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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
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
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)

100 Victoria Embankment, London, England

 

(Address of principal executive offices)

T. E. Lovell, Group Secretary

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

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

0.85% Notes due 2017

2.2% Notes due 2019

2.1% Notes due 2020

4.25% Notes due 2021

1.375% Notes due 2021

3.1% Notes due 2025

2.0% Notes due 2026

5.9% Notes due 2032

4.8% Notes due 2019

  

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

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       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

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       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        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    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


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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 Unilever Group (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; the effect of climate change on Unilever’s business; financial risks; failure to meet high and ethical standards; and managing regulatory, tax and legal matters.

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.

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 Unilever Annual Report and Accounts 2016.


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LOGO

 

 

MAKING

SUSTAINABLE LIVING

COMMONPLACE

 

ANNUAL REPORT ON

FORM 20-F 2016


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ANNUAL REPORT ON

FORM 20-F 2016

This document is made up of the Strategic Report, the Governance Report, the Financial Statements and Notes, and Additional Information for US Listing Purposes.

Our Strategic Report, pages 1 to 28, contains information about us, how we create value and how we run our business. It includes our strategy, business model, market outlook and key performance indicators, as well as our approach to sustainability and risk. The Strategic Report is only part of the Annual Report and Accounts 2016. The Strategic Report has been approved by the Boards and signed on their behalf by Tonia Lovell – Group Secretary.

Our Governance Report, pages 29 to 77 contains detailed corporate governance information, how we mitigate risk, our Committee reports and how we remunerate our Directors.

Our Financial Statements and Notes are on pages 78 to 154.

Pages 1 to 156 constitute the Unilever Annual Report and Accounts 2016 for UK and Dutch purposes, which we may also refer to as ‘this Annual Report and Accounts’ throughout this document.

The Directors’ Report of Unilever PLC (PLC) on pages 29 to 47, 78 (Statement of Directors’ responsibilities), 104 (Dividends on ordinary capital), 115 to 120 (Treasury Risk Management), 143 (branch disclosure) and 150 and 154 (Post balance sheet event) has been approved by the PLC Board and signed on its behalf by Tonia Lovell – Group Secretary.

The Strategic Report, together with the Governance Report, constitutes the report of the Directors within the meaning of Section 2:391 of the Dutch Civil Code and has been approved by the Unilever N.V. (NV) Board and signed on its behalf by Tonia Lovell – Group Secretary.

Pages 157 to 178 are included as Additional Information for US Listing Purposes.

ONLINE

You can find more information about Unilever online at www.unilever.com. For further information on the Unilever Sustainable Living Plan (USLP) visit www.unilever.com/sustainable-living

The Annual Report on Form 20-F 2016 along with other relevant documents can be downloaded at www.unilever.com/ara2016/downloads

CONT ENTS  

About us

     1  

Our purpose

     1  

Chairman’s statement

     2  

Board of Directors

     3  

Chief Executive Officer’s review

     4  

Unilever Leadership Executive (ULE)

     5  

Our markets

     6  

Our business model

     8  

Our strategic focus

     10  

Our performance

     12  

Delivering value for our stakeholders

     14  

Our consumers

     14  

Society

     16  

Our people

     20  

Our shareholders

     22  

Financial Review

     23  

Governance

     29  

Corporate Governance

     29  

Risks

     36  

Report of the Audit Committee

     42  

Report of the Corporate Responsibility Committee

     44  

Report of the Nominating and Corporate Governance Committee

     46  

Directors’ Remuneration Report

     48  

Financial Statements

     78  

Statement of Directors’ responsibilities

     78  

Independent auditors’ reports

     79  

Consolidated financial statements

     84  

Consolidated income statement

     84  

Consolidated statement of comprehensive income

     84  

Consolidated statement of changes in equity

     85  

Consolidated balance sheet

     86  

Consolidated cash flow statement

     87  

Notes to the consolidated financial statements

     88  

Shareholder Information

     155  

Index

     156  

Additional Information for US Listing Purposes

     157  
 


Table of Contents
ABOU T US   OUR PURPOSE

    

 

UNILEVER IS ONE OF THE WORLD’S BEST KNOWN CONSUMER GOODS COMPANIES. EVERY DAY, 2.5 BILLION PEOPLE USE OUR PRODUCTS TO FEEL GOOD, LOOK GOOD AND GET MORE OUT OF LIFE.

We are truly global, operating in more than 100 countries, selling our products in more than 190 countries and employing around 169,000 people.

Unilever is organised in four categories, each with a clearly defined strategy and portfolio of brands. The largest is Personal Care, then Foods followed by Home Care and Refreshment. Each one is discussed in more detail on pages 14 and 15.

We have 13 brands with sales of 1 billion or more:

 

1. Axe
2. Dirt is Good (e.g. Omo)
3. Dove
4. Family Goodness (e.g. Rama)
5. Heartbrand (e.g. Wall’s)
6. Hellmann’s
7. Knorr
8. Lipton
9. Lux
10. Magnum
11. Rexona
12. Sunsilk
13. Surf

Our business model is detailed on pages 8 and 9. It places sustainability at its heart through the Unilever Sustainable Living Plan (USLP) which spans our entire value chain and involves a wide range of stakeholders.

Our brands are household names but we constantly assess our portfolio to ensure the right balance and resilience. We dispose of brands that no longer fit our strategy while acquiring those that give access to new segments and channels. We have around 400 brands allowing us to operate both globally and locally and this scale offers efficiencies and lower costs while reducing risk and mitigating volatility.

In 2015 we had 12 Sustainable Living brands which grew 30% faster than the rest of the business (Knorr, Dove, Dirt is Good e.g. Omo, Lipton, Hellmann’s, Smile e.g. Signal/Pepsodent, Lifebuoy, Ben & Jerry’s, Radiant, Breyers, Heart Health and Domestos). In 2016 these brands grew 40% faster than the rest and delivered nearly half of Unilever’s growth. They are brands which combine a strong purpose delivering a social or environmental benefit, with products contributing to at least one of our USLP goals. Our Sustainable Living brands for 2016 will be announced in May 2017 once the analysis is complete.

UNILEVER HAS A CLEAR PURPOSE – TO MAKE SUSTAINABLE LIVING COMMONPLACE. WE BELIEVE THIS IS THE BEST WAY TO CREATE LONG-TERM VALUE FOR ALL OUR STAKEHOLDERS, ESPECIALLY IN A VOLATILE AND UNCERTAIN WORLD.

Our Purpose inspires our Vision – to accelerate growth in our business, while reducing our environmental footprint and increasing our positive social impact. We want our business to grow but we recognise that growth at the expense of people or the environment is both unacceptable and commercially unsustainable. Sustainable growth is the only acceptable model for our business.

Our Purpose and Vision combine a commercial imperative to succeed against competition globally and locally, with the changing attitudes and expectations of consumers.

This Annual Report and Accounts explains how, in 2016, we have continued to pursue our Purpose and work towards making our Vision a reality. During 2016 we continued to deliver growth that is consistent, competitive, profitable and responsible. This track record of long-term success is underpinned by the USLP, which helps us manage risk, inspires brand purpose and innovation, drives down costs to improve returns and builds trust among consumers across our categories and operations.

Our success depends on the expertise and talent of our people. They are constantly challenged by an environment that remains volatile, uncertain, complex and ambiguous. Digitalisation is impacting all aspects of life. At the same time it is getting easier to enter our industry. Our markets are fragmenting as a result of changes in consumer habits, sales channels, the media and to traditional business models.

This is why Unilever is also changing through our business transformation programme, Connected 4 Growth, which we started to implement during 2016. It is creating a business which is more consumer and customer-centric, faster, more efficient and empowered so that our people can meet these challenges with the necessary resources.

As part of this change, we are also adopting new ways of working to be more entrepreneurial to complement our existing category strategies. In turn, these clearly-defined strategies across our four categories involve the active management of our portfolio through acquisitions and disposals to ensure Unilever has a well-balanced and resilient portfolio relevant to meeting our Purpose and Vision.

 

 

Annual Report on Form 20-F 2016   Strategic Report   1


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CHAIR MAN’S STATEMENT   

    

 

Since becoming Chairman in April 2016 I have enjoyed a busy period getting to know Unilever and discovering at first-hand what a superb organisation it is, made up of many talented and principled people who care deeply about the business and the contribution it can make to improving lives. I am excited to be part of a Group whose products are used by 2.5 billion people every day.

There was nowhere better perhaps to chair my first Board meeting, in July, than in a place often regarded as the physical and spiritual home of the Group, Port Sunlight in the UK. As well as giving me an insight into the history of Unilever and the values that still permeate the Group today, the visit also exposed the Board to the high quality manufacturing facilities and breakthrough technologies being developed to keep Unilever at the forefront of its industry.

