012

  • Page 34
    ... gross margin and better cost control, partly offset by increased advertising and promotions expenditure. • Other key developments include the disposal of our remaining frozen foods business in North America. Europe 2012 2011 % Change Turnover (â,¬ million) Operating profit (â,¬ million) Core...

  • Page 35
    ... Unilever's consolidated financial statements. Information concerning guarantees given by the Group is stated in note 16A on page 117. Finance and liquidity The Group's financial strategy provides the financial flexibility to meet strategic and day-to-day needs. Our current long-term credit rating...

  • Page 36
    ...a system of authorities and extensive independent reporting covers all major areas of activity. Performance is monitored closely. Reviews are undertaken periodically by the corporate internal audit function. The key financial instruments used by Unilever are short-term and long-term borrowings, cash...

  • Page 37
    ... cash flows. FCF is not used as a liquidity measure within Unilever. FCF includes the cash flow from group operating activities, less income tax paid, net capital expenditure, net interest and preference dividends paid. Personal Care 2012 vs 2011 2011 vs 2010 Underlying sales growth (%) Effect...

  • Page 38
    ...costs Depreciation, amortisation and impairment Changes in working capital Pensions and similar provisions less payments Provisions less payments Elimination of (profits)/losses on disposals Non-cash charge for share-based compensation Other adjustments Cash flow from operating activities Income tax...

  • Page 39
    ...management process deploys the necessary tools, technologies and resources to convert category strategies into projects and category plans, develop products and relevant brand communication and successfully roll out new products to our consumers. 36 Report of the Directors About Unilever Unilever...

  • Page 40
    ...targets are being integrated into Unilever's day-to-day business operations. The Unilever Sustainable Development Group, comprising five external specialists in corporate responsibility and sustainability, monitors the execution of this strategy. Progress towards the Unilever Sustainable Living Plan...

  • Page 41
    ...product quality controls are extensive and are regularly tested to ensure that they are effective. All of our key suppliers are periodically reviewed to ensure they meet the rigorous quality standards that our products demand. Commodity price risk is actively managed through forward-buying of traded...

  • Page 42
    ... to manage our liquidity requirements by maintaining access to global debt markets through short-term and long-term debt programmes. In addition, we have high committed credit facilities for general corporate purposes. Unilever Annual Report and Accounts 2012 Report of the Directors About Unilever...

  • Page 43
    ... cost of our floating rate debt and increase the cost of future borrowings. In times of financial market volatility, we are also potentially exposed to counterparty risks with banks, suppliers and customers. Certain businesses have defined benefit pension plans, most now closed to new employees...

  • Page 44
    ... our positive social impact. Our available capital and other resources are applied to underpin our priorities. We aim to maintain a strong single A credit rating on a long term basis, reflecting the strength of our balance sheet and cash flows. Our approach to risk management is designed to provide...

  • Page 45
    ... Committee membership: Audit (Chairman) Key areas of prior experience: Finance Current external appointments: Executive vice president, Corporate Business Activities, BP p.l.c. Previous relevant experience: Chief financial officer, BP p.l.c. 2002-2011. Member, UK Business - Government Forum on Tax...

  • Page 46
    ... Vice President South East Asia and Australasia; Chairman of Unilever Middle East North Africa; Chairman of Nordic ice cream business; Marketing Director Italy; European Olive Oil Category Director; and General Manager - Sauces and Dressings Europe Current external appointments: Board member, AIM...

  • Page 47
    ... Directors with a greater understanding of local businesses and their customers • Continued engagement with shareholders and stakeholders • Consideration of changes to Dutch and UK Corporate Governance Codes 44 Report of the Directors Governance Unilever Annual Report and Accounts 2012

  • Page 48
    ...), Compensation and Management Resources Committee, the Corporate Responsibility Committee and the Nominating and Corporate Governance Committee. Michael Treschow Chairman BOARD COMPOSITION AND GENDER NON-EXECUTIVE BOARD TENURE Unilever Annual Report and Accounts 2012 Report of the Directors...

  • Page 49
    ... of Directors' remuneration policy; • review of the functioning of the Boards and their Committees; and • review of corporate responsibility and sustainability, in particular the Unilever Sustainable Living Plan. Our risk management approach and associated systems of internal control are...

