Form 20-F
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

 

(Mark one)  
¨   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013
OR
¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
¨  

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                  to                 

Commission file number 001-04546

UNILEVER PLC

 

(Exact name of Registrant as specified in its charter)

ENGLAND

 

(Jurisdiction of incorporation or organization)

Unilever House, Blackfriars, London, England

 

(Address of principal executive offices)

T. E. Lovell, Group Secretary

Tel: +44(0)2078225252, Fax: +44(0)2078225464

Unilever House, 100 Victoria Embankment, London EC4Y 0DY, UK

(Name, telephone number, facsimile number and address of Company Contact)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Name of each exchange on which registered

American Shares (evidenced by Depositary Receipts) each representing one ordinary share of the nominal amount of 3 1/9p each    New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The total number of outstanding shares of the issuer’s capital stock at the close of the period covered by the annual report was: 1,310,156,361 ordinary shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:

Yes x      No ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:

Yes ¨      No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x      No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨      No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer x      Accelerated filer ¨      Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP ¨    International Financial Reporting Standards as issued by the International Accounting Standards Board x    Other ¨

If ‘Other’ has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨     Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ¨      No x


Table of Contents

CAUTIONARY STATEMENT

This document may contain forward-looking statements, including ‘forward-looking statements’ within the meaning of the United States Private Securities Litigation Reform Act of 1995. Words such as ‘will’, ‘aim’, ‘expects’, ‘anticipates’, ‘intends’, ‘looks’, ‘believes’, ‘vision’, or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Group. They are not historical facts, nor are they guarantees of future performance.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Among other risks and uncertainties, the material or principal factors which cause actual results to differ materially are: Unilever’s global brands not meeting consumer preferences; Unilever’s ability to innovate and remain competitive; Unilever’s investment choices in its portfolio 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; the production of safe and high quality products; secure and reliable IT infrastructure; successful execution of acquisitions, divestitures and business transformation projects; economic and political risks and natural disasters; financial risks; failure to meet high and ethical standards; and managing regulatory, tax and legal matters. Further details of potential risks and uncertainties affecting the Group are described in the Group’s filings with the London Stock Exchange, Euronext Amsterdam and the US Securities and Exchange Commission, including in the Group’s Annual Report on Form 20-F for the year ended 31 December 2013 and the Annual Report and Accounts 2013. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.


Table of Contents

LOGO

 

ANNUAL REPORT ON FORM 20-F 2013             

 

UNILEVER N.V. AND UNILEVER PLC

 

 

MAKING SUSTAINABLE

LIVING COMMONPLACE

 

  

 

LOGO


Table of Contents

CONTENTS

 

Item 1   Identity of Directors, Senior Management and Advisers      1   
Item 2   Offer Statistics and Expected Timetable      1   
Item 3   Key Information      2   
Item 4   Information on the Company      8   
Item 4A   Unresolved Staff Comments      8   
Item 5   Operating and Financial Review and Prospects      9   
Item 6   Directors, Senior Management and Employees      13   
Item 7   Major Shareholders and Related Party Transactions      14   
Item 8   Financial Information      14   
Item 9   The Offer and Listing      15   
Item 10   Additional Information      16   
Item 11   Quantitative and Qualitative Disclosures About Market Risk      18   
Item 12   Description of Securities Other than Equity Securities      18   
Item 13   Defaults, Dividend Arrearages and Delinquencies      19   
Item 14   Material Modifications to the Rights of Security Holders and Use of Proceeds      20   
Item 15   Controls and Procedures      20   
Item 16   Reserved      20   
Item 17   Financial Statements      21   
Item 18   Financial Statements      22   
Item 19   Exhibits      28   


Table of Contents

References in this Report on Form 20-F are to certain references in the Group’s Annual Report and Accounts 2013 that include pages incorporated therein, including any page references incorporated in the incorporated material, unless specifically noted otherwise.

The following pages and sections of the Group’s Annual Report and Accounts 2013 and specified information referenced therein, regardless of their inclusion in any cross-reference below, are hereby specifically excluded and are not incorporated by reference into this report on

Form 20-F:

  ‘Operational highlights’ on page 2;
  pages 4 to 7;
  ‘Five-year historical Total Shareholder Return (TSR) Performance’ on page 82;
  pages 86 to 89;
  pages 136 to 145; and
  information on our website or any other website or social media site, including our Facebook, Twitter and LinkedIn pages.

This report on Form 20-F and the Group’s Annual Report and Accounts 2013 (furnished separately on 7 March 2014 under Form 6-K) contain certain measures that are not defined by generally accepted accounting principles (GAAP) such as IFRS. We believe this information, along with comparable GAAP measurements, is useful to investors because it provides a basis for measuring our operating performance, ability to retire debt and invest in new business opportunities. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance and value creation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Non-GAAP financial measures as reported by us may not be comparable with similarly titled amounts reported by other companies. In addition, there are limitations on the usefulness of our reported non-GAAP financial measures.

We report on the following non-GAAP measures:

  underlying sales growth;
  underlying volume growth;
  core operating profit and core operating margin (including acquisition and disposal related costs, gain/(loss) on disposal of group companies, impairments and other one-off costs (non-core items));
  core earnings per share (core EPS);
  free cash flow; and
  net debt.

The information set forth under the heading ‘Non-GAAP measures’ on pages 32 to 33 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference. Within these pages further information about the above measures can be found.

THE UNILEVER GROUP

Unilever N.V. (NV) is a public limited company registered in the Netherlands, which has listings of shares and depositary receipts for shares on Euronext Amsterdam and of New York Registry Shares on the New York Stock Exchange. Unilever PLC (PLC) is a public limited company registered in England and Wales which has shares listed on the London Stock Exchange and, as American Depositary Receipts, on the New York Stock Exchange.

The two parent companies, NV and PLC, together with their group companies, operate as a single economic entity (the Unilever Group, also referred to as ‘Unilever’ or ‘the Group’). NV and PLC and their group companies constitute a single reporting entity for the purposes of presenting consolidated accounts. Accordingly, the accounts of the Unilever Group are presented by both NV and PLC as their respective consolidated accounts.

This document contains references to our website. Information on our website or any other website referenced in this document is not incorporated into this document and should not be considered part of this document. We have included any website as an inactive textual reference only.

ITEM 1. IDENTITY OF DIRECTORS,

SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND

EXPECTED TIMETABLE

Not applicable.

 

 

Unilever Annual Report on Form 20-F 2013    Form 20-F                1


Table of Contents

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

The schedules below provide the Group’s selected financial data for the five most recent financial years.

 

      million      million     million     million     million  
Consolidated income statement      2013        

 

2012

(Restated)

  

(a) 

   

 

2011

(Restated)

  

(a) 

   

 

2010

(Restated)

  

(a) 

   

 

2009

(Restated)

  

(a) 

Turnover

     49,797         51,324        46,467        44,262        39,823   

Operating profit

     7,517         6,977        6,420        6,325        5,006   

Net finance costs

     (530      (535     (543     (561     (596

Share of net profit/(loss) of joint ventures and associates and other income/(loss) from non-current investments

     127         91        189        187        489   

Profit before taxation

     7,114         6,533        6,066        5,951        4,899   

Taxation

     (1,851      (1,697     (1,575     (1,486     (1,253

Net profit

     5,263         4,836        4,491        4,465        3,646   

Attributable to:

           

Non-controlling interests

     421         468        371        354        289   

Shareholders’ equity

     4,842         4,368        4,120        4,111        3,357   
Combined earnings per share(b)   

2013

    

2012

   

2011

   

2010

   

2009

 

Basic earnings per share

     1.71         1.54        1.46        1.46        1.20   

Diluted earnings per share

     1.66         1.50        1.42        1.42        1.16   

(a)  For an explanation of the restatement see note 1 ‘Accounting information and policies – Recent accounting developments – Adopted by the Group’ on page 95 of the

     Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K and incorporated here by reference.

(b)  For the basis of the calculations of combined earnings per share see note 7 ‘Combined earnings per share’ on page 108 of the Group’s Annual Report and Accounts

     2013 furnished separately on 7 March 2014 under Form 6-K and incorporated here by reference.

     

       

     

       

      million      million     million     million     million  
     2013      2012     2011     2010     2009  
Consolidated balance sheet            (Restated)     (Restated)     (Restated)     (Restated)  

Non-current assets

     33,391         34,042        33,245        28,706        26,224   

Current assets

     12,122         12,147        14,291        12,484        10,811   

Total assets

     45,513         46,189        47,536        41,190        37,035   

Current liabilities

     17,382         15,815        17,929        13,606        11,599   

Non-current liabilities

     13,316         14,425        14,489        12,322        12,728   

Total liabilities

     30,698         30,240        32,418        25,928        24,327   

Shareholders’ equity

     14,344         15,392        14,491        14,669        12,237   

Non-controlling interests

     471         557        628        593        471   

Total equity

     14,815         15,949        15,119        15,262        12,708   

Total liabilities and equity

     45,513         46,189        47,537        41,190        37,035   
     million      million     million     million     million  
Consolidated cash flow statement    2013      2012     2011     2010     2009  

Net cash flow from operating activities

     6,294         6,836        5,452        5,490        5,774   

Net cash flow from/(used in) investing activities

     (1,161      (755     (4,467     (1,164     (1,263

Net cash flow from/(used in) financing activities

     (5,390      (6,622     411        (4,609     (4,301

Net increase/(decrease) in cash and cash equivalents

     (257      (541     1,396        (283     210   

Cash and cash equivalents at the beginning of the year

     2,217         2,978        1,966        2,397        2,360   

Effect of foreign exchange rates

     84         (220     (384     (148     (173

Cash and cash equivalents at the end of the year

     2,044         2,217        2,978        1,966        2,397   
            2012     2011     2010     2009  
Key performance indicators    2013      (Restated)     (Restated)     (Restated)     (Restated)  

Underlying sales growth (%)(c)

     4.3         6.9        6.5        4.1        3.5   

Underlying volume growth (%)(c)

     2.5         3.4        1.6        5.8        2.3   

Core operating margin (%)(c)

     14.1         13.7        13.5        13.6        12.5   

Free cash flow ( million)(c)

     3,856         4,333        3,075        3,365        4,072   

 

 

2                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 3. KEY INFORMATION CONTINUED

 

     2013      2012      2011      2010      2009  
Ratios and other metrics            (Restated)      (Restated)      (Restated)      (Restated)  

Operating margin (%)

     15.1         13.6         13.8         14.3         12.6   

Net profit margin (%)(d)

     9.7         8.5         8.9         9.3         8.4   

Net debt ( million)(c)

     8,456         7,355         8,781         6,668         6,357   

Ratio of earnings to fixed charges (times)

     11.8         10.2         9.8         10.4         8.8   

(c)  Non–GAAP measures are defined and described on pages 32 and 33 of the Group’s Annual Reports and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K and incorporated here by reference. Reconciliations of non-GAAP measures to relevant GAAP measures are detailed below and should be read in conjunction with pages 32 and 33 of the Group’s Annual Report and Accounts 2013.

(d)  Net profit margin is expressed as net profit attributable to shareholders’ equity as a percentage of turnover.