In September, the Board met in India for its annual review of the Group’s global strategy. The Board re-affirmed its support for a strategy which has helped to drive consistent top and bottom line growth for Unilever over recent years, despite a very challenging environment. The pace of change in this industry is greater than at any time, and for that reason the Board was also pleased to endorse the Connected 4 Growth change programme, which we believe will enhance the organisational focus and agility of the Group.

While in India the Board also visited the Group’s global research facilities, as well as the impressive Enterprise and Technology Solutions Centre, which has been developed over the last five years to provide many of the modern global information and technology platforms on which the Group now depends. A review of Unilever’s business in India, Hindustan Unilever, highlighted to the Directors why Unilever enjoys such a strong presence and reputation in India.

We held our final Board meeting of the calendar year in Portugal, where Unilever has built up a strong business with its joint venture partners and which leads the way today for Unilever in its Out-of-Home capabilities, not just in Europe but across the world. Despite their differing sizes, it was fascinating to see how both the Indian and Portuguese businesses are exporters of talent and ideas to other parts of Unilever.

ENGAGEMENT

I have always enjoyed meeting with shareholders, and have already met with a good number of them who I thank for their thoughts and insights on the business, strategy and governance. These meetings offered me the opportunity to discuss our ideas for changes to Unilever’s Remuneration Policy.

Over the last few years, Paul Polman has built a strong performance culture at Unilever. Indeed, I am pleased to report that Unilever has again in 2016 delivered on its 4G growth model – consistent, competitive, profitable and responsible growth. We now want to take that performance culture to a new level based on managers having an even stronger personal commitment to Unilever share ownership.

The proposed new Remuneration Policy will be put to shareholders to be voted upon at the 2017 AGMs in April. Further information on our proposals can be found in the Compensation Committee’s report on pages 48 to 77. Information on the AGMs can be found within the NV and PLC AGM Notices which will be published in March 2017.

EVALUATION

Given 2016 was my first year I decided that we would conduct a very focused board evaluation (covering strategic discussions, Board composition and our plans for 2017 for further learning and site visits). We will explore these and other areas further in our externally facilitated board evaluation in the first half of 2017, but in my view the Board is working effectively and this was evidenced when Kraft Heinz made its proposed bid for Unilever. Looking ahead, an important focus of our work will be on the management of risks given the increasingly volatile and uncertain nature of today’s external environment and, in the immediate future, we are fully engaged in the recently announced comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders. Further detail on the Board’s remit, operations and the topics the Board regularly discusses and debates can be found in the Governance section on pages 29 to 77.

BOARD COMPOSITION AND SUCCESSION

I feel fortunate to have taken on the chairmanship of such a high calibre Board of Directors. I also believe you would struggle to find a more diverse Board – whether of nationality, experience or of course gender. Indeed, Unilever continues to lead the way among its peers at Board level, with the proportion of female Non-Executive Directors in 2016 at 50%.

I would like to take the opportunity to thank the two board members who stepped down in 2016, my predecessor Michael Treschow and Hixonia Nyasulu, for their many excellent contributions. In addition to my appointment, Unilever’s thorough succession planning identified two further new Non-Executive Directors, Youngme Moon and Strive Masiyiwa, who joined the Boards in April 2016 with me. They have further strengthened the international business and marketing experience on the Boards and also provide unique perspectives into the impact technology, particularly digital, is having on new business models for the future both in the developed and emerging worlds.

I have also been impressed by the quality of Unilever’s executive leadership and senior management team and the depth of management talent. The Board continues to work diligently with the CEO to ensure a further strengthening of the overall talent pipeline, the executive team and where relevant to ensure succession plans are in place.

LOOKING AHEAD

Even though trading conditions are likely to remain tough for some time to come I believe the foundations of the business are very strong and will only be strengthened further by the Connected 4 Growth programme. I have also been struck by how the Unilever Sustainable Living Plan, with its commitment to responsible and equitable growth, unites people across the whole Group and taps into a growing desire among citizens the world over for more purpose-driven brands and business models.

On behalf of the Board, I would like to thank Unilever’s executive leadership, senior management team and all of Unilever’s employees around the world for their efforts, commitment and performance.

MARIJN DEKKERS

CHAIRMAN

 

 

2   Strategic Report    Annual Report on Form 20-F 2016


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BO ARD OF DIRECTORS   

    

 

MARIJN DEKKERS. Chairman. Previous relevant experience: Bayer AG (CEO); Thermo Fisher Scientific Inc. (CEO). Current external appointments: General Electric (NED)

ANN FUDGE. Vice-Chairman/Senior Independent Director. Previous relevant experience: General Electric (NED); Marriott International (NED); Young & Rubicam (Chairman and CEO). Current external appointments: Novartis AG (NED); Northrop Grumman (NED); US Programs Advisory Panel of Gates Foundation (Chairman); Brookings (Honorary Trustee); Catalyst (Honorary Director)

PAUL POLMAN. CEO, Dutch, Male, 60. Appointed CEO: January 2009. Appointed Director: October 2008. Previous relevant experience: Procter & Gamble Co. (Group President, Europe); Nestlé S.A. (CFO); Alcon Inc (Director) . Current external appointments: The Dow Chemical Company (NED); World Business Council for Sustainable Development (Chairman, Executive Committee); UN Global Compact (Board member); UK Business Ambassador

GRAEME PITKETHLY. CFO, British, Male, 50. Appointed CFO: October 2015. Appointed Director: April 2016. Previous Unilever posts include: Unilever UK and Ireland (EVP and General Manager); Finance Global Markets (EVP); Group Treasurer; Head of Mergers & Acquisitions; Unilever Indonesia (CFO); Group Chief Accountant

NILS SMEDEGAARD ANDERSEN. Previous relevant experience: A.P. Moller – Maersk A/S (Group CEO); Inditex (NED); Carlsberg A/S and Carlsberg Breweries A/S (CEO); Danske Sukkerfabrikker; Tuborg International; Union Cervecera; Hannen Brauerei; Hero Group; European Round Table of Industrialists (Vice-Chairman). Current external appointments: Dansk Supermarket Group (Chairman); BP PLC (NED)

LAURA CHA. Previous relevant experience: Securities and Futures Commission, Hong Kong; China Securities Regulatory Commission. Current external appointments: HSBC Holdings plc (Independent NED); China Telecom Corporation Limited (Independent NED); The Hongkong and Shanghai Banking Corporation (Non-executive deputy Chairman); Foundation Asset Management AB (Senior international advisor)

VITTORIO COLAO. Previous relevant experience: RCS MediaGroup (CEO); McKinsey & Co (Partner); Finmeccanica Group (NED); RAS Insurance (NED). Current external appointments: Vodafone Group Plc (CEO); Bocconi University (International Advisory Board); Harvard Business School (Dean’s Advisory Board); European Round Table of Industrialists (Vice-Chairman); Oxford Martin School (Advisor)

PROFESSOR LOUISE FRESCO. Previous relevant experience: Rabobank (Supervisory Director); Agriculture Department of the UN’s Food and Agriculture Organisation (Assistant director-general for agriculture). Current external appointments: Wageningen UR (President of the Executive Board)

JUDITH HARTMANN. Previous relevant experience: Bertelsmann SE & Co. KGaA (CFO); General Electric; The Walt Disney Company; RTL Group (NED); Penguin Random House (NED); Gruner + Jahr GmbH & Co KG (NED). Current external appointments: Suez (NED); ENGIE (CFO)

MARY MA. Previous relevant experience: TPG Capital (Partner); TPG China (Co-Chairman). Current external appointments: Boyu Capital (Managing Partner); MXZ Investment Limited (Director); Lenovo (NED); Securities and Futures Commission in Hong Kong (NED)

STRIVE MASIYIWA. Previous relevant experience: Africa Against Ebola Solidarity Trust (Co-Founder and Chairman); Grow Africa (Co-Chairman); Micronutrient Initiative (Chairman). Current external appointments: Econet Group (Founder and Executive Chairman); AGRA (Chairman); Rockefeller Foundation (Board member); US Council on Foreign Relations (Member Global Advisory Board); Africa Progress Panel (Board member); Asia Society (Trustee)

YOUNGME MOON. Previous relevant experience: Harvard Business School (Chairman and Senior Associated Dean for the MBA Program); Massachusetts Institute of Technology (Professor); American Red Cross (Board of Governors Member). Current external appointments: Avid Technology (NED); Rakuten (NED); Harvard Business School (Professor)

JOHN RISHTON. Previous relevant experience: Rolls-Royce Holdings plc (CEO); Royal Ahold N.V. (CEO, President and CFO); ICA AB (NED); Allied Domecq plc (NED); AeroSpace and Defence Trade Organisation (ASD) (Board member); British Airways plc (CFO). Current external appointments: Informa PLC (NED); Serco Group PLC (NED); Associated British Ports (NED)

FEIKE SIJBESMA. Previous relevant experience: Supervisory Board of DSM Netherlands (Chairman); Dutch Genomics Initiative (NGI) (Member); Utrecht University (Board member); Dutch Cancer Institute (NKI/AVL) (Board member). Current external appointments: Royal DSM N.V. (CEO and Chairman of the Managing Board); De Nederlandsche Bank (Member of the Supervisory Board); Carbon Pricing Leadership Coalition (Co-Chairman) and Climate Leader, convened by the World Bank Group

Unilever’s Group Secretary is Tonia Lovell and she was appointed in 2010.