  • Page 50
    ...'s business, environmental, social and corporate governance, regulatory developments and investor relations matters. In 2012 the Board knowledge sessions were on digital strategy, Unilever's Foods strategy and the supply chain. Unilever Annual Report and Accounts 2012 Report of the Directors...

  • Page 51
    ... and each Director Information flows from management have been defined and priorities for each Committee agreed for the year Time to be built into personal and Board agendas throughout the year for Non-Executive Directors to interact with Senior Executives More frequent periodic reviews of historic...

  • Page 52
    ... • developing strategy with the Chief Executive Officer; • scrutiny of performance of the business and the Chief Executive Officer; • oversight of risks and controls; • reporting of performance; • remuneration of and succession planning for Executive Directors; and • governance and...

  • Page 53
    ... that is disclosed is complete and accurate in all material aspects. The Committee comprises the Controller (Chairman), the Group Secretary and Chief Legal Officer, the Treasurer and the NV and PLC Deputy Secretaries. 50 Report of the Directors Governance Unilever Annual Report and Accounts 2012

  • Page 54
    ... the meetings. The business generally conducted includes approval/adoption of the Annual Report and Accounts, appointment of directors, appointment of external auditors, and authorisation for the Boards to allot and repurchase shares. General Meetings of shareholders of NV and PLC are held at times...

  • Page 55
    ... operate and carry into effect the Equalisation Agreement. At the 2010 PLC AGM, the shareholders agreed that the objects clause be removed from PLC's Articles of Association so that there are no restrictions on its objects. 52 Report of the Directors Governance Unilever Annual Report and Accounts...

  • Page 56
    ...shareholders are best served by linking the long-term share plans to the measures as described in the Directors' Remuneration Report and has not included a nonfinancial performance indicator (Principle II.2 and bpp II.2.3). Risk management and control As a result of the review of the Audit Committee...

  • Page 57
    .../corp_governance. Risk management and control Based on an evaluation by the Boards, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of the Group's disclosure controls and procedures, including those defined in United States Securities Exchange Act...

  • Page 58
    ... GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION PLC's issued share capital on 31 December 2012 was made up of: • £40,760,420 split into 1,310,156,361 ordinary shares of 31/9p each; and • £100,000 of deferred stock. The total number of voting rights attached to PLC's outstanding...

  • Page 59
    ...OF 2012 • Review of the effectiveness of internal controls over financial reporting including internal audit findings • Review of the 2011 Annual Report & Accounts • Review of the Group's dividend policy • Assessment of the debt crisis and Unilever's response • Review of pension costs...

  • Page 60
    ... 2013 corporate risks identified by the Unilever Leadership Executive; • progress on management's improvements to reporting and internal financial control arrangements; • the application of information and communication technology; • tax planning, insurance arrangements and related risk...

  • Page 61
    ... the Code and Code Policies remain fit for purpose and are appropriately applied. In this regard it complements the role of the Audit Committee which considers the Code as part of its remit to review risk management. 58 Report of the Directors Governance Unilever Annual Report and Accounts 2012

  • Page 62
    ... increasing use of social media which means information can be communicated rapidly to a worldwide audience. Towards the end of the year, the Committee put in place an annual review of issues that are strategically important to Unilever. This allows Committee members to see how the Group is managing...

  • Page 63
    ...policies, internal control and risk management of multinationals with share PRIORITIES FOR 2013 • Continued focus on Board and Committee succession • Review induction arrangements for new Non-Executive Directors 60 Report of the Directors Governance Unilever Annual Report and Accounts 2012

  • Page 64
    ... where Unilever is active. Profile This profile guides the Nominating and Corporate Governance Committee and the Boards on the occasion of the nomination of Directors. It is reviewed and updated by the Boards periodically. Unilever Annual Report and Accounts 2012 Report of the Directors Governance...

  • Page 65
    ...to ensure that it remains aligned with Unilever's short- and long-term strategy • Consider the introduction of an all-employee share scheme Paul Walsh Chairman of the Compensation and Management Resources Committee 62 Report of the Directors Governance Unilever Annual Report and Accounts 2012

  • Page 66
    ...growth strategy. Our operations We want to reach new customers by developing innovative products that address different consumer needs at different price points. To do this we use our global scale to help deliver sustainable profitable growth by seeking to add value at every step in the value chain...

  • Page 67
    ...The key elements of the remuneration for Executive Directors are: • Fixed elements - base salary and fixed allowance • Linked to short-term performance - annual bonus • Linked to long-term performance - MCIP and GSIP The following section sets out Unilever's 2013 remuneration policy which...