       

     

     2013      2012      2011      2010      2009  
Underlying sales growth (%)    vs 2012      vs 2011      vs 2010      vs 2009      vs 2008  

Underlying sales growth (%)

     4.3         6.9         6.5         4.1         3.5   

Effect of acquisitions (%)

             1.8         2.7         0.3         0.6   

Effect of disposals (%)

     (1.1      (0.7      (1.5      (0.8      (3.0

Effect of exchange rates (%)

     (5.9      2.2         (2.5      7.3         (2.7

Turnover growth (%)

     (3.0      10.5         5.0         11.1         (1.7
     2013      2012      2011      2010      2009  
Underlying volume growth (%)    vs 2012      vs 2011      vs 2010      vs 2009      vs 2008  

Underlying volume growth (%)

     2.5         3.4         1.6         5.8         2.3   

Effect of price changes (%)

     1.8         3.3         4.8         (1.6      1.2   

Underlying sales growth (%)

     4.3         6.9         6.5         4.1         3.5   
     million      million      million      million      million  
     2013      2012      2011      2010      2009  
Core operating margin and core operating profit            (Restated)      (Restated)      (Restated)      (Restated)  

Operating profit

     7,517         6,977         6,420         6,325         5,006   

Acquisition and disposal related cost

     112         190         234         50         11   

(Gain)/loss on disposal of group companies

     (733      (117      (221      (468      (4

Impairments and other one-off items

     120                 (157      110         (25

Core operating profit

     7,016         7,050         6,276         6,017         4,988   

Turnover

     49,797         51,324         46,467         44,262         39,823   

Operating margin (%)

     15.1         13.6         13.8         14.3         12.6   

Core operating margin (%)

     14.1         13.7         13.5         13.6         12.5   
      million      million      million      million      million  
     2013      2012      2011      2010      2009  
Free cash flow (FCF) to net profit            (Restated)      (Restated)      (Restated)      (Restated)  

Net profit

     5,263         4,836         4,491         4,465         3,646   

Taxation

     1,851         1,697         1,575         1,486         1,253   

Share of net profit of joint ventures/associates and other income from non-current investments

     (127      (91      (189      (187      (489

Net finance costs

     530         535         543         561         596   

Depreciation, amortisation and impairment

     1,151         1,199         1,029         993         1,032   

Changes in working capital

     200         822         (177      169         1,701   

Pensions and similar provisions less payments

     (383      (369      (540      (458      (1,014

Restructuring and other provisions less payments

     126         (43      9         72         (258

Elimination of (profits)/losses on disposals

     (725      (236      (215      (476      13   

Non-cash charge for share-based compensation

     228         153         105         144         195   

Other adjustments

     (15      13         8         49         58   

Cash flow from operating activities

     8,099         8,516         6,639         6,818         6,733   

Income tax paid

     (1,805      (1,680      (1,187      (1,328      (959

Net capital expenditure

     (2,027      (2,143      (1,974      (1,701      (1,258

Net interest and preference dividends paid

     (411      (360      (403      (424      (444

Free cash flow

     3,856         4,333         3,075         3,365         4,072   

Net cash flow (used in)/from investing activities

     (1,161      (755      (4,467      (1,164      (1,263

Net cash flow (used in)/from financing activities

     (5,390      (6,622      411         (4,609      (4,301

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                3   


Table of Contents

ITEM 3. KEY INFORMATION CONTINUED

 

      million      million      million       million       million  
Net debt to total financial liabilities    2013      2012      2011      2010      2009  

Total financial liabilities

     (11,501      (10,221      (13,718      (9,534      (9,971

Financial liabilities due within one year

     (4,010      (2,656      (5,840      (2,276      (2,279

Financial liabilities due after one year

     (7,491      (7,565      (7,878      (7,258      (7,692

Cash and cash equivalents as per balance sheet

     2,285         2,465         3,484         2,316         2,642   

Cash and cash equivalents as per cash flow statement

     2,044         2,217         2,978         1,966         2,397   

Add bank overdrafts deducted therein

     241         248         506         350         245   

Financial assets

     760         401         1,453         550         972   

Net debt

     (8,456      (7,355      (8,781      (6,668      (6,357

RATIO OF EARNINGS TO FIXED CHARGES (TIMES)

For a calculation of our ratio of earnings to fixed charges see Item 19: Exhibits-Calculation of Ratio of Earnings to Fixed Charges.

 

DIVIDEND RECORD

The following tables show the dividends declared and dividends paid by NV and PLC for the last five years, expressed in terms of the revised share denominations which became effective from 22 May 2006. Differences between the amounts ultimately received by US holders of NV and PLC shares are the result of changes in exchange rates between the equalisation of the dividends and the date of payment.

 

Following agreement at the 2009 AGMs and separate meetings of ordinary shareholders, the Equalisation Agreement was modified to facilitate the payment of quarterly dividends from 2010 onwards.

 

  

  

  

    

   

      2013      2012      2011      2010      2009  

Dividends declared for the year

              
NV dividends               

Dividend per 0.16

     1.08         0.97         0.90         0.83         0.46   

Dividend per 0.16 (US Registry)

     US $1.44         US $1.25         US $1.25         US $1.13         US $0.67   
PLC dividends               

Dividend per 31/9p

     £0.91         £0.79         £0.78         £0.71         £0.41   

Dividend per 31/9p (US Registry)

     US $1.44         US $1.25         US $1.25         US $1.13         US $0.67   

Dividends paid during the year

              
NV dividends               

Dividend per 0.16

     1.05         0.95         0.88         0.82         0.78   

Dividend per 0.16 (US Registry)

     US $1.40         US $1.23         US $1.24         US $1.11         US $1.09   
PLC dividends               

Dividend per 31/9p

     £0.89         £0.77         £0.77         £0.71         £0.64   

Dividend per 31/9p (US Registry)

     US $1.40         US $1.23         US $1.24         US $1.11         US $1.00   

 

 

4                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 3. KEY INFORMATION CONTINUED

 

EXCHANGE RATES

Unilever reports its financial results and balance sheet position in euros. Other currencies which may significantly impact our financial statements are sterling and US dollars. Average and year-end exchange rates for these two currencies for the last five years are given below.

 

      2013      2012      2011      2010      2009  

Year end

              

1 = US $

     1.378         1.318         1.294         1.337         1.433   

1 = £

     0.833         0.816         0.839         0.862         0.888   

Average

              

1 = US $

     1.325         1.283         1.396         1.326         1.388   

1 = £

     0.849         0.811         0.869         0.858         0.891   

On 3 March 2014 the exchange rates between euros and US dollars and between euros and sterling as published in the Financial Times in London were as follows: 1 = US $1.377 and 1 = £0.824

Noon 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:

 

      2013      2012      2011      2010      2009  

Year end

              

1 = US $

     1.378         1.319         1.297         1.327         1.433   

Average

              

1 = US $

     1.328         1.286         1.393         1.326         1.394   

High

              

1 = US $

     1.382         1.346         1.488         1.454         1.510   

Low

              

1 = US $

     1.277         1.206         1.293         1.196         1.255   

High and low exchange rate values for each of the last six months:

 

      September
2013
     October
2013
     November
2013
     December
2013
     January
2014
     February
2014
 

High

                 

1 = US $

     1.354         1.381         1.361         1.382         1.368         1.381   

Low

                 

1 = US $

     1.312         1.349         1.336         1.355         1.350         1.351   

SHARE CAPITAL

The information set forth under the heading ‘Note 15A Share capital’ on page 116 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

B. CAPITALISATION AND INDEBTEDNESS

Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D. RISK FACTORS

Our principal risks, as described on pages 34 to 39 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K are incorporated by reference. The information set forth under the heading ‘Note 16 Treasury risk management’ on pages 120 to 125 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

RISK FACTORS

Our business is subject to risks and uncertainties. The risks that we regard as the most relevant to our business are set out below. There may be other risks which are unknown to Unilever or which are currently believed to be immaterial. We have undertaken certain mitigating actions that we believe help us to manage the risks identified below. However, we may not be successful in deploying some or all of these mitigating actions. If the circumstances in these risk factors occur or are not successfully mitigated, our cashflow, operating results, financial position, business and reputation could be materially adversely affected. In addition, risks and uncertainties could cause actual results to vary from those described in this document, or could impact on our ability to meet our targets or be detrimental to our profitability or reputation. This list is not intended to be exhaustive and there may be other risks and uncertainties that are not mentioned below that could impact our future performance or our ability to meet published targets. The risks and uncertainties discussed below should be read in conjunction with the Group’s consolidated financial statements and related notes and the portions of the Strategic Report and Governance section that are incorporated by reference from the Group’s Annual Report and Accounts 2013 (furnished separately on 7 March 2014 on Form 6-K) and other information included in or incorporated by reference in this Report on Form 20-F.

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                5   


Table of Contents

ITEM 3. KEY INFORMATION CONTINUED

 

   

 

PRINCIPAL RISK

    

 

DESCRIPTION OF RISK

   
 

 

BRAND PREFERENCE

      
   

 

As a branded goods business, Unilever’s success depends on the value and relevance of our brands and products to consumers across the world and on our ability to innovate and remain competitive.

    

Consumer tastes, preferences and behaviours are constantly changing and Unilever’s ability to anticipate and respond to these changes and to continue to differentiate our brands and products is vital to our business.

 

We are dependent on creating innovative products that continue to meet the needs of our consumers. If we are unable to innovate effectively, Unilever’s sales or margins could be materially adversely affected.

 

   
 

 

PORTFOLIO MANAGEMENT

      
   

 

Unilever’s strategic investment choices will affect the long-term growth and profits of our business.

    

Unilever’s growth and profitability are determined by our portfolio of categories, geographies and channels and how these evolve over time. If Unilever does not make optimal strategic investment decisions then opportunities for growth and improved margin could be missed.

 

   
 

 

SUSTAINABILITY

      
   

 

The success of our business depends on finding sustainable solutions to support long-term growth.

    

Unilever’s vision to double the size of our business while reducing our environmental footprint and increasing our positive social impact will require more sustainable ways of doing business. This means reducing our environmental footprint while increasing the positive social benefits of Unilever’s activities. We are dependent on the efforts of partners and various certification bodies to achieve our sustainability goals. There can be no assurance that sustainable business solutions will be developed and failure to do so could limit Unilever’s growth and profit potential and damage our corporate reputation.

 

   
 

 

CUSTOMER RELATIONSHIPS

      
   

 

Successful customer relationships are vital to our business and continued growth.

    

Maintaining strong relationships with our customers is necessary for our brands to be well presented to our consumers and available for purchase at all times.

 

The strength of our customer relationships also affects our ability to obtain pricing and secure favourable trade terms. Unilever may not be able to maintain strong relationships with customers and failure to do so could negatively impact the terms of business with the affected customers and reduce the availability of our products to consumers.

 

   
 

 

TALENT

      
   

 

A skilled workforce is essential for the continued success of our business.

    

Our ability to attract, develop and retain the right number of appropriately qualified people is critical if we are to compete and grow effectively.

 

This is especially true in our key emerging markets where there can be a high level of competition for a limited talent pool. The loss of management or other key personnel or the inability to identify, attract and retain qualified personnel could make it difficult to manage the business and could adversely affect operations and financial results.

 

   
 

 

SUPPLY CHAIN

      
   

 

Our business depends on purchasing materials, efficient manufacturing and the timely distribution of products to our customers.

    

Our supply chain network is exposed to potentially adverse events such as physical disruptions, environmental and industrial accidents or bankruptcy of a key supplier which could impact our ability to deliver orders to our customers.

 

The cost of our products can be significantly affected by the cost of the underlying commodities and materials from which they are made. Fluctuations in these costs cannot always be passed on to the consumer through pricing.

 

   
 

 

SAFE AND HIGH QUALITY PRODUCTS

      
   

 

The quality and safety of our products are of paramount importance for our brands and our reputation.

    

The risk that raw materials are accidentally or maliciously contaminated throughout the supply chain or that other product defects occur due to human error, equipment failure or other factors cannot be excluded.

 

   
 

 

SYSTEMS AND INFORMATION

      
   

 

Unilever’s operations are increasingly dependent on IT systems and the management of information.

    

We interact electronically with customers, suppliers and consumers in ways which place ever greater emphasis on the need for secure and reliable IT systems and infrastructure and careful management of the information that is in our possession.

 

Disruption of our IT systems could inhibit our business operations in a number of ways, including disruption to sales, production and cash flows, ultimately impacting our results.

 

There is also a threat from unauthorised access and misuse of sensitive information. Unilever’s information systems could be subject to unauthorised access or the mistaken disclosure of information which disrupts Unilever’s business and/or leads to loss of assets.

 

   

 

 

6                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 3. KEY INFORMATION CONTINUED

 

   

 

PRINCIPAL RISK

    

 

DESCRIPTION OF RISK

   
 

 

BUSINESS TRANSFORMATION

      
   

 

Successful execution of business transformation projects is key to delivering their intended business benefits and avoiding disruption to other business activities.

    

Unilever is continually engaged in major change projects, including acquisitions and disposals and outsourcing, to drive continuous improvement in our business and to strengthen our portfolio and capabilities.

 

Failure to execute such transactions or change projects successfully, or performance issues with third party outsourced providers on which we are dependent, could result in under-delivery of the expected benefits. Furthermore, disruption may be caused in other parts of the business.

 

   
 

 

EXTERNAL ECONOMIC AND POLITICAL RISKS AND NATURAL DISASTERS

      
   

 

Unilever operates across the globe and is exposed to a range of external economic and political risks and natural disasters that may affect the execution of our strategy or the running of our operations.

    

Adverse economic conditions may result in reduced consumer demand for our products, and may affect one or more countries within a region, or may extend globally.

 

Government actions such as fiscal stimulus, changes to taxation and price controls can impact on the growth and profitability of our local operations.

 

Social and political upheavals and natural disasters can disrupt sales and operations.

 

In 2013, more than half of Unilever’s turnover came from emerging markets including Brazil, India, Indonesia, Turkey, South Africa, China, Mexico and Russia. These markets offer greater growth opportunities but also expose Unilever to economic, political and social volatility in these markets.

 

   
 

 

TREASURY AND PENSIONS

      
   

 

Unilever is exposed to a variety of external financial risks in relation to Treasury and Pensions.

    

Changes to the relative value of currencies can fluctuate widely and could have a significant impact on business results. Further, because Unilever consolidates its financial statements in euros it is subject to exchange risks associated with the translation of the underlying net assets and earnings of its foreign subsidiaries.

 

We are also subject to the imposition of exchange controls by individual countries which could limit our ability to import materials paid in foreign currency or to remit dividends to the parent company.