OVERVIEW OF NON-EXECUTIVE DIRECTORS – INCLUDING DIVERSITY AND EXPERIENCE

 

    Marijn   Nils   Laura   Vittorio   Louise   Ann   Judith   Mary   Strive   Youngme   John   Feike
     Dekkers   Andersen   Cha   Colao   Fresco   Fudge   Hartmann   Ma   Masiyiwa   Moon   Rishton   Sijbesma
                            

Age

  59   58   67   55   65   65   47   64   56   52   59   57
                                                    
                            

Gender

  Male   Male   Female   Male   Female   Female   Female   Female   Male   Female   Male   Male
                                                    
                            

Nationality

  Dutch /

American

  Danish   Chinese   Italian   Dutch   American   Austrian   Chinese   Zimbab-
wean
  American   British   Dutch
                                                    
                            

Appointment date

  April

2016

  April
2015
  May

2013

  July
2015
  May

2009

  May

2009

  April
2015
  May
2013
  April
2016
  April
2016
  May

2013

  November
2014
                                                    
                            

Committee membership*

  CC, NCGC   AC   CRC, NCGC   CC   CRC

(Chairman)

  CC

(Chairman)

  AC   AC   CC   CRC   AC

(Chairman)

  NCGC

(Chairman),

CRC

                                                    
                            

Attendance at planned

Board Meetings**

  3/3   6/6   6/6   6/6   6/6   6/6   6/6   6/6   3/3   3/3   6/6   6/6
                                                    
                            

Attendance at ad hoc

Board Meetings

  2/2   1/2   1/2   1/2   1/2   2/2   2/2   2/2   2/2   2/2   0/2   2/2
                                                    
                            

Consumer

                       
                                                    
                            

Sales & Marketing

                       
                                                    
                            

Geopolitical networks

and insights

                       
                                                    
                            

Science & Technology

                       
                                                    
                            

Finance

                       
                                                    

 

* AC refers to the Audit Committee; CC refers to the Compensation Committee; CRC refers to the Corporate Responsibility Committee; and NCGC refers to the Nominating and Corporate Governance Committee.
** Attendance is expressed as the number of meetings attended out of the number eligible to be attended.

 

Annual Report on Form 20-F 2016   Strategic Report   3


Table of Contents
CHIEF EX ECUTIVE OFFICER’S REVIEW

    

 

It has been a busy start to 2017. While the proposed bid for the Group from the Kraft Heinz Company was without financial and strategic merit – and quickly seen as such – we are using it as an opportunity to review the options open to us to accelerate the delivery of value to shareholders. Our aim is to build on the strong track record we have built up of long-term value creation, which has seen a total shareholder return of 190% since 2009.

We will be saying more about this after the review is completed. For the moment, let me focus on the purpose of this report – a review of 2016. There is no doubt it was another difficult year for the global economy, characterised by low growth and slowing consumer demand. We also saw a significant backlash against the forces of globalisation, with all the related challenges around political polarisation and economic uncertainty.

While a more globalised and digitally-connected world has undoubtedly brought vast social and economic benefits, helping to lift millions out of poverty, it is equally clear that many people now feel left behind, detached from a system that they perceive no longer works in their interests. Brexit in the UK and the US Presidential election were clear manifestations of this desire on the part of many to see our political and economic systems evolve in a way that benefits more people.

These political developments and the rise of populism associated with them added to a growing sense of unease and uncertainty on the world’s markets, calling into question the shape of future trading relationships and in particular the unwelcome prospect of a return to protectionism. This comes at a time when trade is already slowing as a proportion of global GDP – itself one of the clear symptoms of a stuttering world economy.

While economic growth may be slowing there is no let-up in the pace of scientific and technological change. The advent of what has been termed a ‘fourth industrial revolution’ is already disrupting whole industry sectors, including our own, not least by increasing the opportunities for new – and mostly local – entrants. Competition is now coming from many, varied directions, making it more important than ever to stay ahead of fast-moving trends and to ensure our business remains relevant for the future.

Despite this turbulent and challenging backdrop, 2016 was another year of solid progress and achievement for Unilever. Guided by our model of consistent, competitive, profitable and responsible growth, we once again out-performed our markets, with 60% of the business gaining share.

We believe that this model of consistency, particularly at times of uncertainty, is in the best long-term interests of Unilever and a good indication of a robust strategy. Good quality top and bottom line growth has now been delivered over the last eight years, a rare achievement in today’s volatile and unpredictable markets and a clear sign of the progress we have made.

Underlying sales growth of 3.7% in 2016 was a good performance in both absolute and relative terms and would have been higher but for the impact of demonetisation in India and the economic crisis in Brazil, two major markets for Unilever. On the bottom line, profitability stepped-up as a result of our organisational change programmes and the returns we are now getting on the significant investments we have made in modernising our industrial base and in upgrading our in-house capabilities. Furthermore, we continue to exert tight discipline in capital spending and in working capital, with both improving again last year.

Importantly, growth was broad-based across our four major categories. This reflects the sharper and more differentiated strategies we have put in place, as well as our ability to roll-out bigger and stronger innovations to even more markets. Examples from 2016 included two of our thirteen 1 billion plus brands: Rexona Antibacterial deodorant, which helps eliminate over 90% of odour-causing bacteria, was introduced to more than 40 countries; and Omo, with its enhanced formulation and cleaning technology, has now successfully been rolled-out across 27 markets.

In addition to driving our core business, it is also important that we continue to experiment with new models, channels and innovative

approaches. That is why we took the opportunity in 2016 to strengthen the business further by acquiring a number of attractive businesses in fast-growing segments of the market and with a strong appeal among Millennials. Seventh Generation, Blueair and the Dollar Shave Club all joined the Unilever family and are proving to be great additions. Since the beginning of 2017 we have also been delighted to welcome Living Proof.

This consistent evolution of the portfolio means that over the last eight years we have disposed of 2.8 billion of turnover in non-strategic businesses and acquired 4 billion in faster growing areas of the market, notably Personal Care, which today accounts for 38% of our total business, up from 28% only eight years ago. We have also invested a total of 3.4 billion in increasing our participation in countries where we do not own 100% of our subsidiaries, most recently in Egypt and China.

The relevance and importance of the Unilever Sustainable Living Plan (USLP) in driving a responsible business model, and in helping to accelerate the growth and profitability of Unilever, was demonstrated again in 2016. Our leadership was also recognized externally. We were industry group leader in the prestigious Dow Jones Sustainability Index, for example, and for the sixth consecutive year we topped the Globescan/SustainAbility survey of experts on leadership in sustainability.

The alignment of our USLP objectives to the 17 Global Goals for Sustainable Development, set out by the United Nations to eradicate poverty in a sustainable and equitable way by 2030, further highlights the relevance of our approach in helping to address some of today’s most urgent global challenges. As the recent report from the Business & Sustainable Development Commission also makes clear, addressing these challenges can generate significant economic opportunities for enlightened businesses, possibly adding as much as 12 trillion to the global economy.

As we look ahead it is clear that the world around us is changing at an accelerating pace. Digital technology in particular is transforming every aspect of the way we live, work and shop.

Companies that thrive in this increasingly dynamic environment will be those best able to respond quickly and innovatively to rapidly changing consumer preferences and market conditions, able to display agility on the one hand and resilience on the other. This calls for faster, simpler and more agile organisational models, as well as cost structures that reflect only the costs that consumers are willing to bear.

We have been answering this call with a major change programme – one of the biggest in Unilever’s history. Connected 4 Growth (C4G) will simplify the way we are organised, freeing up time, resource and – most importantly – the entrepreneurial instinct needed to seize the opportunities that a more digitally connected world provides. The changes, which have been developed thoroughly over the last two years, will touch all elements of Unilever and will help to sharpen even further the strong performance culture we have built up at Unilever.