  • Page 68
    ... awards the Committee also assesses the delivery against personal performance goals and the quality of performance; in terms of both business results and leadership, including corporate social responsibility and progress against the delivery of USLP goals. Unilever Annual Report and Accounts 2012...

  • Page 69
    ... salary respectively. The Committee sets three-year performance targets for each MCIP matching share award and may change these for future awards as the Committee considers appropriate. Performance metrics are linked to Unilever's clearly stated growth ambition and our long-term business strategy...

  • Page 70
    ... to strategy Operation Opportunity Performance metrics Changes made to policy None Supporting information Global Share Incentive Plan (GSIP) The GSIP incentivises Executive Directors The key terms to achieve of the GSIP Unilever's were approved clearly stated by shareholders growth ambition...

  • Page 71
    ... Unilever • 6 months' notice from the Executive Director • Severance payments limited to base salary and fixed allowance and benefits • Incentives typically pro-rated for time and performance for 'good leavers' only Treatment of share-based incentives in the event of a change of control...

  • Page 72
    ... Non-Executive Director fee levels for 2013. NV PLC Chairman Vice-Chairman Basic Non-Executive fee Committee Chair: Audit Nominating and Corporate Governance Compensation and Management Resources Corporate Responsibility Committee Members: Audit Nominating and Corporate Governance Compensation and...

  • Page 73
    ...2013. AT A GLANCE...Remuneration paid in 2012 (unaudited) CEO (£ '000) CFO (£ '000) Base salary(a) Fixed allowances and other benefits(b) Annual bonus(c) GSIP performance shares: - Performance element(d) - Share price appreciation element(e) Conditional supplemental pension(f) Total remuneration...

  • Page 74
    ...volume growth (1/3) Core operating margin improvement (1/3) The Committee also considers the quality of performance in terms of business results and leadership, including corporate social responsibility and delivery of USLP goals, when determining payouts. Unilever Annual Report and Accounts 2012...

  • Page 75
    ...-tax annual bonus. In the event that their net after-tax annual bonus is insufficient to cover full participation in the MCIP at 60%, Executive Directors write Unilever a cheque for the balance of the shares they purchase. In return, they receive a corresponding award of performance-related matching...

  • Page 76
    ... for 2013 with the target award for the CEO remaining at 200% of base salary and the target award for the CFO remaining at 175% of base salary. Underlying sales growth (25%) Core operating margin improvement (25%) Cumulative operating cash flow (25%) Relative total shareholder return (25...

  • Page 77
    ... 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 (by the later of 2015 or five years from the date of appointment) to firmly align their interests with those of Unilever's long-term...

  • Page 78
    ... the Compensation and Management Resources Committee with effect from 1 January 2013. The Committee is concerned with: • the remuneration policy for the ULE and senior corporate executives; • the remuneration and benefits of the Directors and other members of the ULE; • the design and terms...

  • Page 79
    .... Update on Unilever North America Omnibus Equity Compensation Plan. January 2013 Held following the year end but prior to the finalisation of this report. Review and approval of performance for 2012 annual and 2010 long-term incentives. Setting targets for 2013 annual bonus and 2013-2015 MCIP and...

  • Page 80
    ... fixed allowance into the Unilever international pension plan fund in 2012. (c) Benefits for medical insurance, tax return preparation and costs of provision for death-in-service benefits and administration. Also includes payment to protect against the difference between the employee social security...

  • Page 81
    ... 3,781 3,794 Each award of conditional matching shares vests three years after the date of the award, subject to performance conditions based on underlying sales growth, core operating margin improvement, cumulative operating cash flow and relative total shareholder return (further details can be...

  • Page 82
    ... sales growth, core operating margin improvement, cumulative operating cash flow and relative total shareholder return (further details can be found on page 73). The 2012 award was made at grant date 17 February 2012. (b) This includes a grant of 69,210 of each of Unilever NV and PLC shares made...

  • Page 83
    ... Chairman of Compensation and Management Resources Committee & Nominating and Corporate Governance Committee. (h) Retired at AGMs in 2011. We do not grant our Non-Executive Directors any personal loans or guarantees. 80 Report of the Directors Governance Unilever Annual Report and Accounts 2012

  • Page 84
    ... GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Non-Executive Directors' interests in share capital (audited) Non-Executive Directors are encouraged to build up their personal holding of Unilever shares to at least one-times their annual fees over the five years from 1 January 2012...