 

Currency rates, along with demand cycles, can also result in significant swings in the prices of the raw materials needed to produce our goods.

 

Unilever may face liquidity risk, i.e. difficulty in meeting its obligations, associated with its financial liabilities. A material and sustained shortfall in our cash flow could undermine Unilever’s credit rating, impair investor confidence and also restrict Unilever’s ability to raise funds.

 

We are exposed to market interest rate fluctuations on our floating rate debt. Increases in benchmark interest rates could increase the interest 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 counter-party risks with banks, suppliers and customers.

 

Certain businesses have defined benefit pension plans, most now closed to new employees, which are exposed to movements in interest rates, fluctuating values of underlying investments and increased life expectancy. Changes in any or all of these inputs could potentially increase the cost to Unilever of funding the schemes and therefore have an adverse impact on profitability and cash flow.

 

   
 

 

ETHICAL

      
   

 

Acting in an ethical manner, consistent with the expectations of customers, consumers and other stakeholders, is essential for the protection of the reputation of Unilever and its brands.

    

Unilever’s brands and reputation are valuable assets and the way in which we operate, contribute to society and engage with the world around us is always under scrutiny both internally and externally. Despite the commitment of Unilever to ethical business and the steps we take to adhere to this commitment, there remains a risk that activities or events cause us to fall short of our desired standard, resulting in damage to Unilever’s corporate reputation and business results.

 

   
 

 

LEGAL AND REGULATORY

      
   

 

Compliance with laws and

regulations is an essential part of Unilever’s business operations.

    

Unilever is subject to local, regional and global laws and regulations in such diverse areas as product safety, product claims, trademarks, copyright, patents, competition, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes.

 

Failure to comply with laws and regulations could expose Unilever to civil and/or criminal actions leading to damages, fines and criminal sanctions against us and/or our employees with possible consequences for our corporate reputation.

 

Changes to laws and regulations could have a material impact on the cost of doing business. Tax, in particular, is a complex area where laws and their interpretation are changing regularly, leading to the risk of unexpected tax exposure.

 

   

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                7   


Table of Contents

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘About Unilever’ on page 42;
  ‘Financial Review 2013’ on pages 26 to 33;
  ‘Requirements and compliance’ on pages 47 to 50;
  ‘Note 10 Property, Plant and Equipment’ on pages 111 and 112;
  ‘Note 21 Acquisitions and disposals’ on pages 131 and 132;
  ‘Share Capital’ on pages 51 and 52;
  ‘Analysis of shareholding’ on pages 51 and 52; and
  ‘Shareholder information’ on pages 146 and 147 (other than ‘Website’).

Please refer also to ‘Financial Review 2012’ within Item 5A of this report and ‘The Unilever Group’ on page 1 of this report.

B. BUSINESS OVERVIEW

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Note 2 Segment information’ on pages 96 and 97;
  ‘Reaching more consumers’ on page 18;
  ‘Financial Review 2013’ on pages 26 to 33; and
  ‘Legal and Regulatory’ on page 39.

Please refer also to ‘Financial Review 2012’ within Item 5A of this report.

Please also refer to ‘The Unilever Group’ on page 1 of this report.

MARKETING CHANNELS

Unilever’s products are generally sold through our own sales force as well as through independent brokers, agents and distributors to chain, wholesale, co-operative and independent grocery accounts, food service distributors and institutions. Products are physically distributed through a network of distribution centres, satellite warehouses, company-operated and public storage facilities, depots and other facilities.

RAW MATERIALS

Our products use a wide variety of raw and packaging materials which we source internationally, and which may be subject to price volatility. Although we have seen rather more stable conditions in key commodity markets in 2013 we remain watchful for further periods of volatility in 2014.

SEASONALITY

Certain of our businesses, such as ice cream, are subject to significant seasonal fluctuations in sales. However, Unilever operates globally in many different markets and product categories, and no individual element of seasonality is likely to be material to the results of the Group as a whole.

INTELLECTUAL PROPERTY

We have a large portfolio of patents and trademarks, and we conduct some of our operations under licences that are based on patents or trademarks owned or controlled by others. We are not dependent on any one patent or group of patents. We use all appropriate efforts to protect our brands and technology.

COMPETITION

As a FMCG (fast moving consumer goods) company, we are competing with a diverse set of competitors. Some of these operate on an international scale like ourselves, while others have a more regional or local focus. Our business model centres on building brands which consumers know, trust, like and buy in conscious preference to competitors’. Our brands command loyalty and affinity and deliver superior performance.

INFORMATION PRESENTED

Unless otherwise stated, share refers to value share. The market data and competitive set classifications are taken from independent industry sources in the markets in which Unilever operates.

IRAN-RELATED REQUIRED DISCLOSURE

Unilever operates in Iran through a non-US subsidiary. In 2013, sales in Iran were significantly less than one percent of Unilever’s worldwide turnover. This non-US subsidiary had 2,426 in gross revenues and 679 in net profits attributable to the sale of home, personal care and food products to local pharmacies controlled by the Government of Iran or affiliated entities in 2013. This non-US subsidiary stopped making these sales in October 2013 and does not intend to resume that business. In addition, we advertised our products on television networks that are owned by the Government of Iran or affiliated entities. Income, payroll and other taxes, duties and fees (including for utilities) were payable to the Government of Iran and affiliated entities in connection with our operations. Our non-US subsidiary maintains bank accounts in Iran to facilitate our business in the country and make any required payments to the Government of Iran and affiliated entities. Our activities in Iran comply in all material respects with applicable laws and regulations, including US and other international trade sanctions, and except as described above, we plan to continue these activities.

C. ORGANISATIONAL STRUCTURE

The information set forth under the heading ‘Note 26 Principal group companies and non-current investments’ on pages 134 and 135 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

Please also refer to ‘The Unilever Group’ on page 1 of this report.

D. PROPERTY, PLANT AND EQUIPMENT

We have interests in properties in most of the countries where there are Unilever operations. However, none is material in the context of the Group as a whole. The properties are used predominantly to house production and distribution activities and as offices. There is a mixture of leased and owned property throughout the Group. We are not aware of any environmental issues affecting the properties which would have a material impact upon the Group, and there are no material encumbrances on our properties. Any difference between the market value of properties held by the Group and the amount at which they are included in the balance sheet is not significant. We believe our existing facilities are satisfactory for our current business and we currently have no plans to construct new facilities or expand or improve our current facilities in a manner that is material to the Group.

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Note 10 Property, plant and equipment’ on pages 111 and 112; and
  ‘Note 26 Principal group companies and non-current investments’ on  pages 134 and 135.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

 

 

 

8                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 5. OPERATING AND FINANCIAL

REVIEW AND PROSPECTS

A. OPERATING RESULTS

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Our key performance indicators’ on page 3;
  ‘Outlook’ on page 34;
  ‘Financial review 2013’ on pages 26 to 33;
  ‘Currency risk’ on pages 122 to 123; and
  ‘Legal and Regulatory’ on page 39.

FINANCIAL REVIEW 2012

BASIS OF REPORTING

The information set forth under the heading ‘Basis of reporting and critical accounting policies’ on page 31 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

GROUP RESULTS AND EARNINGS PER SHARE

The following discussion summarises the results of the Group during the years 2012 and 2011. The figures quoted are in euros, at current rates of exchange, being the average rates applying in each period as applicable, unless otherwise stated. Information about exchange rates between the euro, pound sterling and US dollar is given on page 5 of this report.

In 2012 and 2011, no disposals qualified to be disclosed as discontinued operations for purposes of reporting.

 

     2012      2011      % change  
      (Restated)      (Restated)          

Turnover ( million)

     51,324         46,467         10.5

Operating profit ( million)

     6,977         6,420         9

Core operating profit
( million)

     7,050         6,276         12

Profit before tax ( million)

     6,533         6,066         8

Net profit ( million)

     4,836         4,491         8

Diluted earnings per
share ()

     1.50         1.42         6

Core earnings per share ()

     1.53         1.37         12

Turnover at 51.3 billion increased 10.5%, including a positive impact from foreign exchange of 2.2% and acquisitions net of disposals of 1.1%. Underlying sales growth increased to 6.9%, well balanced between volume growth of 3.4% and price contributions of 3.3%. As in the prior year, emerging markets grew strongly, with underlying sales up 11.4% and now representing 55% of total turnover.

Operating profit was 7.0 billion, compared with 6.4 billion in 2011, up 9%. The increase was driven by higher gross profit and improved cost discipline. Core operating profit was 7.1 billion, up 12% from 6.3 billion in 2011, reflecting the additional impact of lower one-off credits within non-core items.

The cost of financing net borrowings was 390 million, 58 million less than in 2011. The average level of net debt increased by 0.7 billion to 8.9 billion, reflecting the full-year impact of financing prior year acquisitions such as Alberto Culver. The average interest rate was 3.5% on debt and 2.9% on cash deposits. The pensions financing cost was a charge of 145 million, compared to 95 million in 2011.

The effective tax rate was 26.0% compared with 26.0% in 2011.

Net profit from joint ventures and associates, together with other income from non-current investments, contributed 91 million in 2012, compared to 189 million in the prior year. Assets related to businesses sold in previous years recorded positive adjustments to fair value in 2011, whilst similar but unrelated assets were impaired in 2012.

 

Fully diluted earnings per share were 1.50, up 6% from 1.42 in the prior year. Higher operating profit was the key driver with lower profits from business disposals and one-off items, partially offset by higher minority interests and pension costs and a lower contribution from non-current investments. Core earnings per share were 1.53, up 12% from 1.37 in 2011, reflecting the additional impact of lower one-off credits within non-core items.

EXPENSES WHICH MATERIALLY IMPACTED OPERATING PROFIT IN 2012

Absolute turnover grew by 4.9 billion which translated into a core operating profit increase of 774 million and an operating profit increase of 557 million due to cost increases in the following key areas.

Costs of raw and packaging materials and goods purchased for resale increased by 1.7 billion, driven primarily by increased business volume of 1.3 billion and input costs increase of 1.1 billion offset by other items including material cost savings of 0.7 billion during the year. Additionally, distribution costs increased by 184 million. Despite these increases, due to higher selling prices and benefit from customers buying products with higher margins, gross margin improved by 0.1% to 40.0% at constant exchange rates.

Staff costs increased by 0.9 billion due to salary inflation, particularly in emerging markets, higher pensions charge as a result of one-off credits taken in the prior year and higher bonuses.

Advertising and promotional expenses increased by 694 million as we continue to invest behind our brands.

The impact of input costs and investment in advertising and promotional expenses are discussed further in our segmental disclosures, which also provide additional details on the impact of brands, products and subcategories on driving top line growth.

Out of the increase of 774 million in core operating profit, the majority of it was contributed by Personal Care (365 million) and Refreshments (235 million).

IMPACT OF COMMODITY COSTS ON GROSS MARGIN

During 2012, the Unilever Group faced cost inflation of over 1.5 billion. The Unilever Group actively mitigates the impact of cost inflation through a combination of price increases and costs savings to protect its margin. Hence, despite cost increases, the Unilever Group was able to improve its gross margin by 0.1 percentage points during 2012. Specifically gross margin was protected in 3 out of the 4 categories. In our Foods category the impact of high vegetable oil prices was not fully recovered as described below. Petrochemicals materially affect our Home Care category, where we have protected our margins. There are no other commodities that have a material impact.

Part of our commodity risk, principally vegetable oils and petrochemicals, is hedged using a combination of physical contracts as well as derivatives (futures and options).

 

 

 

Unilever Annual Report on Form 20-F 2013    Form 20-F                9


Table of Contents

ITEM 5. OPERATING AND FINANCIAL

REVIEW AND PROSPECTS CONTINUED

 

LOGO

 

PERSONAL CARE

 

     million      million      %  
     2012      2011      Change  
      (Restated)      (Restated)          

Turnover

     18,097         15,471         17.0   

Operating profit

     2,925         2,533         15.5   

Core operating profit

     3,085         2,720         13.4   

Core operating margin (%)

     17.0         17.6         (0.6

Underlying sales growth (%)

     10.0         8.2      

Underlying volume growth (%)

     6.5         4.2      

Effect of price changes (%)

     3.3         3.8            

KEY DEVELOPMENTS

  Personal Care turned in yet another year of strong performance with turnover growth of 17%. Underlying sales growth of 10.0% was driven by both underlying volume growth of 6.5% and a positive price contribution of 3.3%. This was spurred by innovations like Dove Nutrium Moisture and the roll-out of our brands in new markets like TRESemmé in Brazil and complemented by a strong contribution of the recently acquired brands from the Kalina acquisition.
  Core operating profit at 3.1 billion was higher by 365 million over the prior year. Out of the 365 million, turnover growth contributed 465 million which was offset by 100 million from a reduction in core operating margin by 0.6 percentage points primarily due to continued investments in building beauty capabilities and infrastructure, while gross margins remained stable.