We will complete the implementation of the C4G programme in 2017. Together with related savings programmes – like Zero-Based Budgeting – it will release funds to support our growth ambitions and accelerate margin improvement, despite what we expect to be a continuation of the very tough trading environment.

Unilever’s strong performance in 2016 and the further steps we took to strengthen the fundamental pillars of the business could not have been achieved without the 169,000 wonderful men and women of Unilever, as well as the many thousands more who work with us throughout the value chain. I thank all of them for their leadership, integrity and dedication.

PAUL POLMAN

CHIEF EXECUTIVE OFFICER

 

 

 

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UNILEVE R LEADERSHIP EXECUTIVE (ULE)

    

 

 

FOR PAUL POLMAN AND GRAEME PITKETHLY SEE PAGE 3

 

 

  

 

  

 

  

 

 

DAVID BLANCHARD

Chief R&D Officer

 

  

MARC ENGEL

Chief Supply Chain Officer

  

KEVIN HAVELOCK

President, Refreshment

  

ALAN JOPE

President, Personal Care

 

  

 

  

 

  

 

Nationality British Age 52, Male

Appointed to ULE January 2013

Joined Unilever 1986

Previous Unilever posts include:

Unilever Research & Development (SVP);

Unilever Canada Inc. (Chairman); Foods America (SVP Marketing Operations); Global Dressings (VP R&D); Margarine and Spreads (Director of Product Development)

Current external appointments:

Ingleby Farms and Forests (NED)

  

Nationality Dutch Age 50, Male

Appointed to ULE January 2016

Joined Unilever 1990

Previous Unilever posts include:

Unilever East Africa and Emerging Markets (EVP); Chief Procurement Officer; Supply Chain, Spreads, Dressings and Olive Oil Europe (VP); Ice Cream Brazil (Managing Director); Ice Cream Brazil (VP); Corporate Strategy Group; Birds Eye Wall’s, Unilever UK (Operations Manager)

Current external appointments:

PostNL (Member of the Supervisory Board)

 

  

Nationality British Age 59, Male

Appointed to ULE November 2011

Joined Unilever 1985

Previous Unilever posts include:

Global Ice Cream Category (EVP); Unilever North America and Caribbean (EVP); Unilever France (Président Directeur Général); Unilever Arabia (Chairman); Unilever UK (Chairman)

Current external appointments: Pepsi/Lipton JV (Co-Chairman)

  

Nationality British Age 52, Male

Appointed to ULE November 2011

Joined Unilever 1985

Previous Unilever posts include:

Unilever Russia, Africa and Middle East (President); Unilever North Asia (President); SCC and Dressings (Global Category Leader); Home and Personal Care business in North America (President)

 

  

 

  

 

  

 

 

KEES KRUYTHOFF

President, North America

 

  

LEENA NAIR

Chief Human Resources Officer

  

NITIN PARANJPE

President, Home Care

  

RITVA SOTAMAA

Chief Legal Officer

 

  

 

  

 

  

 

Nationality Dutch Age 48, Male

Appointed to ULE November 2011

Joined Unilever 1993

Previous Unilever posts include: Brazil (EVP); Unilever Foods South Africa (CEO); Unilever Bestfoods Asia (SVP and Board member)

Current external appointments:

Pepsi/Lipton JV (Board member); Enactus (Chairman)

  

Nationality Indian Age 47, Female

Appointed to ULE March 2016

Joined Unilever 1992

Previous Unilever posts include: HR Leadership and Organisational Development and Global Head of Diversity (SVP)

  

Nationality Indian Age 53, Male

Appointed to ULE October 2013

Joined Unilever 1987

Previous Unilever posts include:

Hindustan Unilever Limited (CEO); Home and Personal Care, India (Executive Director); Home Care (VP); Fabric Wash (Category Head); Laundry and Household Cleaning, Asia (Regional Brand Director)

  

Nationality Finnish Age 53, Female Appointed to ULE February 2013

Joined Unilever 2013

Previous posts include: Siemens AG – Siemens Healthcare (GC); General Electric Company – GE Healthcare (various positions including GE Healthcare Systems (GC)); Instrumentarium Corporation (GC) Current external appointments:

Fiskars Corporation (NED)

 

 

  

 

  

 

  

 

 

AMANDA SOURRY

President, Foods

  

 

KEITH WEED

Chief Marketing & Communications Officer

 

  

 

JAN ZIJDERVELD

President, Europe

  

 

  

 

  

 

  

Nationality British Age 53, Female

Appointed to ULE October 2015

Joined Unilever 1985

Previous Unilever posts include:

Global Hair (EVP); Unilever UK and Ireland (EVP and Chairman); Global Spreads and Dressings (EVP); Unilever US Foods (SVP)

Current external appointments: PHV Corp. (NED)

  

Nationality British Age 55, Male

Appointed to ULE April 2010

Joined Unilever 1983

Previous Unilever posts include:

Global Home Care and Hygiene (EVP); Lever Fabergé (Chairman); Hair and Oral Care (SVP) Current external appointments:

Business in the Community International Board (Chairman); Business in the Community (Board member)

  

Nationality Dutch Age 52, Male

Appointed to ULE February 2011

Joined Unilever 1988

Previous Unilever posts include:

South East Asia and Australasia (EVP); Unilever Middle East North Africa (Chairman); Nordic ice cream business (Chairman)

Current external appointments:

AIM (Vice-President); FoodDrinkEurope (Board member); Pepsi/Lipton JV (Board member); ECR Europe (Efficient Consumer Response) (Board member)

 

  

 

  

 

  

 

  

 

 

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OUR MARKETS   

    

 

UNILEVER OPERATES IN THE FAST-MOVING CONSUMER GOODS (FMCG) INDUSTRY, ONE OF THE LARGEST AND MOST COMPETITIVE INDUSTRIAL SECTORS IN THE WORLD.

As an indication of the size of the FMCG industry that Unilever competes in, the top 25 global players generate sales of about 590 billion. While enjoying significant scale, global FMCG players are also facing material risks and challenges to their traditional business models.

Our markets are characterised by intense levels of competition, globally but also locally, and equally intense levels of change and fragmentation among consumers, routes to market, media used to reach consumers and business models. This is disrupting the competitor landscape. 2016 has seen significant milestones achieved in Unilever’s response, through innovation-led growth, acquisitions and disposals or our Connected 4 Growth change programme.

Increased competition and disruption within the FMCG industry continue to drive the trend for consolidation and focus, notably among larger players.

Cost reduction is a constant theme, as is a requirement to ensure focus on execution and the management of brands which fit specific strategic objectives. This continues to lead to disposals, with proceeds – at least in part – reinvested in rebalancing portfolios for long-term growth.

Our markets continue to see rapid and conflicting changes to how consumers live, representing significant social challenges for our business. The middle class, middle income, nuclear family – once the bedrock of FMCG businesses – is no longer as culturally dominant. In the US, the middle class has ceased to be the nation’s economic majority, although in emerging markets the middle class continues to expand. However, worldwide the demographic divide continues to widen with older generations commanding significant spending power compared with younger generations often exposed to high levels of unemployment.

That said, research shows that by 2025 Millennials (18-34 year olds) will number around 2.3 billion people, representing the largest population cohort globally. Their spending power will have risen to 1.7 trillion, 570 billion of which will be for non-essential expenditure. Such spending power encourages the trend for growth categories such as foods with organic and traceable ingredients, free-from alternatives and personal care products with natural formulations and greater authenticity – all areas in which Unilever has innovated this year.

Consumer concerns once considered niche, such as sustainability, have gone mainstream. Our own research shows that interest in sustainability cuts across demographic and socio-economic groups, with 78% of consumers in the US, 53% in the UK, 85% in Brazil and 88% in India agreeing that they felt better about themselves when they bought products that they knew were sustainable or better for the environment. These trends are shared across emerging markets and developed markets with consumers in emerging markets often more acutely aware of sustainability issues. In South Africa, for instance, our laundry brand Sunlight responded with a revolutionary water-saving formulation in 2016 which reduced by half the amount of water and time required for laundry.

Whether in emerging or developed markets, the trend for consumers to be motivated to buy sustainably is clear. In Unilever’s study, 54% of consumers either already buy sustainably or are open to buying sustainably.

ECONOMIC FORCES

2016 has added further evidence to the prevailing wisdom among economists of a ‘slow growth’ global economy becoming embedded as a medium- to long-term issue, caused by falling population growth and productivity levels. The OECD has predicted that its members, plus Nigeria (Africa’s largest economy), will see average growth over the next 50 years of 2.4%, down from 3.6% over the previous 50 years.