  • Page 85
    ... income Consolidated statement of changes in equity Consolidated balance sheet Consolidated cash flow statement Notes to the consolidated financial statements 1 Accounting information and policies 2 Segment information 3 Gross profit and operating costs 4 Employees 4A Staff and management costs...

  • Page 86
    ... Dutch Civil Code (in the case of the NV parent company accounts), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the NV and PLC entities taken as a whole; and • The Report of the Directors includes a fair review of the development and...

  • Page 87
    ...income, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and the notes to the consolidated financial statements, comprising a summary of significant accounting policies and other explanatory information. Directors' responsibility The Directors...

  • Page 88
    ... of the UK Corporate Governance Code specified for our review; and • certain elements of the report to shareholders by the Board on Directors' remuneration. Other matters We have reported separately on the parent company financial statements of Unilever PLC for the year ended 31 December 2012 and...

  • Page 89
    ... income, consolidated statement of changes in equity, consolidated balance sheet and consolidated cash flow statement relate to notes on pages 90 to 131, which form an integral part of the consolidated financial statements. 86 Financial statements Unilever Annual Report and Accounts 2012

  • Page 90
    ...FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Consolidated statement of comprehensive income Consolidated statement of comprehensive income for the year ended 31 December â,¬ million 2012 â,¬ million 2011 â,¬ million 2010 Fair value gains/(losses) on financial instruments net of tax: On cash flow...

  • Page 91
    FINANCIAL STATEMENTS UNILEVER GROUP continued Consolidated balance sheet Consolidated balance sheet as at 31 December â,¬ million 2012 â,¬ million 2011 Assets Non-current assets Goodwill 9 Intangible assets 9 Property, plant and equipment 10 Pension asset for funded schemes in surplus 4B Deferred ...

  • Page 92
    ... GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Consolidated cash flow statement Consolidated cash flow statement for the year ended 31 December â,¬ million 2012 â,¬ million 2011 â,¬ million 2010 Net profit Taxation Share of net profit of joint ventures/associates and other income...

  • Page 93
    ... those companies controlled by NV or PLC. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The net assets and results of acquired businesses are included in the consolidated financial statements from...

  • Page 94
    ...GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 1. Accounting information and policies continued Critical accounting estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions in the application of accounting policies...

  • Page 95
    ...dressings, margarines and spreads. Refreshment - including sales of ice cream, tea-based beverages, weight-management products and nutritionally enhanced staples sold in developing markets. Home Care - including sales of home care products, such as laundry tablets, powders and liquids, soap bars and...

  • Page 96
    ... 47 13,240 2,028 (313) 1,715 43 51,324 6,989 73 7,062 105 46,467 6,433 (144) 6,289 113 44,262 6,339 (308) 6,031 111 Refers to Asia, Africa, Middle East, Turkey, Russia, Ukraine and Belarus. Unilever Annual Report and Accounts 2012 Financial statements 93

  • Page 97
    ...THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued 3. Gross profit and operating costs Research and market support costs 3. Gross profit and operating costs Expenditure on research and market support, such as advertising, is charged to the income statement as incurred. Non-core items...

  • Page 98
    ABOUT UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 4. Employees 4. Employees 4A. Staff and management costs Staff costs Remuneration of employees Pensions and other post-employment benefits Social security costs Share-based compensation costs â,¬ million 2012 â,¬ million 2011...

  • Page 99
    ... the long-term rates of return on government bonds available at the balance sheet date and applies to these rates suitable risk premiums that take account of historic market returns and current market long-term expectations for each asset class. 96 Financial statements Unilever Annual Report and...

  • Page 100
    ...GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 4B. Pensions and similar obligations continued For the most important pension plans, representing approximately 80% of all defined benefit plans by liabilities, the assumptions used at 31 December 2012 and 2011 were: United Kingdom 2012 2011...

  • Page 101
    ... in the 2011 balance are a past service credit of â,¬153 million, as Unilever implemented amendments to certain constructive obligations in the UK that the company had the discretion to amend and curtailment credits of â,¬146 million relating to benefit changes mainly in the UK, the USA and Canada...

  • Page 102
    ABOUT UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 4B. 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...