REFRESHMENT

 

     million      million      %  
     2012      2011      Change  
      (Restated)      (Restated)          

Turnover

     9,726         8,804         10.5   

Operating profit

     908         720         26.1   

Core operating profit

     908         673         34.9   

Core operating margin (%)

     9.3         7.7         1.6   

Underlying sales growth (%)

     6.3         4.9      

Underlying volume growth (%)

     2.4         1.4      

Effect of price changes (%)

     3.9         3.4            

KEY DEVELOPMENTS

  Refreshment performance improved in growth momentum and profitability. Turnover grew by a strong 10.5% with underlying sales growth of 6.3% reflecting good contribution from underlying volume growth of 2.4% and underlying price growth of 3.9%. In ice cream, growth momentum was driven by powerful performance in Latin America, Asia, North America and Europe and benefited from innovation behind our global brands such as Magnum, which is now a brand with sales in excess of 1 billion. In tea, innovation improved growth momentum in particular in emerging markets, such as Russia, Arabia and India.
  Core operating profit at 908 million improved by 235 million over the previous year. Out of the 235 million, turnover growth contributed 70 million while improvement in core operating margin by 1.6 percentage points contributed 165 million. Core operating margin improvement was driven primarily by higher gross margin arising from a strong savings programme and cost discipline.

FOODS

 

     million     million     %  
     2012     2011     Change  
      (Restated)     (Restated)         

Turnover

     14,444        13,986        3.3   

Operating profit

     2,601        2,688        (3.2

Core operating profit

     2,528        2,444        3.4   

Core operating margin (%)

     17.5        17.5          

Underlying sales growth (%)

     1.8        4.9     

Underlying volume growth (%)

     (0.9     (1.2  

Effect of price changes (%)

     2.7        6.2           

KEY DEVELOPMENTS

  Foods turnover grew by 3.3% during the year. Underlying sales growth in Foods was 1.8%. Underlying volume growth was (0.9)%, continuing to reflect the impact of a contracting spreads market and the price rises we took in 2011 to counter significant increases in input prices. Growth was supported by the roll-out of innovations such as Knorr jelly bouillon and Knorr baking bags, as well as solid results delivered by our Food Solutions business.
  Core operating profit at 2.5 billion increased by 84 million over previous year. This increase was entirely due to increase in turnover. Core operating margin was in line with previous year as the impact of higher commodity costs on gross margins was offset by improved cost discipline and savings delivery.

HOME CARE

 

     million      million      %  
     2012      2011      Change  
      (Restated)      (Restated)          

Turnover

     9,057         8,206         10.4   

Operating profit

     543         479         13.4   

Core operating profit

     529         439         20.5   

Core operating margin (%)

     5.8         5.4         0.4   

Underlying sales growth (%)

     10.3         8.1      

Underlying volume growth (%)

     6.2         2.2      

Effect of price changes (%)

     3.9         5.8            

KEY DEVELOPMENTS

  Home Care delivered a strong performance with turnover growth of 10.4% driven by underlying sales growth of 10.3%, balanced between volume growth of 6.2% and price changes contributing 3.9%. We improved our market position in highly competitive markets such as the UK, France, China and South Africa on the back of continued innovation and continuing success of our brands like Omo and Comfort. Household care growth was equally supported by the roll-out of new and improved products, driving strong growth momentum for our global brands Domestos, Cif and Sunlight.
  Core operating profit at 529 million improved by 90 million over previous year. Out of the 90 million, turnover growth contributed 45 million, while improvement in core operating margin by 0.4 percentage points contributed 45 million primarily due to better gross margins benefiting from successful new business models.
 

 

 

10                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 5. OPERATING AND FINANCIAL

REVIEW AND PROSPECTS CONTINUED

 

NON-GAAP MEASURES

The information set forth under the heading ‘Non-GAAP measures’ on pages 32 and 33 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

UNDERLYING SALES GROWTH (USG)

The reconciliation of USG to changes in the GAAP measure turnover is as follows:

TOTAL GROUP

     

2012

vs 2011

   

2011

vs 2010

 

Underlying sales growth (%)

     6.9        6.5   

Effect of acquisitions (%)

     1.8        2.7   

Effect of disposals (%)

     (0.7     (1.5

Effect of exchange rates (%)

     2.2        (2.5

Turnover growth (%)

     10.5        5.0   
PERSONAL CARE     
     

2012

vs 2011

   

2011

vs 2010

 

Underlying sales growth (%)

     10.0        8.2   

Effect of acquisitions (%)

     4.4        7.3   

Effect of disposals (%)

     (0.5     (0.2

Effect of exchange rates (%)

     2.3        (2.9

Turnover growth (%)

     17.0        12.4   
FOODS     
     

2012

vs 2011

   

2011

vs 2010

 

Underlying sales growth (%)

     1.8        4.9   

Effect of acquisitions (%)

            0.2   

Effect of disposals (%)

     (1.5     (4.3

Effect of exchange rates (%)

     3.0        (1.9

Turnover growth (%)

     3.3        (1.3
REFRESHMENT     
     

2012

vs 2011

   

2011

vs 2010

 

Underlying sales growth (%)

     6.3        4.9   

Effect of acquisitions (%)

     0.8        0.3   

Effect of disposals (%)

     0.7        (0.3

Effect of exchange rates (%)

     2.4        (2.5

Turnover growth (%)

     10.5        2.3   
HOME CARE     
     

2012

vs 2011

   

2011

vs 2010

 

Underlying sales growth (%)

     10.3        8.1   

Effect of acquisitions (%)

     0.6        1.3   

Effect of disposals (%)

     (1.1     0.1   

Effect of exchange rates (%)

     0.6        (3.1

Turnover growth (%)

     10.4        6.2   

UNDERLYING VOLUME GROWTH (UVG)

Underlying Volume Growth or “UVG” is part of USG and means, for the applicable period, the increase in turnover in such period calculated as the sum of (1) the increase in turnover attributable to the volume of products sold; and (2) the increase in turnover attributable to the composition of products sold during such period. UVG therefore excludes any impact to USG due to changes in prices. The relationship between the two measures is set out below:

 

     

2012

vs 2011

    

2011

vs 2010

 

Underlying volume growth (%)

     3.4         1.6   

Effect of price changes (%)

     3.3         4.8   

Underlying sales growth (%)

     6.9         6.5   

FREE CASH FLOW (FCF)

Within the Unilever Group, free cash flow (FCF) is defined as cash flow from operating activities, less income taxes paid, net capital expenditures and net interest payments and preference dividends paid. It does not represent residual cash flows entirely available for discretionary purposes; for example, the repayment of principal amounts borrowed is not deducted from FCF. Free cash flow reflects an additional way of viewing our liquidity that we believe is useful to investors because it represents cash flows that could be used for distribution of dividends, repayment of debt or to fund our strategic initiatives, including acquisitions, if any.

The reconciliation of FCF to net profit is as follows:

 

                                       
     

million

2012

(Restated)

   

million

2011

(Restated)

 

Net profit

     4,836        4,491   

Taxation

     1,697        1,575   

Share of net profit of joint ventures/associates and other income from non-current investments

     (91     (189

Net finance cost

     535        543   

Depreciation, amortisation and impairment

     1,199        1,029   

Changes in working capital

     822        (177

Pensions and similar obligations less payments

     (369     (540

Provisions less payments

     (43     9   

Elimination of (profits)/losses on disposals

     (236     (215

Non-cash charge for share-based compensation

     153        105   

Other adjustments

     13        8   

Cash flow from operating activities

     8,516        6,639   

Income tax paid

     (1,680     (1,187

Net capital expenditure

     (2,143     (1,974

Net interest and preference dividends paid

     (360     (403

Free cash flow

     4,333        3,075   

Net cash flow (used in)/from investing activities

     (755     (4,467

Net cash flow (used in)/from financing activities

     (6,622     411   

CORE OPERATING MARGIN AND CORE OPERATING PROFIT

Core operating profit and core operating margin mean operating profit and operating margin, respectively, before the impact of business disposals, acquisition and disposal related costs, impairments and other one-off items, which we collectively term non-core items, on the grounds that the incidence of these items is uneven between reporting periods.

The reconciliation of core operating profit to operating profit is as follows:

 

                                       
     

million

2012

(Restated)

   

million

2011

(Restated)

 

Operating profit

     6,977        6,420   

Acquisition and disposal related costs

     190        234   

(Gain)/loss on disposal of group companies

     (117     (221

Impairments and other one-off items

            (157

Core operating profit

     7,050        6,276   

Turnover

     51,324        46,467   

Operating margin (%)

     13.6        13.8   

Core operating margin (%)

     13.7        13.5   
 

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                11   


Table of Contents

ITEM 5. OPERATING AND FINANCIAL

REVIEW AND PROSPECTS CONTINUED

 

NET DEBT

The reconciliation of net debt to the GAAP measure total financial liabilities is as follows:

 

       million
2012
     million
2011
 

Total financial liabilities

     (10,221     (13,718
    

Financial liabilities due within one year

     (2,656     (5,840

Financial liabilities due after one year

     (7,565     (7,878

Cash and cash equivalents as per balance sheet

     2,465        3,484   
    

Cash and cash equivalents as per cash flow statement

     2,217        2,978   

Bank overdrafts deducted therein

     248        506   

Financial assets

     401        1,453   

Net debt

     (7,355     (8,781

ACQUISITIONS AND DISPOSALS – 2011

On March 2011 the Group announced a binding agreement to sell the global Sanex business to Colgate-Palmolive for 672 million. The deal was completed on 20 June 2011.

On 10 May 2011 the Group completed the purchase of 100% of Alberto Culver at a consideration of 2,689 million in cash.

On 6 December 2011 the Group completed the acquisition of 82% of the outstanding shares of Concern Kalina, one of Russia’s leading local personal care companies.

B. LIQUIDITY AND CAPITAL RESOURCES

(I) INFORMATION REGARDING THE GROUP’S LIQUIDITY

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Finance and liquidity’ and ‘Financial Instruments and Risk’ on pages 30 and 31;
  ‘Management of market risk’ on pages 122 to 124;
  ‘Management of liquidity risk’ on page 120 to 122;
  ‘Capital and funding’ on pages 115 to 116;
  ‘Going concern’ on page 85;
  ‘Cash flow’ on page 29;
  ‘Consolidated cash flow statement’ on page 93;
  ‘Financial liabilities’ on page 118 and 119;
  ‘Financial assets’ on page 126 and 127; and
  ‘Note 17 Investment and return’ on pages 125 to 126.

(II) INFORMATION REGARDING THE TYPE OF FINANCIAL INSTRUMENTS USED, THE MATURITY PROFILE OF DEBT, CURRENCY AND INTEREST RATE STRUCTURE

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Note 15 Capital and funding’ on pages 115 and 116;
  ‘Financial liabilities’ on pages 118 and 119;
  ‘Financial assets’ on pages 126 and 127;
  ‘Note 16 Treasury risk management’ on pages 120 to 125;
  ‘Note 17 Investment and return’ on pages 126 and 127;
  ‘Note 18 Financial instruments fair value risk’ on pages 127 to 129;
  ‘Financial instruments and risk’ on page 31; and
  ‘Our risk appetite and approach to risk management’ on page 34.

(III) INFORMATION REGARDING THE GROUP’S MATERIAL COMMITMENTS FOR CAPITAL EXPENDITURE

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Note 20 Commitments and contingent liabilities’ on pages 129 to 131; and
  ‘Note 10 Property, plant and equipment’ on pages 111 and 112.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES, ETC.

The information set forth under the heading ‘Fewer, Bigger Innovations’ on page 12 and ‘Innovating Together’ on page 21 and ‘Note 3 Gross profit and operating costs’ on page 98 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

D. TREND INFORMATION

Please refer also to Item 3D ‘Risk factors’ on pages 5 to 7 of this report.

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Financial review 2013’ on pages 26 to 33; and
  ‘Outlook’ on page 34.

Please refer also to ‘Financial review 2012’ within Item 5A of this report on pages 9 to 12.

E. OFF-BALANCE SHEET ARRANGEMENTS

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Note 16 Treasury risk management’ on pages 120 to 125;
  ‘Note 18 Financial instruments fair value risk’ on pages 127 to 129; and
  ‘Note 20 Commitments and contingent liabilities’ on pages 129 to 131.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The information set forth under the heading ‘Contractual obligations at 31 December 2013’ on page 31 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

G. SAFE HARBOUR

This document may contain forward-looking statements, including ‘forward-looking statements’ within the meaning of the United States Private Securities Litigation Reform Act of 1995. Words such as ‘will’, ‘aim’, ‘expects’, ‘anticipates’, ‘intends’, ‘looks’, ‘believes’, ‘vision’, or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Group. They are not historical facts, nor are they guarantees of future performance.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Among other risks and uncertainties, the material or principal factors which could cause actual results to differ materially are: Unilever’s global brands not meeting consumer preferences; Unilever’s ability to innovate and remain competitive; Unilever’s investment choices in its portfolio 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; the production of safe and high quality products; secure and reliable IT infrastructure; successful execution of acquisitions, divestitures and business transformation projects; economic and political risks and natural disasters; financial risks; failure to meet high ethical standards; and managing regulatory, tax and legal matters.