In the short-term, a mix of weakening consumer confidence during 2016 combined with a recovery in commodity prices, such as Brent Crude and palm oil, and sharp fluctuations in the currency markets, have continued to drive volatility in our markets. Against this backdrop, growth in Europe was slightly down, with increased political and economic uncertainty caused by events such as the UK’s decision to leave the EU. We respect the outcome of the UK’s EU referendum. Brexit will not change our commitment to creating a strong and thriving UK and European business. Since we sell our products in more than 190 countries, we are used to dealing in many currencies and inside many different trading structures. We will adapt to the new arrangements, whatever the outcomes. In the meantime, we remain focused on delivering consistent, competitive, profitable and responsible growth.

North America is witnessing slightly better economic conditions and an improvement in growth. In emerging markets, Latin America has experienced slowing consumer demand with countries such as Brazil in recession while Asia has seen weaker demand with some inflationary pressures coming through.

Emerging markets still provide the FMCG industry with significant growth potential and cause for optimism. Unilever is unique in having around 70% of its volume in emerging markets, equal to 57% of turnover in emerging markets. Unlike in developed markets such as the US, the number of people at middle income levels is expected to continue to grow, with a further 800 million by 2020 generating higher levels of per capita consumption that will benefit FMCG companies. The continuing trend of urbanisation in emerging markets means there will be another 400 million people living in cities while an additional 300 million women are predicted to move into paid employment by 2020, supporting demand for FMCG products.

There are certainly bright spots in emerging markets but overall growth is weaker at present than many FMCG groups have been used to.

MARKET DISRUPTORS

These more restrained growth rates make traditional business models all the more sensitive to greater competition, which is becoming ever more disruptive and unpredictable in nature.

A key disruptor is the increased success of local competitors. These players have always been present but are increasingly sophisticated. Their advantages include a scale and organisational approach that allows for a more agile, nimble and culturally attuned response to changing consumer needs, thanks to relevant local insights.

At the same time, the FMCG industry is seeing a new generation of entrepreneur enter the industry with brands that speak directly to growth segments, such as Millennials, with values, purpose and attributes directly relevant to these groups.

 

 

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Such entrepreneurial challengers utilise digital distribution and marketing to forge alternative business models that represent another source of disruption. Chief among these is a direct-to-consumer model with cost advantages and faster response times to changing consumer needs. Crucial also is the direct relationship forged with consumers, providing data that can be utilised to improve brand offers and more accurately generate and predict sales opportunities. Such direct-to-consumer models are accelerating the further fragmentation of the traditional sales channels used by FMCG groups, such as the ‘big box’ retailers and long-established distributors within markets. Brands that can apply a subscription model – generally premium brands with strong consumer engagement – or are a replenishment purchase are particularly well suited to the direct-to-consumer model.

Unilever is responding to these challenges by making the business fitter and more agile through our Connected 4 Growth programme. Our focus on active portfolio management means we can also respond through acquisitions and disposals to ensure our brand portfolio remains resilient. Our acquisition of Dollar Shave Club in 2016 is a good example of this.

DIGITAL REVOLUTION

The adoption of digital technology continues to impact every walk of life. Research shows that global online shopping retail sales are predicted to grow to US$370 billion in 2017, while 18-34 year olds in the US spend US$2,000 per head on e-commerce annually which is more than any other group.

Digital shopping is being powered by mobile devices with about 50% of the world’s population now mobile subscribers and PC sales in decline. Mobile access to the internet is being accelerated by the take-up of smartphones, which Cisco predicts will account for half of all global devices and connections by 2020.

Digital technology is also empowering companies’ understanding of consumers. Unilever’s own Consumer and Market Insights (CMI) group has created People Data Centres which analyse data from social media, consumer carelines and digital marketing to turn millions of conversations into business decisions to maximise sales and revenue.

Consumers’ use of technology, however, is constantly changing. Generation Z (post-Millennial generation) are increasingly adopting applications such as WhatsApp and Snapchat, reflecting an evolving approach to social media usage, including a more comprehensive use of privacy settings.

Artificial Intelligence, augmented and virtual reality are increasingly being incorporated in many companies’ marketing plans with these technologies rapidly going mainstream and falling within consumer affordability, increasing take-up and further accelerating its development.

ENVIRONMENTAL AND SOCIAL CHALLENGES

The business case for sustainability is increasingly accepted, witnessed by private sector support of the Global Goals for Sustainable Development (see page 19) and evidence that consumers want to buy more sustainably. Unilever is not alone in recognising that a sustainable business requires sustainable production, sustainable consumption and climate stability but there is more work to be done.

According to the World Meteorological Organization, 2016 was the hottest year on record. The top three ten-year risks in the World Economic Forum’s Global Risks Survey relate to this fact. They are: water crises; failure of climate change mitigation and adaptation; and extreme weather events. The FMCG industry relies on agriculture to provide its raw materials but agriculture is also part of the environmental problem, causing deforestation which accounts for 15% of global greenhouse gas emissions. Consumption places a strain on natural resources such as water and uses energy in both manufacturing and end-use which contributes to harmful emissions and further climate change problems.

We are taking direct action to address climate change within our value chain. For instance, we have committed to being carbon positive in our operations by 2030, with all electricity purchased from the grid coming from renewable sources and coal eliminated from our energy mix by 2020. We will also support the generation of more renewable energy than we consume and make the surplus available to the markets and communities where we operate.

There are serious human and social consequences to these environmental challenges too, not least displacement caused by severe weather events and threats to the livelihoods of smallholder farmers. Shortages of clean water have hygiene implications while the dwindling of natural resources reinforces social inequality. Find out how we are addressing societal issues on pages 16 to 18.

 

 

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OUR BU SINESS MODEL

    

 

WE BELIEVE THAT SUSTAINABLE AND EQUITABLE GROWTH IS THE ONLY LONG-TERM BUSINESS MODEL. THAT IS WHY WE HAVE PLACED THE UNILEVER SUSTAINABLE LIVING PLAN AT THE HEART OF OURS.

Our sustainable business model drives growth that is consistent by reducing risks, is more competitive by inspiring innovations that help us grow, is more profitable by reducing costs and is more responsible – leading to enhanced trust in our business.

The three big goals of the USLP – to help more than 1 billion people improve their health and well-being by 2020; to halve the environmental impact of our products across the value chain by 2030; and to enhance the livelihoods of millions as we grow our business by 2020 – are integrated into our business model. From sustainable sourcing of our agricultural raw materials to eco-production in manufacturing to marketing brands with purpose – the USLP is our blueprint for achieving our vision.

We invest in innovation and brands, which creates profitable volume growth. Our scale spreads fixed overheads, improving profitability further, and this profitable growth allows us to reinvest, generating more free cash flow which can be further invested in brands and innovation which in turn drive more profitable volume growth. Our geographical reach also helps spread the risks of local environmental disruptions in our markets caused by climate change.

CONSUMER INSIGHT

Our business model begins with consumer insight which informs brand innovation. Accurate insight is critical to understanding how markets are changing and segmenting. We forge relationships with consumers through insights from focus groups and quantitative studies. Digital research adds one-on-one sophistication while new lines of communication are opening through direct-to-consumer channels, allowing closer relationships.

Our Consumer and Market Insight (CMI) group helps us prioritise growth opportunities. Through CMI we monitor data about consumption patterns and social media dialogue to inform action, including sustainability insights, which drive product innovations and behaviour change programmes.

COLLABORATION

Collaboration is critical to our success. We are open to external ideas and adept at capturing and integrating their benefits. The USLP involves working with many governments and NGOs. Our supply chain operates our Partner to Win programme to encourage innovations from suppliers. For example, we work with biotechnology partners to create laundry products that give superior stain removal and whiteness while using less water and energy. This furthers innovation-led growth and our USLP commitment to halve the environmental impact of our products across their lifecycle.

INNOVATION

Unilever spends 1 billion annually on research and development, employing approximately 6,000 experts to drive innovation, often in partnership with suppliers and academia. Our innovations use insights and technologies to deliver brand-led benefits which meet the latest trends. Examples include natural variants in Foods and Personal Care by our Knorr and TRESemmé brands, and vegan product variants by Ben & Jerry’s and Hellmann’s. Our innovation is increasingly responsive to local needs, landing results faster into markets.

An important development in 2016 has been the announcement of our intention to build a new global Foods Innovation Centre in Wageningen, The Netherlands, complementing similar innovation centres in Port Sunlight and Colworth in the UK, Shanghai in China, Bangalore in India and Trumbull in the US.