  • Page 103
    ...benefit Group cash flow in respect of pensions and similar benefits 610 130 160 900 435 116 170 721 297 90 166 553 482 72 187 741 Contributions to funded defined benefit plans are subject to periodic review, taking account of local legislation. 100 Financial statements Unilever Annual Report...

  • Page 104
    ...UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 4C. Share-based compensation plans The fair value of the awards at the grant date is calculated using pricing models and recognised over the vesting period of the grant as a remuneration cost with a corresponding increase in equity...

  • Page 105
    ... in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years. 102 Financial statements Unilever Annual Report and Accounts 2012

  • Page 106
    ... for tax purposes Other Effective tax rate (a) % 2012 % 2011 % 2010 26 (5) 2 - 2 1 26 27 (5) 2 (1) 1 2 26 28 (5) 2 (3) 1 3 26 The computed tax rate used is the average of the standard rate of tax applicable in the countries in which Unilever operates, weighted by the amount of profit before...

  • Page 107
    ... TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued 6B. Deferred tax continued At the balance sheet date, the Group has unused tax losses of â,¬1,582 million (2011: â,¬1,568 million) and tax credits amounting to â,¬120 million (2011: â,¬39 million) available for offset against future...

  • Page 108
    ...payable in March 2013. See note 25 'Events after the balance sheet date' on page 129. Total dividends declared in relation to 2012 were â,¬0.97 (2011: â,¬0.90) per NV ordinary share and £0.79 (2011: £0.78) per PLC ordinary share. Unilever Annual Report and Accounts 2012 Financial statements 105

  • Page 109
    ...-life intangibles mainly comprise trademarks and brands. These assets are capitalised at cost but are not amortised. They are subject to a review for impairment annually, or more frequently if events or circumstances indicate this is necessary. Any impairment is charged to the income statement...

  • Page 110
    ... annual review. Value in use has been calculated as the present value of projected future cash flows. A pre-tax discount rate of 7.4% was used. For the significant CGUs, the following key assumptions were used in the discounted cash flow projections: Foods Europe Foods The Americas Foods...

  • Page 111
    ... (2011: â,¬272 million) of freehold land. The Group also has commitments to capital expenditure of â,¬364 million (2011: â,¬514 million). See note 20 on page 125 for property, plant and equipment under finance lease agreements. 108 Financial statements Unilever Annual Report and Accounts 2012

  • Page 112
    ... to sell with any changes recognised in the income statement. â,¬ million 2012 â,¬ million 2011 Interest in net assets of joint ventures Interest in net assets of associates Long-term trade and other receivables Fair value of biological assets Other non-financial assets(a) 32 51 172 29 252 536 48...

  • Page 113
    ... (2011: â,¬327 million), including supplier and customer deposits, employee advances and certain derivatives, and non-financial assets of â,¬592 million (2011: â,¬698 million), including tax deposits and reclaimable sales tax. 110 Financial statements Unilever Annual Report and Accounts 2012

  • Page 114
    ... cost, using the effective interest method. We do not consider the fair values of trade and other payables to be significantly different from their carrying values. Trade and other liabilities Due within one year Trade payables Accruals Social security and sundry taxes Others â,¬ million 2012...

  • Page 115
    ... are designed to: • maintain a competitive balance sheet in line with A+/A1 rating (see note 15); • secure funding at lowest costs for the Group's operations, M&A activity and external dividend payments (see note 15); • protect the Group's financial results and position from financial risks...

  • Page 116
    ...information on the rights of shareholders of NV and PLC and the operation of the Equalisation Agreement, see Corporate Governance report on page 52. A nominal dividend of 6% is paid on the deferred stock of PLC, which is not redeemable. Unilever Annual Report and Accounts 2012 Financial statements...

  • Page 117
    ... and grant price of share options. (b) 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. â,¬ million Total 2012 â,¬ million Total 2011 â,¬ million Total...

  • Page 118
    ...6 5,359 10,502 83 43 768 760 1,526 578 577 - 385 - 222 171 127 113 71 12 6 5,359 10,585 Information in relation to the derivatives used to hedge bonds and other loans within a fair value hedge relationship is shown in note 16. Unilever Annual Report and Accounts 2012 Financial statements 115

  • Page 119
    .... Cash flow from operating activities provides the funds to service the financing of financial liabilities on a day-to-day basis. The Group seeks to manage its liquidity requirements by maintaining access to global debt markets through short-term and long-term debt programmes. In addition, Unilever...