 

 

 

12                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 5. OPERATING AND FINANCIAL

REVIEW AND PROSPECTS CONTINUED

 

Further details of potential risks and uncertainties affecting the Group are described in the Group’s filings with the London Stock Exchange, Euronext Amsterdam and the US Securities and Exchange Commission, including in the Group’s Annual Report on Form 20-F for the year ended 31 December 2013 and the Annual Report and Accounts 2013. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

(I) NAME, EXPERIENCE AND FUNCTIONS

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Unilever Leadership Executive (ULE)’ on page 41;
  ‘Board of Directors’ on page 40; and
  ‘The Boards’ on pages 42 to 45.

(II) ACTIVITIES OUTSIDE THE ISSUING COMPANY

The information set forth under the headings ‘Board of Directors’ and ‘Unilever Leadership Executive (ULE)’ on pages 40 and 41 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

(III) AGE

The information set forth under the headings ‘Board of Directors’ and ‘Unilever Leadership Executive (ULE)’ on pages 40 and 41 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

(IV) FAMILY RELATIONSHIP

The information set forth under the heading ‘Independence and Conflicts’ (third paragraph) on page 45 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

(V) OTHER ARRANGEMENTS

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Independence and Conflicts’ (second and third paragraphs) on page 45.

B. COMPENSATION

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Remuneration policy for new hires’ on page 69;
  Remuneration policy description on pages 62 to 72;
  ‘Elements of remuneration’ on pages 79 and 80;
  ‘Single Figure of Remuneration and Implementation of the Remuneration Policy in 2013 for Executive Directors’ on pages 73 to 79;
  ‘Single Figure of Remuneration in 2013 for Non-Executive Directors (Audited)’ on page 81;
  ‘Note 4C Share-based compensation plans’ on pages 104 and 105;
  ‘Note 4A Staff and management costs – Key management compensation’ on page 99; and
  ‘Note 4B Pensions and similar obligations’ on pages 99 to 104.

C. BOARD PRACTICES

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Board of Directors’ and ‘Unilever Leadership Executive (ULE)’ on pages 40 and 41;
  ‘Appointment of Directors’ on page 43;
  ‘Executive Directors’ on page 42;
  ‘Non-Executive Directors’ on page 42;
  ‘Board Committees’ on page 45;
  ‘Report of the Audit Committee’ on pages 53 to 55; and
  ‘Directors’ Remuneration Report’ on pages 60 to 83.

D. EMPLOYEES

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ’Note 4A Staff and management costs – Average number of employees during the year’ on page 99.

The average number of employees during 2013 included 8,744 seasonal and 25,764 plantation workers. We believe our relationship with our employees and any labour unions of which they may be part is satisfactory in all material respects.

E. SHARE OWNERSHIP

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Single Figure of Remuneration and Implementation of the Remuneration Policy in 2013 for Executive Directors’ on pages 73 to 79;
  ‘Elements of Remuneration’ on pages 79 and 80;
  ‘Single Figure of Remuneration in 2013 for Non-Executive Directors (Audited)’ on page 81; and
  ‘Note 4C Share-based compensation plans’ on pages 104 and 105.
 

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                13   


Table of Contents

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Margarine Union (1930) Limited: Conversion Rights’ and ‘Foundation Unilever N.V. Trust office’ on pages 46 and 47; and
  ‘Analysis of shareholding’ on pages 51 and 52.

The principal trading markets upon which Unilever shares are listed are Euronext Amsterdam for NV ordinary and preference shares and the depositary receipts of these NV ordinary and preference shares, and the London Stock Exchange for PLC ordinary shares. NV ordinary shares mainly trade in the form of depositary receipts for shares.

In the United States, NV New York Registry Shares and PLC American Depositary Receipts are traded on the New York Stock Exchange. Citibank, N.A. acts for NV and PLC as issuer, transfer agent and, in respect of the PLC American Depositary Receipts, depositary.

There have not been any significant trading suspensions in the past three years.

At 3 March 2014 there were 5,218 registered holders of NV New York Registry Shares and 1,010 registered holders of PLC American Depositary Receipts in the United States. We estimate that approximately 12% of NV’s ordinary shares were held in the United States (approximately 13% in 2012), while most holders of PLC ordinary shares are registered in the United Kingdom – approximately 98% in 2013 and in 2012.

NV and PLC are separate companies with separate stock exchange listings and different shareholders. Shareholders cannot convert or exchange the shares of one for shares of the other and the relative share prices on the various markets can, and do, fluctuate. Each NV ordinary share represents the same underlying economic interest in the Unilever Group as each PLC ordinary share (save for exchange rate fluctuations).

If you are a shareholder of NV, you have an interest in a Dutch legal entity, your dividends will be paid in euros (converted into US dollars if you have shares registered in the United States) and you may be subject to tax in the Netherlands. If you are a shareholder of PLC, your interest is in a UK legal entity, your dividends will be paid in sterling (converted into US dollars if you have American Depositary Receipts) and you may be subject to UK tax. Nevertheless, the Equalisation Agreement means that as a shareholder of either company you effectively have an interest in the whole of Unilever. You have largely equal rights over our combined net profit and capital reserves as shown in the consolidated accounts.

The information set forth under the heading ‘Equalisation Agreement’ on page 47 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

B. RELATED PARTY TRANSACTIONS

The information set forth under the heading ‘Note 23 Related party transactions’ on page 133 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

Transactions with related parties are conducted in accordance with agreed transfer pricing policies and include sales to joint ventures and associates. Other than those disclosed in the Group’s Annual Report and Accounts (and incorporated herein as above), there were no related party transactions that were material to the Group or to the related parties concerned that are required to be reported in 2013 or the two preceding years.

C. INTEREST OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Please refer also to Item 18 ‘Financial Statements’ on page 22 to 28 of this report.

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Financial statements’ on page 85 and pages 90 to 135;
  ‘Legal proceedings’ on page 131; and
  ‘Financial calendar’ on page 146.

Also see ‘Dividend record’ on page 4 of this report.

B. SIGNIFICANT CHANGES

The information set forth in ‘Note 25 Events after the balance sheet date’ on page 133 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

 

 

 

14                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

Please refer to information given on page 14 under Item 7A’ Major shareholders’.

SHARE PRICES AT 31 DECEMBER 2013

The share prices of the ordinary shares at the end of the year were as follows:

 

NV per 0.16 ordinary share in Amsterdam

     29.28   

NV per 0.16 ordinary share in New York

     US $40.23   

PLC per 31/9p ordinary share in London

     £24.82   

PLC per 31/9p ordinary share in New York

     US $41.20   

MONTHLY HIGH AND LOW PRICES FOR THE MOST RECENT SIX MONTHS

 

              September
2013
     October
2013
     November
2013
     December
2013
     January
2014
     February
2014
 

NV per 0.16 ordinary share in Amsterdam (in )

     High           30.09         29.24         29.39         29.28         29.94         28.92   
       Low           28.25         27.50         28.64         27.72         27.71         27.16   

NV per 0.16 ordinary share in New York (in US $)

     High           40.49         40.28         39.65         40.25         40.55         39.57   
       Low           37.28         37.27         38.38         38.26         37.34         36.72   

PLC per 31/9p ordinary share in London (in £)

     High           25.88         25.48         25.35         24.82         25.05         24.74   
       Low           24.30         23.19         24.59         23.68         23.39         23.06   

PLC per 31/9p ordinary share in New York (in US $)

     High           41.47         41.06         40.77         41.20         41.71         41.34   
       Low           38.06         37.67         39.65         39.09         38.61         37.85   

QUARTERLY HIGH AND LOW PRICES FOR 2013 AND 2012

 

                     

1st

Quarter

2013

    

2nd

Quarter

2013

    

3rd

Quarter

2013

    

4th

Quarter

2013

 

NV per 0.16 ordinary share in Amsterdam (in )

        High           31.96         32.89         31.84         29.39   
                Low           28.58         28.82         28.25         27.50   

NV per 0.16 ordinary share in New York (in US $)

        High           41.19         42.78         41.58         40.28   
                Low           37.95         37.94         37.28         37.27   

PLC per 31/9p ordinary share in London (in £)

        High           27.84         28.85         28.20         25.48   
                Low           23.78         25.16         24.30         23.19   

PLC per 31/9p ordinary share in New York (in US $)

        High           42.24         43.54         42.67         41.20   
                Low           38.38         39.00         38.06         37.67   
                     

1st

Quarter

2012

    

2nd

Quarter

2012

    

3rd

Quarter

2012

    

4th

Quarter

2012

 

NV per 0.16 ordinary share in Amsterdam (in )

        High           27.11         26.39         28.79         29.50   
                Low           24.78         24.56         26.42         27.53   

NV per 0.16 ordinary share in New York (in US $)

        High           34.92         35.00         36.35         38.75   
                Low           32.09         30.79         32.11         35.58   

PLC per 31/9p ordinary share in London (in £)

        High           21.89         21.44         23.34         24.29   
                Low           19.94         20.05         21.27         22.62   

PLC per 31/9p ordinary share in New York (in US $)

        High           34.02         34.74         37.29         39.37   
                Low           31.50         31.04         32.88         36.11   

 

ANNUAL HIGH AND LOW PRICES

 

                 
              2013      2012      2011      2010      2009  

NV per 0.16 ordinary share in Amsterdam (in )

     High           32.89         29.50         26.58         24.11         22.88   
       Low           27.50         24.56         21.00         20.68         13.59   

NV per 0.16 ordinary share in New York (in US $)

     High           42.78         38.75         35.06         33.10         32.80   
       Low           37.27         30.79         29.07         26.02         17.04   

PLC per 31/9p ordinary share in London (in £)

     High           28.85         24.29         21.73         20.09         20.15   
       Low           23.19         19.94         17.93         16.62         12.30   

PLC per 31/9p ordinary share in New York (in US $)

     High           43.54         39.37         34.30         32.41         32.19   
       Low           37.67         31.04         28.65         25.74         17.04   

 

 

Unilever Annual Report on Form 20-F 2013    Form 20-F                15


Table of Contents

ITEM 9. THE OFFER AND LISTING CONTINUED

 

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

This information is set forth under the heading The Unilever Group’ on page 1 of this report.

D. SELLING SHAREHOLDERS

Not applicable.

E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. ARTICLES OF ASSOCIATION

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

  ‘Corporate governance’ on pages 42 to 52; and
  ‘Note 15A Share Capital’ on page 116; and
  ‘Minimum shareholding requirement’ on page 69.

Please also refer to ‘The Unilever Group’ on page 1 of this report.

C. MATERIAL CONTRACTS

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Note 21 Acquisition and disposals’ on pages 131 and 132; and
  ‘Our Foundation Agreements’ on page 47.

D. EXCHANGE CONTROLS

Under the Dutch External Financial Relations Act of 25 March 1994 the Minister of Finance is authorised to issue regulations relating to financial transactions concerning the movement of capital to or from other countries with respect to direct investments, establishment, the performing of financial services, the admission of negotiable instruments or goods with respect to which regulations have been issued under the Import and Export Act in the interest of the international legal system or an arrangement relevant thereto. These regulations may contain 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.

Other than certain economic sanctions which may be in place from time to time, there are currently no UK laws, decrees or regulations restricting the import or export of capital or affecting the remittance of dividends or other payments to holders of the company’s shares who are non-residents of the UK. Similarly, other than certain economic sanctions which may be in force from time to time, there are no limitations relating only to non-residents of the UK under English law or the company’s Articles of Association on the right to be a holder of, and to vote in respect of, the company’s shares.

E. TAXATION

TAXATION FOR US PERSONS HOLDING SHARES IN NV

The following notes are provided for guidance. US persons should consult their local tax advisers, particularly in connection with potential liability to pay US taxes on disposal, lifetime gift or bequest of their shares. A US person is a US individual citizen or resident, a corporation organised under the laws of the United States, or any other legal person subject to United States Federal Income Tax on its worldwide income.

TAXATION ON DIVIDENDS IN THE NETHERLANDS

As of 1 January 2007 dividends paid by companies in the Netherlands are in principle subject to dividend withholding tax of 15%. Where a shareholder is entitled to the benefits of the current Income Tax Convention (‘the Convention’) concluded on 18 December 1992 between the United States and the Netherlands, when dividends are paid by NV to:

  a corporation organised under the laws of the United States (or any territory of it) having no permanent establishment in the Netherlands of which such shares form a part of the business property; or
  any other legal person subject to United States Federal income tax with respect to its worldwide income, having no permanent establishment in the Netherlands of which such shares form a part of the business property, these dividends qualify for a reduction of withholding tax on dividends in the Netherlands from 15% to 5% if the beneficial owner is a company which directly holds at least 10% of the voting power of NV shares.