SOURCING

Our procurement teams are responsible for purchasing 34 billion of goods and services. They are central to driving efficiencies to enhance profitability, delivering over 1 billion of savings, but also implementing our USLP. 51% of our agricultural raw materials were sustainably sourced in 2016, including 95% of our top 13 vegetables and herbs and 75% of tea, supporting brands such as Knorr and Lipton. 67% of our suppliers met the mandatory self-assessed criteria in our Responsible Sourcing Policy.

 

 

LOGO

 

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MANUFACTURING

We operate 306 factories in 69 countries and employ approximately 100,000 people in 100 countries. Our focus is on implementing World Class Manufacturing with 119 factories enrolled and 139.5 million of savings identified. We also carry out annual climate change risk assessments at the manufacturing site level alongside environmental initiatives.

Our Aguai factory in Brazil is setting new benchmarks in sustainability. With Brazil’s water system under huge strain due to climate change, 60% of the site’s water needs will be met by collecting rainwater and recycling waste water, while returning clean water to the environment. Skylights reduce artificial light needs and solar panels power the entire administration block.

LOGISTICS

We operate a network of around 400 warehouses globally coordinated by a central system of control towers that improve customer service, cut costs and reduce emissions. We transport goods the equivalent of approximately 1.5 billion km a year. In 2016, despite significantly higher volumes, we have achieved a 7.5% CO 2 absolute emissions reduction across 14 countries compared to 2015. We have also delivered a 27% improvement in CO 2 efficiency measured as kg CO 2 /tonne sold compared to 2010 figures across these 14 countries. This has been achieved by reducing truck mileage; using lower emission vehicles and fuels; employing alternative transport such as rail or ship; and improving the energy efficiency of our warehouses.

MARKETING

In 2016 we mapped consumers’ purchase journeys in the digital world, using data to delve deeper and segment consumers more accurately. This enables us to deliver more relevant, authentic and effective marketing content in real time using the full range of digital communications. We have launched U-Studio, our in-house studios, to create content and advertising across our digital platforms, direct-to-consumer, e-commerce channels and our social and digital communications to make marketing faster, more efficient and effective. In parallel U-Entertainment collaborates with media companies to create brand-inspired entertainment content.

Sustainability is an integral part of our brand strategies. We want all of our top brands to be Sustainable Living brands, which combine a strong purpose delivering a social or environmental benefit, with products contributing to at least one of our USLP goals.

SALES

Generating turnover of 52.7 billion in 2016 in a highly competitive market place involves a sophisticated Customer Development function. We work closely with retailers, online through e-commerce and in physical stores. Our teams ensure our brands are always available, properly displayed and in the right recommended price bracket. We strive to be supplier of choice for customers and trade partners, through strong joint business planning and in-store execution applying our Perfect Store programme. In 2016 this reached 10 million plus executions, to deliver sales growth as we launch product innovations and brand extensions, and enter new geographies.

In 2016 we developed a strategic framework to ensure Unilever wins with every shopper on every occasion. As the traditional channels continue to fragment, we have brought renewed focus to e-commerce and out-of-home. We have now added an additional focus on small and convenience stores. There are 33 million of these globally, growing at about 5% annually as consumers shop more regularly for smaller baskets of goods. We are using our global advantages of technology and analytics to help us execute through these local channels via flexible service models and digitised distribution systems, further strengthening our strong heritage in this channel.

DELIVERING VALUE FOR OUR STAKEHOLDERS

Key to our sustainable business model are our stakeholders. To succeed we need to engage and work in partnership with them. They include customers and consumers; investors; suppliers; governments, regulators and legislators; NGOs and charities; scientific institutions and academia; and other organisations in the business world, including peer companies and trade associations.

Some of our stakeholders are direct participants in our value chain and are integral to our ability to deliver consistent, competitive, profitable and responsible growth. Others influence how we do business by setting the laws and norms within our countries of operation. In turn, we deliver value to our stakeholders in various forms. Read about the value we deliver for consumers, society, employees and shareholders on pages 14 to 22.

Stakeholder engagement is essential in delivering our Compass strategy outlined on page 10 and in tackling the issues addressed by the USLP. We also combine action in our business with external advocacy and joint working with governments, NGOs and others through ‘transformational change’ partnerships. By working together, we believe that fundamental change is possible in the near-term. Read more about our work in our four transformational areas in the Society section on page 16.

 

 

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OUR STRA TEGIC FOCUS   

    

 

OUR CATEGORIES HAVE CLEARLY DEFINED STRATEGIES WITH THE COMMON GOAL OF GROWTH THAT IS CONSISTENT, COMPETITIVE, PROFITABLE AND RESPONSIBLE.

    

 

Further binding the category strategies together are our Compass pillars which define how Unilever wins in the FMCG industry. They are:

  Winning with brands and innovation
  Winning in the marketplace
  Winning through continuous improvement
  Winning with people.

Underpinning the Compass is the USLP which is the foundation of our business. By delivering social and environmental benefits throughout our business we drive our growth, which in turn drives our ability to improve the lives and opportunities of people everywhere.

The USLP contributes directly to consistent growth by helping manage risk through the supply of sustainably-grown agricultural raw materials, such as vegetables in our Foods brands, especially important as climate change affects rainfall. It drives growth that is competitive by stimulating innovation to create brands that meet the growing consumer demand for sustainable products. Profitable growth is achieved by reducing costs through our eco-production methods in our factories, which reduce waste, use fewer raw materials and consume less energy. And responsible growth is an outcome from the trust that we earn by acting ethically and responsibly. Our impact on society through the USLP and our wider partnerships and collaboration, is detailed further on page 16.

Each of Unilever’s four category strategies includes specific priorities aimed at growing sales and delivering improved financial metrics, such as margin and cash flow, against a backdrop of continued low growth in markets globally. The individual category strategies are:

  Personal Care – Grow the core and build premium
  Foods – Accelerate growth and preserve the value of strong cash flows
  Home Care – Step up profitability and scale household care
  Refreshment – Grow ice cream return on capital investment and accelerate growth in tea.

Our categories face numerous and increasingly complex challenges in their markets as the industry experiences rapid fragmentation and disruption. However, our Compass pillars provide strategic responses to help drive growth ahead of our markets.

Our success as an organisation depends on our ability to identify and mitigate the risks generated by our business and the markets we are in. In doing this, we take an embedded approach to risk management which puts risk and opportunity assessment at the core of the leadership team agenda, which is where we believe it should be. A summary of the most material risks to our business performance – our Principal Risk Factors – are described on pages 37 to 41.

 

 

 

 WINNING WITH BRANDS AND INNOVATION

 

 

We are innovating to meet trends displaying high growth. For instance, Pure Leaf tea responds to the demand for natural ingredients, Sunsilk Hijab Recharge shampoo benefits Muslim women wearing hijabs, while Lux Silicone-Free and the recently launched Hellmann’s vegan mayonnaise provide ‘free-from’ alternatives.

 

Our ambition is to divide our innovation work as follows: 70% global brands at scale, such as Magnum and Axe; 20% global brands locally adapted, for example Knorr and Sunsilk; 10% local brands like Bango and Marmite.

 

We are focused on innovating in high-growth segments, creating our own disruptive technologies, innovating faster and being more agile locally. In 2016 43% of innovation turnover was driven by new technology which differentiates us from competitors, up by more than 20% in recent years. This is increasingly driven by collaboration with external parties through our global R&D, supply chain and procurement functions.

 

Marketing drives consumer-led growth but has to remain relevant. In 2016 we have trained more than 5,000 marketers globally with over 90,000 lessons through our Connected World Programme to increase the digital skills and understanding that are essential in a connected world.

 

We work closely with partners developing leading marketing and insight technology. Through Unilever Ventures, for example, we have invested in and partnered with Blis to provide geo-located mobile targeting services to drive footfall to our T2 tea stores. Technology also drives further efficiency in our 8 billion annual marketing spend. For instance, ULTRA is our proprietary trading desk which allows programmatic planning and buying across digital platforms globally.

 

 

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 WINNING IN THE MARKETPLACE

 

 

We lead market development by growing new channels with a focus on execution through our Perfect Stores programme.

 

We work with customers, such as large retail chains, to generate insights about who visits their stores using technology that creates detailed shopper profiles. This allows us to target and personalise campaigns. We also work closely with these customers for our new ‘Selling with Purpose’ programme, which will increase the number of touch-points in our distribution chain, thereby creating more employment opportunities for people across the world, and enabling our consumers to enjoy our brands with purpose, which in turn unlocks growth.

 

E-commerce grew 49% in 2016 and the direct to consumer channel expanded significantly, mainly through the acquisition of Dollar Shave Club, growing at 47% year-on-year.

 

Acquisitions are part of our relentless focus on actively managing our brand portfolio. They help preserve our market position in attractive segments where we can bring our global scale and local strengths to bear. They also bring us disruptive business models and business styles that are entrepreneurial, helping transform our business culture. Disposals liberate capital to reinvest in higher-growth segments in support of our objective of long-term growth.