  • Page 120
    ... GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 16A. Management of liquidity risk continued The following table shows Unilever's contractually agreed undiscounted cash flows, including expected interest payments, which are payable under financial liabilities at the balance sheet date...

  • Page 121
    ... market risks that arise from its use of financial instruments: • commodity price risk; • currency risk; and • interest rate risk. The above risks may affect the Group's income and expenses, or the value of its financial instruments. The objective of the Group's management of market risk...

  • Page 122
    ... on short-term borrowings in 2012 was 1.5% (2011: 2.5%). Unilever's interest rate management approach aims for an optimal balance between fixed and floating-rate interest rate exposures on expected net debt. The objective of this approach is to minimise annual interest costs after tax and to reduce...

  • Page 123
    ... CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP continued 16B. Management of market risk continued The following table shows the split in fixed and floating rate interest exposures, taking into account the impact of interest rate swaps and cross currency swaps: â,¬ million 2012 â,¬ million 2011...

  • Page 124
    ABOUT UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 17. Investment and return Cash and cash equivalents 17. Investment and return Cash and cash equivalents in the balance sheet include deposits, investments in money market funds and highly liquid investments. To be ...

  • Page 125
    ...) was in the form of bond securities. The non-cash collateral has not been recognised as an asset in the Group's balance sheet. Further details in relation to the Group's exposure to credit risk are shown in note 13 and note 16A. 122 Financial statements Unilever Annual Report and Accounts 2012

  • Page 126
    ... recognised in other comprehensive income Purchases and new issues Sales and settlements Transfers into Level 3 Transfers out of Level 3 31 December â,¬ million 2012 â,¬ million 2011 2 (35) 67 - - 472 - 506 69 - (20) - (47) - - 2 Unilever Annual Report and Accounts 2012 Financial statements 123

  • Page 127
    ... present value of the anticipated future cash flows associated with these instruments using rates currently available for debt on similar terms, credit risk and remaining maturities. • Fair values for finance lease creditors have been assessed by reference to current market rates for comparable...

  • Page 128
    .... Future minimum sublease payments of â,¬33 million (2011: â,¬38 million) are expected to be received. Long-term operating lease commitments Land and buildings Plant and machinery â,¬ million 2012 â,¬ million 2011 1,400 547 1,947 1,199 429 1,628 Unilever Annual Report and Accounts 2012 Financial...

  • Page 129
    ... 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 was comparable with restructurings done by many companies in Brazil. The Group...

  • Page 130
    ... local personal care companies. On 20 December 2011 the Group completed the acquisition of Ingman Ice Cream for an undisclosed sum. The table below shows the impact of disposals on the Group during the year. The results of disposed businesses are included in the consolidated financial statements up...

  • Page 131
    ... in cash from its investment in Langholm I. Langholm Capital Partners II was launched in 2009. Unilever has invested â,¬31 million in Langholm II, with an outstanding commitment at the end of 2012 of â,¬44 million (2011: â,¬50 million). 128 Financial statements Unilever Annual Report and Accounts...

  • Page 132
    ...to Hormel Foods for a total cash consideration of approximately US$700 million. On 23 January 2013 Unilever announced a quarterly dividend with the 2012 fourth quarter results of â,¬0.2430 per NV ordinary share and £0.2039 per PLC ordinary share. Unilever Annual Report and Accounts 2012 Financial...

  • Page 133
    ... to the next Annual Return of Unilever PLC. Unless otherwise indicated, the companies are incorporated and principally operate in the countries under which they are shown. The aggregate percentage of equity capital directly or indirectly held by NV or PLC is shown in the margin, except where it...

  • Page 134
    ... FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 26. Principal group companies and non-current investments continued % Ownership 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...

  • Page 135
    ...: the General Meeting of Shareholders of Unilever N.V. Report on the company accounts We have audited the accompanying company accounts 2012 as set out on pages 133 to 136 of the Annual Report and Accounts 2012 of Unilever N.V., Rotterdam, which comprise the balance sheet as at 31 December 2012, the...

  • Page 136
    ABOUT UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION COMPANY ACCOUNTS UNILEVER N.V. Balance sheet as at 31 December Balance sheet as at 31 December (after proposed appropriation of profit) â,¬ million 2012 â,¬ million 2011 Fixed assets Intangible assets Fixed investments Total...