Where a United States person has a permanent establishment in the Netherlands, which has shares in NV forming part of its business property, dividends it receives on those shares are included in that establishment’s profit. They are subject to income tax or corporation tax in the Netherlands, as appropriate, and tax on dividends in the Netherlands will generally be applied at the full rate of 15% with, as appropriate, the possibility to claim a credit for that tax on dividends in the Netherlands against the income tax or corporation tax in the Netherlands. The net tax suffered may be treated as foreign income tax eligible for credit against shareholder’s United States income taxes.

The Convention provides, subject to certain conditions, for a complete exemption from, or refund of, Dutch dividend withholding tax if the beneficial owner is a qualified ‘Exempt Pension Trust’ as defined in Article 35 of the Convention or a qualified ‘Exempt Organisation’ as defined in Article 36 of the Convention. It is noted that, subject to certain conditions, foreign (non-Dutch) tax exempt entities may also be entitled to a full refund of any Dutch dividend withholding tax suffered based on specific provisions in the Dividend Tax Act in the Netherlands. This tax refund opportunity under Dutch domestic tax law already applied to European Union and European Economic Area entities as of 1 January 2007 and has been extended as of 1 January 2012 to all foreign tax exempt entities including, if appropriate, United States tax exempt entities.

Under the Convention, qualifying United States organisations that are generally exempt from United States taxes and that are constituted and operated exclusively to administer or provide pension, retirement or other employee benefits may be exempt at source from withholding tax on dividends received from a Dutch corporation. A Competent Authority Agreement between the US and Dutch Tax Authorities on 6 August 2007, published in the US as Announcement 2007-75, 2007-2 Cumulative Bulletin 540 as amended by a Competent Authority Agreement published in the United States as Announcement 2010-26, 2010-1 Cumulative Bulletin 604, describes the eligibility of these US organisations for benefits under the Convention and procedures for claiming these benefits.

 

 

 

16                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 10. ADDITIONAL INFORMATION

CONTINUED

 

Under the Convention, a United States trust, company or organisation that is operated exclusively for religious, charitable, scientific, educational or public purposes is subject to an initial 15% withholding tax rate. Such an exempt organisation may be entitled to reclaim from tax authorities in the Netherlands a refund of the Dutch dividend tax, if and to the extent that it is exempt from United States Federal Income Tax and it would be exempt from tax in the Netherlands if it were organised and carried on all its activities there.

If you are an NV shareholder resident in any country other than the United States or the Netherlands, any exemption from, or reduction or refund of, dividend withholding tax in the Netherlands may be governed by specific provisions in Dutch tax law, the ‘Tax Regulation for the Kingdom of the Netherlands’, or by the tax convention or any other agreement for the avoidance of double taxation, if any, between the Netherlands and your country of residence.

UNITED STATES TAXATION ON DIVIDENDS

If you are a United States person, the dividend (including the withheld amount) up to the amount of NV earnings and profits for United States Federal Income Tax purposes will be ordinary dividend income. Dividends received by an individual will be taxed at a maximum rate of 15% or 20%, depending on the income level of the individual, provided the individual has held the shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date, that NV is a qualified foreign corporation and that certain other conditions are satisfied. NV is a qualified foreign corporation for this purpose. In addition, an additional tax of 3.8% will apply to dividends and other investment income received by individuals with incomes exceeding certain thresholds. The dividends are not eligible for the dividends received deduction allowed to corporations.

For US foreign tax credit purposes, the dividend is foreign source income, and withholding tax in the Netherlands is a foreign income tax that is eligible for credit against the shareholder’s United States income taxes. However, the rules governing the US foreign tax credit are complex, and additional limitations on the credit apply to individuals receiving dividends eligible for the maximum tax rate on dividends described above.

Any portion of the dividend that exceeds NV’s United States earnings and profits is subject to different rules. This portion is a tax free return of capital to the extent of your basis in NV’s shares, and thereafter is treated as a gain on a disposition of the shares.

Under a provision of the Dividend Tax Act in the Netherlands and provided certain conditions are satisfied, NV is entitled to a credit (up to a maximum of 3% of the gross dividend from which dividend tax is withheld) against the amount of dividend tax withheld before remittance to tax authorities in the Netherlands. The United States tax authority may take the position that withholding tax in the Netherlands eligible for credit should be limited accordingly.

DISCLOSURE REQUIREMENTS FOR US INDIVIDUAL HOLDERS

US individuals that hold certain specified foreign financial assets, including stock in a foreign corporation, with values in excess of certain thresholds are required to file Form 8938 with their United States Federal Income Tax return. Such Form requires disclosure of information concerning such foreign assets, including the value of the assets. Failure to file the form when required is subject to penalties. An exemption from reporting applies to foreign assets held through a US financial institution, generally including a non-US branch or subsidiary of a US institution and a US branch of a non-US institution. Investors are encouraged to consult with their own tax advisors regarding the possible application of this disclosure requirement to their investment in the shares.

TAXATION ON CAPITAL GAINS IN THE NETHERLANDS

Under the Convention, if you are a United States person and you have capital gains on the sale of shares of a Dutch company, these are generally not subject to taxation by the Netherlands. An exception to this rule generally applies if you have a permanent establishment in the Netherlands and the capital gain is derived from the sale of shares which form part of that permanent establishment’s business property.

SUCCESSION DUTY AND GIFT TAXES IN THE NETHERLANDS

Under the Estate and Inheritance Tax Convention between the United States and the Netherlands of 15 July 1969, individual US persons who are not Dutch citizens who have shares will generally not be subject to succession duty in the Netherlands on the individual’s death, unless the shares are part of the business property of a permanent establishment situated in the Netherlands.

A gift of shares of a Dutch company by a person who is not a resident or a deemed resident of the Netherlands is generally not subject to gift tax in the Netherlands. A non-resident Netherlands citizen, however, is still treated as a resident of the Netherlands for gift tax purposes for ten years and any other non-resident person for one year after leaving the Netherlands.

TAXATION FOR US PERSONS HOLDING SHARES IN PLC

The following notes are provided for guidance. US persons should consult their local tax advisers, particularly in connection with potential liability to pay US taxes on disposal, lifetime gift or bequest of their shares. A US person is a US individual citizen or resident, a corporation organised under the laws of the United States, or any other legal person subject to United States Federal Income Tax on its worldwide income.

UNITED KINGDOM TAXATION ON DIVIDENDS

Under United Kingdom law, income tax is not withheld from dividends paid by United Kingdom companies. Shareholders, whether resident in the United Kingdom or not, receive the full amount of the dividend actually declared.

UNITED STATES TAXATION ON DIVIDENDS

If you are a US person, the dividend up to the amount of PLC’s earnings and profits for United States Federal Income Tax purposes will be ordinary dividend income. Dividends received by an individual will be taxed at a maximum rate of 15% or 20%, depending on the income level of the individual, provided the individual has held the shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date, that PLC is a qualified foreign corporation and certain other conditions are satisfied. PLC is a qualified foreign corporation for this purpose. In addition, an additional tax of 3.8% will apply to dividends and other investment income received by individuals with incomes exceeding certain thresholds. The dividend is not eligible for the dividends received deduction allowable to corporations. The dividend is foreign source income for US foreign tax credit purposes.

Any portion of the dividend that exceeds PLC’s United States earnings and profits is subject to different rules. This portion is a tax free return of capital to the extent of your basis in PLC’s shares, and thereafter is treated as a gain on a disposition of the shares.

DISCLOSURE REQUIREMENTS FOR US INDIVIDUAL HOLDERS

US individuals that hold certain specified foreign financial assets, including stock in a foreign corporation, with values in excess of certain thresholds are required to file Form 8938 with their United States Federal Income Tax return. Such Form requires disclosure of information concerning such foreign assets, including the value of the assets. Failure to file the form when required is subject to penalties. An exemption from reporting applies to foreign assets held through a US financial institution, generally including a non-US branch or subsidiary of a US institution and a US branch of a non-US institution. Investors are encouraged to consult with their own tax advisors regarding the possible application of this disclosure requirement to their investment in the shares.

 

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                17   


Table of Contents

ITEM 10. ADDITIONAL INFORMATION

CONTINUED

 

UK TAXATION ON CAPITAL GAINS

Under United Kingdom law, when you sell shares you may be liable to pay capital gains tax. However, if you are either:

  an individual who is neither resident nor ordinarily resident in the United Kingdom; or
  a company which is not resident in the United Kingdom

you will generally not be liable to United Kingdom tax on any capitaI gains made on disposal of your shares.

Two exceptions are: if the shares are held in connection with a trade or business which is conducted in the United Kingdom through a branch or an agency; and if the shares are held by an individual who has left the UK for a period of non-residence of less than five tax years having been resident for at least four of the seven tax years prior to leaving the UK.

UK INHERITANCE TAX

Under the current estate and gift tax convention between the United States and the United Kingdom, ordinary shares held by an individual shareholder who is:

  domiciled for the purposes of the convention in the United States; and
  is not for the purposes of the convention a national of the United Kingdom

will not be subject to United Kingdom inheritance tax:

  on the individual’s death; or
  on a gift of the shares during the individual’s lifetime.

The exception is if the shares are part of the business property of a permanent establishment of the individual in the United Kingdom or, in the case of a shareholder who performs independent personal services, pertain to a fixed base situated in the United Kingdom.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

The information set forth under the headings ‘Contact details’ and ‘Publications’ on pages 146 and 147 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

UNILEVER ANNUAL REPORT ON FORM 20-F 2013

Filed with the SEC on the SEC’s website. Printed copies are available, free of charge, upon request to Unilever PLC, Investor Relations Department, Unilever House, 100 Victoria Embankment, London EC4Y 0DY, United Kingdom.

DOCUMENTS ON DISPLAY IN THE UNITED STATES

Unilever files and furnishes reports and information with the United States SEC. Such reports and information can be inspected and copied at the SEC’s public reference facilities in Washington DC, Chicago and New York. Certain of our reports and other information that we file or furnish to the SEC are also available to the public over the internet on the SEC’s website.

I. SUBSIDIARY INFORMATION

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Please refer also to Item 3D ‘Risk Factors’ of this report.

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Outlook’ on page 34;
  ‘Note 4B Pensions and similar obligations’ on pages 99 to 104;
  ‘Note 13 Trade and other current receivables’ on pages 113 to 114;
  ‘Note 14 Trade payables and other liabilities’ on page 114;
  ‘Note 15 CapitaI and funding’ on pages 115 and 116;
  ‘Note 16 Treasury risk management’ on pages 120 to 125;
  ‘Note 17 Investment and return’ on pages 125 and 126; and
  ‘Note 18 Financial instruments fair value risk’ on pages 127 to 129.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

The Unilever Group has appointed Citibank, N.A. (‘Citibank’) as both its transfer agent and registrar pursuant to the New York Registered Share program for Unilever N.V. and as its depositary pursuant to its American Depositary Receipt program for Unilever PLC. Any fee arrangement with Citibank will therefore cover both programs.

D.3 TRANSFER AGENT FEES AND CHARGES FOR UNILEVER N.V.

Although items 12.D.3 and 12.D.4 are not applicable to Unilever N.V. the following fees, charges and transfer agent payments are listed, as any fee arrangement with Citibank will cover both programs.

Under the terms of the Transfer Agent Agreement for the Unilever N.V. New York Registered Share program, a New York Share (NYS) holder may have to pay the following service fees to the transfer agent:

  Issuance of NYSs: Up to US 5¢ per NYS issued.
  Cancellation of NYSs: Up to US 5¢ per NYS cancelled.

An NYS holder will also be responsible to pay certain fees and expenses incurred by the transfer agent and certain taxes and governmental charges such as:

  Fees for the transfer and registration of Shares charged by the registrar and transfer agent for the Shares in the Netherlands (i.e. upon deposit and withdrawal of Shares);
  Expenses incurred for converting foreign currency into US dollars;
  Expenses for cable, telex and fax transmissions and for delivery of securities;
  Taxes and duties upon the transfer of securities (i.e. when shares are deposited or withdrawn from deposit); and
  Fees and expenses incurred in connection with the delivery or servicing of shares on deposit.

Transfer agent fees payable upon the issuance and cancellation of NYSs are typically paid to the transfer agent by the brokers (on behalf of their clients) receiving the newly-issued NYSs from the transfer agent and by the brokers (on behalf of their clients) delivering the NYSs to the transfer agent for cancellation. The brokers in turn charge these transaction fees to their clients.

Note that the fees and charges an investor may be required to pay may vary over time and may be changed by us and by the Transfer Agent. Notice of any changes will be given to investors.

 

 

 

18                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES CONTINUED

 

D.3 DEPOSITARY FEES AND CHARGES FOR UNILEVER PLC

Under the terms of the Deposit Agreement for the Unilever PLC American Depositary Shares (ADSs), an ADS holder may have to pay the following service fees to the depositary bank:

  Issuance of ADSs: Up to US 5¢ per ADS issued.
  Cancellation of ADSs: Up to US 5¢ per ADS cancelled.