 

 

 

 WINNING THROUGH CONTINUOUS IMPROVEMENT

 

 

Key to Unilever meeting its growth ambitions is building agility and resilience into our organisation. We have three key initiatives within our Connected 4 Growth programme:

 

Organisational Change – a programme to make us faster, simpler, more consumer and customer-centric while unlocking capacity. It will make us more agile at lower cost with a more streamlined organisation. We are deploying more resource in global brand communities and local operations, with fewer layers in decision-making. It will allow us to leverage what can be done globally at scale while empowering people to take more effective action locally.

 

Zero-Based Budgeting (ZBB) – we have analysed expenditure and challenged what we spend, where and why to help drive value and growth. Having benchmarked Unilever to identify where we spend above and below peers, we have identified which activities can deliver savings and which have appropriate expenditure. ZBB, together with the Organisational Change programme, will aim to deliver at least 1 billion of savings by 2018 and more than 1 billion by 2019, to further support our business.

 

Net Revenue Management (NRM) – a detailed programme to optimise pricing which aims to drive additional volume as well as value. It ensures the right packs, at the right prices in the right channels to optimise differing buying opportunities. At the end of 2016 NRM had been applied to about 50% of our turnover since its introduction.

 

 

 

 WINNING WITH PEOPLE

 

 

Our People strategy aims to ensure that we attract and retain the talent we require to achieve our strategic growth priorities. Our workforce, totalling around 169,000 people, is our most powerful resource to transform our business.

 

We are becoming a more agile and empowered organisation. By changing our structure, we are creating more capable leaders with more time to focus on their roles and we are inspiring our people through purpose, well-being and management. Our people are also key to delivering the USLP and contributing to its targets.

 

More details about Our People can be found on pages 20 and 21.

 

.

 

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OUR PERF ORMANCE

    

 

THE BENEFITS THAT OUR VISION AND STRATEGY DELIVER TRANSLATE INTO PERFORMANCE FOR SHAREHOLDERS AND SOCIETY AT LARGE.

FINANCIAL PERFORMANCE

 

 

 

GROWING THE BUSINESS: GROUP

 

   
TURNOVER GROWTH   OPERATING MARGIN
   
2016   2016
   
(1.0)%   14.8%
   

2015: 10.0%

 

 

2015: 14.1%

 

       
UNDERLYING SALES GROWTH *   UNDERLYING VOLUME GROWTH *   CORE OPERATING MARGIN *   FREE CASH FLOW *
       
2016   2016   2016   2016
       
3.7%   0.9%   15.3%   4.8 billion
       
2015: 4.1%   2015: 2.1%   2015: 14.8%   2015: 4.8 billion
       

Underlying sales growth

averaged 4.4% over five years.

 

Underlying volume growth

averaged 2.0% over five years.

 

Core operating margin has steadily increased over five years from 13.7% to 15.3%.

 

 

Unilever has generated free

cash flow of 20.9 billion over

five years.

 

 

GROWING THE BUSINESS: CATEGORIES

 

       
PERSONAL CARE   FOODS   HOME CARE   REFRESHMENT
       
Turnover   Turnover   Turnover   Turnover
       
20.2 billion     12.5 billion   10.0 billion   10.0 billion
       
2015: 20.1 billion   2015: 12.9 billion   2015: 10.2 billion   2015: 10.1 billion
       
Turnover growth   Turnover growth   Turnover growth   Turnover growth
       
0.5%   (3.1)%   (1.5)%   (1.1)%
       
2015: 13.2%   2015: 4.5%   2015: 10.9%   2015: 10.3%
       
Underlying sales growth   Underlying sales growth   Underlying sales growth   Underlying sales growth
       
4.2%   2.1%   4.9%   3.5%
       
2015: 4.1%   2015: 1.5%   2015: 5.9%   2015: 5.4%
       
Operating margin   Operating margin   Operating margin   Operating margin
       
18.4%   17.4%   9.5%   9.7%
       
2015: 18.1%   2015: 17.8%   2015: 7.3%   2015: 8.3%
       
Core operating margin   Core operating margin   Core operating margin   Core operating margin
       
19.1%   17.9%   9.7%   9.9%
       
2015: 18.9%  

2015: 18.2%

 

  2015: 7.6%   2015: 9.4%

 

* Key Financial Indicators.

Underly ing sales growth, underlying volume growth, core operating margin and free cash flow are non-GAAP measures. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of the business, please refer to our commentary on non-GAAP measures on pages 26 to 28.

 

12   Strategic Report    Annual Report on Form 20-F 2016


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UNILEVER SUSTAINABLE LIVING PLAN

 

 

IMPROVING HEALTH AND WELL-BEING

 

  

 

ENHANCING LIVELIHOODS

 

 

By 2020 we will help more than a billion people take action to improve their health and well-being.

 

  

 

By 2020 we will enhance the livelihoods of millions of people as we grow our business.

 

HEALTH AND HYGIENE

 

TARGET

By 2020 we will help more than a billion people to improve their health and hygiene. This will help reduce the incidence of life-threatening diseases like diarrhoea.

 

PERFORMANCE

Around 538 million people reached by end 2016 through our programmes on handwashing, safe drinking water, oral health, sanitation and self-esteem.

  

 

NUTRITION

 

TARGET

By 2020 we will double the proportion of our portfolio that meets the highest nutritional standards, based on globally recognised dietary guidelines. This will help hundreds of millions of people to achieve a healthier diet.

 

PERFORMANCE

35% of our portfolio by volume met the highest nutritional standards in 2016, based on globally recognised dietary guidelines.

  

 

FAIRNESS IN THE WORKPLACE

 

TARGET

By 2020 we will advance human rights across our operations and extended supply chain.

 

PERFORMANCE

67% of procurement spend through suppliers meeting mandatory requirements of our Responsible Sourcing Policy.

 

We continued to embed human rights with a focus on our eight salient human rights issues which are documented in our 2015 Human Rights Report.

 

Our Total Recordable Frequency Rate for 2016 was 1.01 per million hours worked (2015: 1.12).** f

 

Engagement score among 6,228 employees surveyed in 2016 was 76% (2015: 77%).**

 

  

 

OPPORTUNITIES FOR WOMEN

 

TARGET

By 2020 we will empower

5 million women.

 

PERFORMANCE

We enabled around 920,000 women to access initiatives aiming to promote their safety, develop their skills and expand their opportunities. LOGO

 

The percentage of persons of each sex who were Unilever managers was 54% male and 46% female (2015: 55% male and 45% female).**

  

 

INCLUSIVE BUSINESS

 

TARGET

By 2020 we will have a positive impact on the lives of 5.5 million people.

 

PERFORMANCE

In 2016 we enabled around 650,000 smallholder farmers and 1.5 million small-scale retailers to access initiatives aiming to improve their agricultural practices or increase their incomes. LOGO f

                   

 

REDUCING ENVIRONMENTAL IMPACT

 

 

By 2030 our goal is to halve the environmental footprint of the making and use of our products as we grow our business.

 

 

GREENHOUSE GASES

 

TARGET

Halve the greenhouse gas impact of our products across the lifecycle by 2030.

 

 

PERFORMANCE

 

OUR OPERATIONS

We produced 83.52 kg CO 2 from energy per tonne of manufacturing production (2015: 88.49kg).** f

 

OUR PRODUCTS’ LIFECYCLE

Our greenhouse gas impact per consumer use has increased by around 8% since 2010. q

  

 

WATER

 

TARGET

Halve the water associated with the consumer use of our products by 2020.

 

 

PERFORMANCE

 

OUR OPERATIONS

We used 1.85m 3 water per tonne of manufacturing production (2015: 1.88m 3 ).** f

 

OUR PRODUCTS IN USE

Our water impact per consumer use has reduced by around 7% since 2010.

  

 

WASTE

 

TARGET

Halve the waste associated with the disposal of our products by 2020.

 

 

PERFORMANCE

 

OUR OPERATIONS

We sent for disposal 0.35kg of total waste per tonne of manufacturing production (2015: 0.26kg).** f

 

OUR PRODUCTS AT DISPOSAL

Our waste impact per consumer use has reduced by around 28% since 2010. q

 

  

 

SUSTAINABLE SOURCING

 

TARGET

By 2020 we will source 100% of our agricultural raw materials sustainably.

 

PERFORMANCE

51% of agricultural raw materials sustainably sourced by end of 2016 (2015: 60%). y This includes 48% as physical sustainable sources (2015: 39%) and 3% in the form of certificates used mainly in soy and sugar (2015: 3%). In 2016, we stopped buying GreenPalm certificates (2015: 18%). See Society (page 18) for an explanation.