  • Page 137
    ... of such plans are not included in NV's balance sheet. Dividends Under Financial Reporting Standard 21 'Events after the Balance Sheet Date' (FRS 21), proposed dividends do not meet the definition of a liability until such time as they have been approved by shareholders at the Annual General Meeting...

  • Page 138
    ... the Netherlands). Capital and reserves â,¬ million 2012 â,¬ million 2011 Company accounts Unilever N.V. Unilever Group: shareholders' equity 7,853 15,159 7,712 14,293 1 January Profit for the year Dividends Realised profit/(loss) on shares/certificates held to meet employee share options Other...

  • Page 139
    ...management compensation is provided in note 4A to the consolidated group financial statements on page 95. Employee information During 2012 13 employees were employed by NV, of whom 12 worked abroad. The Board of Directors 5 March 2013 136 Financial statements Unilever Annual Report and Accounts...

  • Page 140
    ... 2013 the Directors announced a dividend of â,¬0.243 per Unilever N.V. ordinary share. The dividend is payable from 13 March 2013 to shareholders registered at close of business on 8 February 2013. Special controlling rights under the Articles of Association See note 15 to the consolidated accounts...

  • Page 141
    ... company financial statements of Unilever PLC for the year ended 31 December 2012 which comprise the balance sheet and the related notes on pages 139 to 141. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United...

  • Page 142
    ...a cash flow statement is not included, as the cash flows are included in the consolidated cash flow statement of the Unilever Group. On behalf of the Board of Directors M Treschow Chairman P Polman Chief Executive Officer 5 March 2013 Unilever Annual Report and Accounts 2012 Financial statements...

  • Page 143
    .... Fixed investments Shares in group companies are stated at cost less any amounts written off to reflect a permanent impairment. Any impairment is charged to the profit and loss account as it arises. Financial instruments The company's accounting policies under United Kingdom generally accepted...

  • Page 144
    ... per Unilever PLC ordinary share. The dividend is payable from 13 March 2013 to shareholders registered at close of business on 8 February 2013. Deferred taxation Other provisions 7 1 8 8 1 9 1 Of which due within one year 1 Unilever Annual Report and Accounts 2012 Financial statements 141

  • Page 145
    ... regularly. For example, Unilever UK provides policies on home working, flexible working, maternity and paternity leave, child care provision and career breaks, which help us to meet the objective of greater employee diversity. Business review The UK Companies Act 2006 requires Unilever PLC to set...

  • Page 146
    ABOUT UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Supplier payment policies Individual operating companies are responsible for agreeing the terms and conditions under which business transactions with their suppliers are conducted. The Directors' Reports of the United Kingdom...

  • Page 147
    ... applicable to all four Unilever listings (NV ordinary shares, PLC ordinary shares, NV New York shares, and PLC ADRs). Announced Ex-dividend date Record date Payment date Quarterly Dividend announced with the Q4 2012 results Quarterly Dividend announced with the Q1 2013 results Quarterly Dividend...

  • Page 148
    ....co.uk USA Citibank Shareholder Services PO Box 43077 Providence, RI 02940-3077 Toll free phone (inside US) Toll phone (outside US) Website Email 888 502 6356 +1 781 575 4555 www.citi.com/dr [email protected] Unilever Annual Report and Accounts 2012 Shareholder information 145

  • Page 149
    NOTES 146 Unilever Annual Report and Accounts 2012

  • Page 150
    NOTES Unilever Annual Report and Accounts 2012 147

  • Page 151
    ...Financial review 28-35 Foods 7, 30, 92 Free cash flow 6, 28-29, 34-35 Geographies 7, 31, 93, 95, 107 Goodwill 106-107 Gross profit 94 Group structure 3, 90 Home Care 7, 30, 92 Impairment 92, 94, 106-107 Income statement 29, 86 Innovation 9, 12-15 Intangible assets 106-107, 134, 140-141 International...

  • Page 152
    ... management; inability to find sustainable solutions to support long-term growth; customer relationships; the recruitment and retention of talented employees; disruptions in our supply chain; the cost of raw materials and commodities; secure and reliable IT infrastructure; successful execution...

  • Page 153
    ... F +44 (0)20 7822 5951 UNILEVER PLC REGISTERED OFFICE Unilever PLC Port Sunlight Wirral Merseyside CH62 4ZD United Kingdom For further information on our social, economic and environmental performance, please visit our website Registered in England and Wales Company Number: 41424 WWW.UNILEVER.COM