An ADS holder will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as:

  Fees for the transfer and registration of Shares charged by the registrar and transfer agent for the Shares in the United Kingdom (i.e., upon deposit and withdrawal of Shares);
  Expenses incurred for converting foreign currency into US dollars;
  Expenses for cable, telex and fax transmissions and for delivery of securities;
  Taxes and duties upon the transfer of securities (ie when shares are deposited or withdrawn from deposit);
  Fees and expenses incurred in connection with the delivery or servicing of shares on deposit; and
  Fees incurred in connection with the distribution of dividends.

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly-issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these transaction fees to their clients.

Note that the fees and charges an investor may be required to pay may vary over time and may be changed by us and by the depositary bank. Notice of any changes will be given to investors.

D.4 TRANSFER AGENT PAYMENTS – FISCAL YEAR 2013 FOR UNILEVER N.V.

In 2013, we received the following payments from Citibank, N.A., the Transfer Agent and Registrar for our New York Registered Share program:

 

      US $  

Reimbursement of listing fees (NYSE/NASDAQ)

     251,964.00   

Reimbursement of settlement infrastructure fees (including DTC feeds)

     118,091.17   

Reimbursement of proxy process expenses (printing, postage and distribution)

     283,396.23   

Tax reclaim services

     33,474.47   

Program-related expenses (that include expenses incurred from the requirements of the Sarbanes-Oxley Act of 2002)

     663,074.13   

INDIRECT PAYMENTS

As part of its service to Unilever N.V., Citibank, N.A. has agreed to waive fees for the standard costs associated with the administration of the ADR Program, associated operating expenses and investor relations advice estimated to total US $150,000.00.

D.4 DEPOSITARY PAYMENTS – FISCAL YEAR 2013 FOR UNILEVER PLC

In 2013, we received the following payments from Citibank, N.A., the Depositary Bank for our American Depositary Receipt Program:

 

      US $  

Reimbursement of listing fees (NYSE/NASDAQ)

     180,486.00   

Reimbursement of settlement infrastructure fees (including DTC feeds)

     74,279.46   

Reimbursement of proxy process expenses (printing, postage and distribution)

     286,519.78   

Program-related expenses (that include expenses incurred from the requirements of the Sarbanes-Oxley Act of 2002)

     808,714.76   

INDIRECT PAYMENTS

As part of its service to Unilever PLC, Citibank, N.A. has agreed to waive fees for the standard costs associated with the administration of the ADR Program, associated operating expenses and investor relations advice estimated to total US $150,000.00.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

A.DEFAULTS

There has been no material default in the payment of principal, interest, a sinking or purchase fund instalments or any other material default relating to indebtedness of the Group.

B. DIVIDEND ARREARAGES AND DELINQUENCIES

There have been no arrears in payment of dividends on, and material delinquency with respect to, any class of preferred stock of any significant subsidiary of the Group.

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                19   


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ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

The information set forth under the headings ‘Report of Independent Registered Public Accounting Firm’ in Item 18 on page 22 of this report, and ‘Our Risk Appetite and Approach to Risk Management’ on page 34, ‘Requirements – The United States’ on page 50 and ‘Risk management and internal control arrangements’ on page 54 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

In accordance with the requirements of Section 404 of the US Sarbanes-Oxley Act of 2002, the following report is provided by management in respect of the Group’s internal control over financial reporting (as defined in rule 13a–15(f) or rule 15d–15(f) under the US Securities Exchange Act of 1934):

  Unilever’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Group;
  Unilever’s management has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework (1992) to evaluate the effectiveness of our internal control over financial reporting. Management believes that the COSO framework (1992) is a suitable framework for its evaluation of our internal control over financial reporting because it is free from bias, permits reasonably consistent qualitative and quantitative measurements of internal controls, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of internal controls are not omitted and is relevant to an evaluation of internal control over financial reporting;
  Management has assessed the effectiveness of internal control over financial reporting as of 31 December 2013, and has concluded that such internal control over financial reporting is effective; and
  PricewaterhouseCoopers LLP and PricewaterhouseCoopers Accountants N.V., who have audited the consolidated financial statements of the Group for the year ended 31 December 2013, have also audited the effectiveness of internal control over financial reporting as at 31 December 2013 and have issued an attestation report on internal control over financial reporting. For the Auditors’ report please refer to Item 18 on page 22 of this report.

ITEM 16. RESERVED

A. AUDIT COMMITTEE FINANCIAL EXPERT

The information set forth under the heading ‘Report of the Audit Committee’ on pages 53 to 55 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

B. CODE OF ETHICS

The information set forth under the following headings of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference:

  ‘Foundation and principles’ on pages 34 and 35; and
  ‘Requirements – The United States’ on page 50.

C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information set forth under the heading ‘Report of the Audit Committee’ on pages 53 to 55 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

 

     

 million

2013

    

 million

2012

    

 million

2011

 

Audit fees(a)

     16         18         18   

Audit-related fees(b)

     3         2         2   

Tax fees

     1         1         1   

All other fees

     1                 1   

 

(a)  Excludes 1 million fees paid in respect of services supplied for associated pension schemes. (2012: 1 million; 2011: 1 million).
(b)  Includes other audit services which comprise audit and similar work that regulations or agreements with third parties require the auditors to undertake.

D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

 

 

20                Form 20-F   Unilever Annual Report on Form 20-F 2013


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ITEM 16. RESERVED CONTINUED

 

E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

SHARE PURCHASES DURING 2013

 

                          million  
     

Total number of

shares purchased

    

Average price

paid per share ()

    

Of which, numbers of

shares purchased

as part of publicly

announced plans

    

Maximum value that

may yet be purchased

as part of publicly

announced plans

 

January

                               

February(a)

     160,400         30.21                   

March(a)

     203,677         30.70                   

April

                               

May

                               

June

                               

July

                               

August

                               

September

                               

October

                               

November

                               

December

                               

Total

     364,077         30.48                   

 

(a) Shares were purchased to satisfy commitments to deliver shares under our share-based plans as described in note 4C ‘Share-Based Compensation Plans’ on pages 104 and 105 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K and incorporated by reference.

Between 26 February and 3 March 2014 Unilever N.V. purchased 527,958 shares with an average price of Euro 28.91 per share to facilitate grants in connection with its employee compensation programs.

F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

In 2013 we conducted a tender process for the Unilever Group’s statutory audit contract. The change in auditors is being made in order to remain at the forefront of good governance and in recognition of regulatory changes in Europe and elsewhere. Accordingly the engagement of PricewaterhouseCoopers LLP and PricewaterhouseCoopers Accountants N.V. (together, ‘PricewaterhouseCoopers’), Unilever’s current auditor, will not be renewed in 2014. As a result of the audit tender process we announced on 2 December 2013 that following completion of the audit of the Unilever Group financial statements for the year ended 31 December 2013 and the audit of the effectiveness of internal control over financial reporting as of 31 December 2013, KPMG LLP and KPMG Accountants N.V. (together, ‘KPMG’) will become Unilever’s statutory auditor, subject to approval by shareholders at the 2014 Annual General Meeting of Unilever PLC and Unilever N.V. The approval for this was delegated by the Board to a Board Committee comprising the Chairman, the Chief Financial Officer, the Chairman of the Audit Committee and the Vice-Chairman/Senior Independent Director.

During the two years prior to 31 December 2013, (1) PricewaterhouseCoopers has not issued any reports on the financial statements of the Unilever Group or on the effectiveness of internal control over financial reporting that contained an adverse opinion or a disclaimer of opinion, nor were the auditors’ reports of PricewaterhouseCoopers qualified or modified as to uncertainty, audit scope, or accounting principles, (2) there has not been any disagreement over any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to PricewaterhouseCooper’s satisfaction would have caused it to make reference to the subject matter of the disagreement in connection with its auditors’ reports, or any “reportable event” as described in Item 16F(a)(1)(v) of Form 20-F.

Further in the two years prior to 31 December 2013 we have not consulted with KPMG regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the consolidated financial statements of the Unilever Group; or (ii) any matter that was the subject of a disagreement as that term is used in Item 16F(a)(1)(iv) of Form 20-F or a “reportable event” as described in Item 16F(a)(1)(v) of Form 20-F.

G. CORPORATE GOVERNANCE

The information set forth under the heading ‘Corporate governance’ on pages 42 to 52 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

ITEM 17. FINANCIAL STATEMENTS

Unilever has responded to Item 18 in lieu of this item.

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                21   


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ITEM 18. FINANCIAL STATEMENTS

The information set forth under the heading ‘Financial statements’ on page 85 and pages 90 to 135 of the Group’s Annual Report and Accounts 2013 furnished separately on 7 March 2014 under Form 6-K is incorporated by reference.

To the Directors and shareholders

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

In our opinion, the consolidated income statements and the related consolidated balance sheets, consolidated cash flow statements, consolidated statements of comprehensive income and consolidated statements of changes in equity set forth under the heading ‘Financial Statements’ on pages 90 to 135 (excluding Note 24 on page 133) of Unilever Group’s Annual Report and Accounts 2013 and the Guarantor financial information included in Item 18 of this Form 20-F present fairly, in all material respects, the financial position of the Unilever Group at 31 December 2013 and 31 December 2012 and the results of its operations and its cash flows for each of the three years in the period ended 31 December 2013, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and in conformity with IFRS as adopted by the European Union. Also in our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of 31 December 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (1992). The Group’s Directors and management are responsible for these consolidated financial statements.

The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying ‘Management’s report on internal control over financial reporting’ included in Item 15 of this Form 20-F. Our responsibility is to express opinions on these consolidated financial statements and on the Group’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statements presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and Directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ PricewaterhouseCoopers LLP    Amsterdam, The Netherlands, 4 March 2014
London, United Kingdom    PricewaterhouseCoopers Accountants N.V.
As auditors of Unilever PLC    As auditors of Unilever N.V.
4 March 2014    Original has been signed by P J van Mierlo RA

 

 

22                Form 20-F   Unilever Annual Report on Form 20-F 2013


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ITEM 18. FINANCIAL STATEMENTS CONTINUED

 

GUARANTOR STATEMENTS (AUDITED)

On 1 November 2011, NV and Unilever Capital Corporation (UCC) filed a US Shelf registration, which is unconditionally and fully guaranteed, jointly and severally, by NV, PLC and Unilever United States, Inc. (UNUS). This superseded the previous NV and UCC US Shelf registration filed on 18 November 2008, which is unconditionally and fully guaranteed, jointly and severally, by NV, PLC and UNUS. UCC and UNUS are each indirectly 100% owned by the Unilever parent entities (as defined below). Of the US Shelf registration, US $5.8 billion of Notes were outstanding at 31 December 2013 (2012: US $5.0 billion; 2011: US $4.0 billion) with coupons ranging from 0.45% to 5.9%. These Notes are repayable between 15 February 2014 and 15 November 2032.

Provided below are the income statements, cash flow statements and balance sheets of each of the companies discussed above, together with the income statement, cash flow statement and balance sheet of non-guarantor subsidiaries. These have been prepared under the historical cost convention and, aside from the basis of accounting for investments at net asset value (equity accounting), comply in all material respects with International Financial Reporting Standards. The financial information in respect of NV, PLC and UNUS has been prepared with all subsidiaries accounted for on an equity basis. Information on NV and PLC is shown collectively as Unilever parent entities. The financial information in respect of the non-guarantor subsidiaries has been prepared on a consolidated basis.

 

     million         million        million        million        million         million   

Income statement

for the year ended 31 December 2013

    
 
 
 
 
Unilever
Capital
Corporation
subsidiary
issuer
  
  
  
  
  
   

 

 

Unilever

parent

entities

(a) 

  

  

   
 
 
 
 
Unilever
United
States Inc.
subsidiary
guarantor
  
  
  
  
  
   
 
 
Non-
guarantor
subsidiaries
  
  
  
    Eliminations       
 
Unilever
Group
  
  

Turnover

                          49,797               49,797   

Operating profit

            296        4        7,217               7,517   

Finance income

                          103               103   

Finance costs

     (150     (111            (239            (500

Pensions and similar obligations

            (4     (29     (100            (133

Inter-company finance income/(costs)

     150        32        (190     8                 

Dividends

            2,945               (2,945              

Share of net profit/(loss) of joint ventures and associates

                          113               113   

Other income from non-current investments

                          14               14   

Profit before taxation

            3,158        (215     4,171               7,114   

Taxation

            (13     (419     (1,419            (1,851

Net profit

            3,145        (634     2,752               5,263   

Equity earnings of subsidiaries

            2,118        1,395               (3,513       

Net profit

            5,263        761        2,752        (3,513     5,263   

Attributable to:

            

Non-controlling interests

                          421               421   

Shareholders’ equity

            5,263        761        2,331        (3,513     4,842   

Total comprehensive income

     (15     3,234        (209     2,057               5,067   

 

(a)  The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC.

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                23   


Table of Contents

ITEM 18. FINANCIAL STATEMENTS CONTINUED

 

     million     million     million     million     million     million  
    

Unilever

Capital

         

Unilever

United

                   
Income statement     

 

 

Corporation

subsidiary

issuer

  

  

  

   

 

 

Unilever

parent

entities

(a) 

  

  

   

 

 

States Inc.

subsidiary

guarantor

  

  

  

   

 

 

Non-

guarantor

subsidiaries

  

  

  

    Eliminations       

 

Unilever

Group

  

  

for the year ended 31 December 2012                      (Restated)        (Restated)                (Restated)   
Turnover                           51,324               51,324   
Operating profit             334        7        6,636               6,977   

Finance income

                          136               136   

Finance costs

     (153     (169            (204            (526

Pensions and similar obligations

            (5     (32     (108            (145

Inter-company finance income/(costs)

     153        (6     (110     (37              

Dividends

            2,851        676        (3,527              

Share of net profit/(loss) of joint ventures and associates

                          105               105   

Other income from non-current investments

                          (14            (14
Profit before taxation             3,005        541        2,987               6,533   

Taxation

            (29     (192     (1,476            (1,697
Net profit             2,976        349        1,511               4,836   

Equity earnings of subsidiaries

            1,860        728               (2,588       
Net profit             4,836        1,077        1,511        (2,588     4,836   

Attributable to:

            

Non-controlling interests

                          468               468   

Shareholders’ equity

            4,836        1,077        1,043        (2,588     4,368   

Total comprehensive income

     (9     2,824        438        645               3,898   
     million     million     million     million     million     million  
    

Unilever

Capital

         

Unilever

United

                   
Income statement     

 

 

Corporation

subsidiary

issuer

  

  

  

   

 

 

Unilever

parent

entities

(a) 

  

  

   

 

 

States Inc.

subsidiary

guarantor

  

  

  

   

 

 

Non-

guarantor

subsidiaries

  

  

  

    Eliminations       

 

Unilever

Group

  

  

for the year ended 31 December 2011                      (Restated)        (Restated)                (Restated)   
Turnover                           46,467               46,467   
Operating profit             155        (12     6,277               6,420   

Finance income

                          92               92   

Finance costs

     (127     (203            (210            (540

Pensions and similar obligations

            (5     (26     (64            (95

Inter-company finance income/(costs)

     128        61        (11     (178              

Dividends

            2,631               (2,631              

Share of net profit/(loss) of joint ventures and associates

                          113               113   

Other income from non-current investments

                          76               76   
Profit before taxation      1        2,639        (49     3,475               6,066   

Taxation

            50        (233     (1,392            (1,575
Net profit      1        2,689        (282     2,083               4,491   

Equity earnings of subsidiaries

            1,802        898               (2,700       
Net profit      1        4,491        616        2,083        (2,700     4,491   

Attributable to:

            

Non-controlling interests

                          371               371   

Shareholders’ equity

     1        4,491        616        1,712        (2,700     4,120   

Total comprehensive income

     9        2,542        (290     262               2,523   

 

(a)  The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC.

 

 

24                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 18. FINANCIAL STATEMENTS CONTINUED

 

     million      million     million     million     million      million  
Balance sheet at 31 December 2013     

 

 

 

 

Unilever

Capital

Corporation

subsidiary

issuer

  

  

  

  

  

   

 

 

Unilever

parent

entities

(a) 

  

  

   

 

 

 

 

Unilever

United

States Inc.

subsidiary

guarantor

  

  

  

  

  

   

 

 

Non-

guarantor

subsidiaries

  

  

  

    Eliminations       

 

Unilever

Group

  

  

Assets

            

Non-current assets

            

Goodwill and intangible assets

            1,726               19,178               20,904   

Property, plant and equipment

                          9,344               9,344   

Pension asset for funded schemes in surplus

            1               990               991   

Deferred tax assets

            163        38        883               1,084   

Financial assets

                          505               505   

Other non-current assets

                   1        562               563   

Amounts due from group companies

     7,896                      30        (7,926       

Net assets of subsidiaries (equity accounted)

            41,740        17,841        (20,528     (39,053       
     7,896        43,630        17,880        10,964        (46,979     33,391   

Current assets

            

Inventories

                          3,937               3,937   

Amounts due from group companies

            5,112        2,103        (7,215              

Trade and other current receivables

            91        13        4,727               4,831   

Current tax assets

            18               199               217   

Cash and cash equivalents

            3               2,282               2,285   

Other financial assets

                          760               760   

Non-current assets held for sale

                          92               92   
            5,224        2,116        4,782               12,122   
Total assets      7,896        48,854        19,996        15,746        (46,979     45,513   

Liabilities

            

Current liabilities

            

Financial liabilities

     885        2,132        3        990               4,010   

Amounts due to group companies

     3,101        29,747               (32,848              

Trade payables and other current liabilities

     45        170        31        11,489               11,735   

Current tax liabilities

            (17     155        1,116               1,254   

Provisions

            11               368               379   

Liabilities associated with assets held for sale

                          4               4   
     4,031        32,043        189        (18,881            17,382   

Non-current liabilities

            

Financial liabilities

     3,600        2,326               1,565               7,491   

Amounts due to group companies

                   7,937        (11     (7,926       

Pensions and post-retirement healthcare liabilities

            

Funded schemes in deficit

                   12        1,393               1,405   

Unfunded schemes

            102        480        981               1,563   

Provisions

            5        2        885               892   

Deferred tax liabilities

            18               1,506               1,524   

Other non-current liabilities

            16               425               441   
     3,600        2,467        8,431        6,744        (7,926     13,316   

Total liabilities

     7,631        34,510        8,620        (12,137     (7,926     30,698   

Equity

            

Shareholders’ equity

            

Called up share capital

            484                             484   

Share premium account

            138        942        (942            138   

Other reserves

     (10     (6,746     (381     (2,680     3,071        (6,746

Retained profit

     275        20,468        10,815        31,034        (42,124     20,468   
     265        14,344        11,376        27,412        (39,053     14,344   

Non-controlling interests

                          471               471   

Total equity

     265        14,344        11,376        27,883        (39,053     14,815   
Total liabilities and equity      7,896        48,854        19,996        15,746        (46,979     45,513   

 

(a)  The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC.

 

 

Unilever Annual Report on Form 20-F 2013      Form 20-F                25   


Table of Contents

ITEM 18. FINANCIAL STATEMENTS CONTINUED

 

     million      million     million     million     million     million  
    

Unilever

Capital

          

Unilever

United

                   
    

 

 

Corporation

subsidiary

issuer

  

  

  

    

 

 

Unilever

parent

entities

(a) 

  

  

   

 

 

States Inc.

subsidiary

guarantor

  

  

  

   

 

 

Non-

guarantor

subsidiaries

  

  

  

    Eliminations       

 

Unilever

Group

  

  

Balance sheet at 31 December 2012                       (Restated)        (Restated)                (Restated)   

Assets

             

Non-current assets

             

Goodwill and intangible assets

             1,330               20,388               21,718   

Property, plant and equipment

                           9,445               9,445   

Pension asset for funded schemes in surplus

                           758               758   

Deferred tax assets

             103        251        696               1,050   

Financial assets

                    1        534               535   

Other non-current assets

                    7        529               536   

Amounts due from group companies

     6,642                       (26     (6,616       

Net assets of subsidiaries (equity accounted)

             40,627        15,710        (17,981     (38,356       
     6,642         42,060        15,969        14,343        (44,972     34,042   

Current assets

             

Inventories

                           4,436               4,436   

Amounts due from group companies

             5,050        2,087        (7,137              

Trade and other current receivables

             80        12        4,344               4,436   

Current tax assets

             287        98        (168            217   

Cash and cash equivalents

             3               2,462               2,465   

Other financial assets

                           401               401   

Non-current assets held for sale

                           192               192   
             5,420        2,197        4,530               12,147   
Total assets      6,642         47,480        18,166        18,873        (44,972     46,189   
Liabilities              

Current liabilities

             

Financial liabilities

     691         1,250        3        712               2,656   

Amounts due to group companies

     1,859         28,132               (29,991              

Trade payables and other current liabilities

     46         181        33        11,408               11,668   

Current tax liabilities

             304               825               1,129   

Provisions

             34               327               361   

Liabilities associated with assets held for sale

                           1               1   
     2,596         29,901        36        (16,718            15,815   

Non-current liabilities

             

Financial liabilities

     3,766         2,058               1,741               7,565   

Amounts due to group companies

                    6,701        (85     (6,616       

Pensions and post-retirement healthcare liabilities

             

Funded schemes in deficit

             2        174        1,884               2,060   

Unfunded schemes

             110        580        1,350               2,040   

Provisions

             12        1        833               846   

Deferred tax liabilities

                           1,414               1,414   

Other non-current liabilities

             5        81        414               500   
     3,766         2,187        7,537        7,551        (6,616     14,425   
Total liabilities      6,362         32,088        7,573        (9,167     (6,616     30,240   
Equity              

Shareholders’ equity

             

Called up share capital

             484                             484   

Share premium account

             140        942        (942            140   

Other reserves

     5         (6,196     (612     (1,695     2,302        (6,196

Retained profit

     275         20,964        10,263        30,120        (40,658     20,964   
     280         15,392        10,593        27,483        (38,356     15,392   

Non-controlling interests

                           557               557   
Total equity      280         15,392        10,593        28,040        (38,356     15,949   
Total liabilities and equity      6,642         47,480        18,166        18,873        (44,972     46,189   

 

(a)  The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC.

 

 

26                Form 20-F   Unilever Annual Report on Form 20-F 2013


Table of Contents

ITEM 18. FINANCIAL STATEMENTS CONTINUED

 

     million      million     million     million     million      million  

Cash flow statement

for the year ended 31 December 2013

    

 

 

 

 

Unilever

Capital

Corporation

subsidiary

issuer

  

  

  

  

  

   

 

 

Unilever

parent

entities

(a) 

  

  

   

 

 

 

 

Unilever

United

States Inc.

subsidiary

guarantor

  

  

  

  

  

   

 

 

Non-

guarantor

subsidiaries

  

  

  

    Eliminations       

 

Unilever

Group

  

  

Cash flow from operating activities

     1        512        56        7,530               8,099   

Income tax

            (110     (223     (1,472            (1,805
Net cash flow from operating activities      1        402        (167     6,058               6,294   

Interest received

                          100               100   

Net capital expenditure

            (464            (1,563            (2,027

Acquisitions and disposals

            21               932               911   

Other investing activities

     (1,465     (1,042     (107     1,004        1,465        (145
Net cash flow from/(used in) investing activities      (1,465     (1,527     (107     473        1,465        (1,161

Dividends paid on ordinary share capital

            (41     (1,092     (1,860            (2,993

Interest and preference dividends paid

     (152     (128            (231            (511

Acquisition of non-controlling interest

            (2,515            (386            (2,901

Change in financial liabilities

     275        1,192               (203            1,264   

Other movement in treasury stocks

            163        (32     (107            24   

Other finance activities

     1,337        2,402        1,398        (3,945     (1,465     (273
Net cash flow from/(used in) financing activities      1,460        1,073        274        (6,732     (1,465     (5,390

Net increase/(decrease) in cash and cash equivalents

     (4     (52            (201            (257
Cash and cash equivalents at the beginning of the year             3        (3     2,217               2,217   

Effect of foreign exchange rate changes

     4        52               28               84   
Cash and cash equivalents at the end of the year             3        (3     2,044               2,044   
     million     million     million     million     million      million  

Cash flow statement

for the year ended 31 December 2012

    

 

 

 

 

Unilever

Capital

Corporation

subsidiary

issuer

  

  

  

  

  

   

 

 

Unilever

parent

entities

(a) 

  

  

   

 

 

 

 

Unilever

United

States Inc.

subsidiary

guarantor

  

  

  

  

  

   

 

 

Non-

guarantor

subsidiaries

  

  

  

    Eliminations       

 

Unilever

Group

  

  

Cash flow from operating activities

            478        3        8,035               8,516   

Income tax

            (89     (135     (1,456            (1,680
Net cash flow from operating activities             389        (132     6,579               6,836   

Interest received

                          146               146   

Net capital expenditure

            (1,176            (967)               (2,143

Acquisitions and disposals

                          113               113   

Other investing activities

     (1,181     5,838        (98     (4,575     1,145        1,129   
Net cash flow from/(used in) investing activities      (1,181     4,662        (98     (5,283     1,145        (755

Dividends paid on ordinary share capital

            (1,368     (917     (414)               (2,699

Interest and preference dividends paid

     (147     (177            (182            (506

Change in borrowing and finance leases

     (93     (1,866            (1,050            (3,009

Other movement in treasury stocks