 

** Key Non-Financial Indicators.
PricewaterhouseCoopers (PwC) assured. For details and the basis of preparation see www.unilever.com/ara2016/downloads.
f Measured 1 October – 30 September.
Full Global People Survey not undertaken in 2015. Comparator is for full survey among managers in 2014.
LOGO Around 300,000 women have accessed initiatives under both the Inclusive Business and the Opportunities for Women pillars in 2016.
q The 2010 baseline has been restated by a reduction of 0.2g CO 2 per consumer use for Greenhouse Gases and a reduction of 0.04g per consumer use for Waste.
y In 2016 had we continued to buy GreenPalm certificates our overall sustainable sourcing performance in 2016 would have been 66%.
For more details see  www.unilever.com/sustainable-living.

 

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DELIVERING VALUE FOR OUR STAKEHOLDERS

    

 

 

OUR CONSUMERS

PERSONAL CARE

PERSONAL CARE IS UNILEVER’S LARGEST CATEGORY WITH A TURNOVER OF 20.2 BILLION IN 2016, ACCOUNTING FOR 38% OF UNILEVER’S TURNOVER AND 48% OF OPERATING PROFIT.

Unilever is one of the big three global players in Personal Care, with a growth rate that continues to outpace the market. It includes five 1 billion brands: Axe, Dove, Lux, Rexona and Sunsilk.

Personal Care’s strategic role is to deliver competitive growth of the core brands while premiumising the overall portfolio. In 2016 the category continued to execute its strategy and delivered underlying sales growth of 4.2%.

Dove continued its global Self Esteem Project, helping the next generation of women to realise their full potential, and helping make beauty a source of confidence, not anxiety. In 2016, Dove unveiled a new campaign in India, ‘Let’s Break the Rules of Beauty’, aimed at inspiring India to embrace its own diversity and widening beauty ideals beyond current stereotypes. The centrepiece of the campaign was an online film that captured 85 ‘real women’ from across India celebrating their own ideal of beauty.

In 2016 Axe announced a bold new direction with a campaign that took a progressive point of view on masculinity and attractiveness. Contributing to Unilever’s #unstereotype initiative, Axe called on men all over the world to ‘Find Your Magic’, offering a broader range of male grooming products to help men work on their individual style, and in doing so challenge stereotypical notions of masculinity. The new range includes daily fragrances, hair styling, body washes, and antiperspirants. Brand performance has improved in a number of geographies and brand equity was stronger, but continued focus and investment are required in 2017 to improve financial contribution consistently across all countries.

The growth of our core brands was fuelled by innovation and equity building communication.

Growth in hair care was supported by innovations such as TRESemmé Beauty-Full Volume. This is a unique reverse system, first using conditioner to soften hair, then shampoo to wash away weight, improving volume-seekers’ product experience and beauty results.

In our deodorants business, Rexona Antibacterial Defence built on its 2015 launch and is now present in more than 40 countries, helping fight the bacteria which cause body odour with 48 hours of protection.

Personal Care is also home to several brands which are driving Unilever’s purpose of making sustainable living commonplace. In addition to Dove, these include Lifebuoy and Signal, which we categorise as Sustainable Living brands.

We are under-represented in the premium segment of the global Personal Care market and so we continued to build our market share in this fast-growing market segment. We strengthened and expanded our premium brands such as TRESemmé and Zendium, and launched and supported premium ranges and formats including Dove Advanced Hair Series and Signal White Now.

Our acquisition of brands such as Dollar Shave Club in the male grooming segment and Living Proof in early 2017, the premium hair care business, demonstrated active management of our portfolio. We also continued to build the prestige skin care brands acquired in 2015: Dermalogica; Murad; Kate Somerville; and REN.

The digital revolution is quickly changing how we do business and how we build brands. Responding quickly to these opportunities is an important priority for the Personal Care category. Communication for our brands increasingly makes the most of digital channels, from video or display to social media and search. The Axe ‘Find Your Magic’ campaign took a digitally-led multi-channel approach, while All Things Hair, our content-rich online channel, offers hair ideas, insights on

latest trends, and how-to videos on a digital platform. The acquisition of Dollar Shave Club brought us a direct-to-consumer business model that thrives on insights generated from rich relationships with its members.

The Unilever-wide Connected 4 Growth transformation programme is helping evolve the Personal Care organisation so that we continue to grow ahead of our markets. Global strengths are increasingly combined with local insights to make initiatives more consumer and customer-centric, with ways of working becoming faster and simpler.

FOODS

FOODS GENERATED TURNOVER OF 12.5 BILLION IN 2016, ACCOUNTING FOR 24% OF UNILEVER’S TURNOVER AND 28% OF OPERATING PROFIT.

It includes 1 billion brands Knorr and Hellmann’s, both of which are Sustainable Living brands. Alongside global brands, we have iconic local brands such as Bango in Indonesia, Robertson’s in South Africa and Kissan in India.

The category’s strategic role is to accelerate top-line growth while maintaining profitability and its strong cash contribution.

To achieve this, the category has three priorities: accelerating growth in emerging markets, which now account for more than 40% of sales; modernising our portfolio to address changing consumer habits; and preserving value in the Baking, Cooking and Spreads (BCS) business (Europe and North America).

We made solid progress in 2016 against these goals, although markets remained challenging and volatile, characterised by acceleration of local competition, ongoing price deflation in Europe and currency devaluation in emerging markets. This highlights the importance of Unilever’s Connected 4 Growth programme to transform the organisation, making us leaner, fitter and more empowered to tackle the challenges we face.

In 2016, underlying sales growth improved to 2.1% thanks to an acceleration in Knorr and Hellmann’s and strong positive momentum in savoury, dressings and Food Solutions.

Sales in emerging markets expanded by over 7%, broadly ahead of market. Growth has been particularly strong in Latin America, Africa and South East Asia, with all markets showing double-digit growth. Except for South East Asia, where Bango continued to be a key growth driver, underlying sales growth has been predominantly price-led, with volume lagging.

In both Europe and the US, consumers continue to seek greater trust and transparency from products along with new taste experiences and healthier options. In response, we modernised our portfolio by reformulating existing products and launching new organic and ‘100% natural’ variants under Hellmann’s and Knorr respectively. We saw good growth in our US dressings business, and both Hellmann’s and Knorr grew market share in a highly competitive environment.

In BCS, we repositioned key brands to feature their plant-based origins which showed early signs of success. We also implemented a leaner, more market-facing organisation. However, these have not stemmed the overall decline of the category driven by changing consumer preferences. There were no fundamental changes to the negative trend in Europe and the US.

Our sustainability mission – ‘Food that tastes good, does good and doesn’t cost the earth’ – remains at the heart of our category strategy. For instance, we have improved food fortification with Blue Band in Africa and continue to promote healthy, nutritious cooking with Knorr and made reducing food waste a priority in Food Solutions.

2016 also saw a step-change in our digital marketing to respond to changing consumer and media trends. This includes the successful Hellmann’s #strangewich activation in the US and the ground-breaking Knorr #LoveAtFirstTaste film, which generated around 2.1 billion impressions and well over 100 million YouTube views.

 

 

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HOME CARE

HOME CARE GENERATED TURNOVER OF 10.0 BILLION IN 2016, ACCOUNTING FOR 19% OF UNILEVER’S TURNOVER AND 12% OF OPERATING PROFIT.

It includes 1 billion brands Dirt is Good and Surf as well as other household names including Comfort, Sunlight, Domestos and our water purification brand, Pureit. Dirt is Good, Domestos and Radiant are Sustainable Living brands.

The category generates 80% of its sales in emerging markets where strong future growth is most likely and holds the number one position in 7 out of its top 10 markets.

Home Care’s strategic role is to step up profitability and scale household care. It made good progress delivering on this strategy during 2016, generating underlying sales growth of 4.9% while expanding operating margin by 2.2 percentage points. It achieved this by simplifying its operations, increasing efficiencies and providing consumers the opportunity to trade up through premium offerings.

This performance was delivered in a rapidly evolving consumer environment that witnessed intensifying competition both globally and locally, presenting opportunities as well as challenges for Home Care’s brands.

Rapid urbanisation and more women in the workforce mean households have more income, and better homes and clothes, but less time for household tasks. Cif responded by expanding its Ultrafast and Power & Shine range of trigger sprays, delivering efficacy and convenience while growing market share for household care. Dirt is Good addressed the need for greater convenience by launching ancillaries in Argentina, Chile and Colombia. Skip sharpened its brand proposition with an innovative campaign which started its rollout to 11 markets, meeting fashion lovers’ demands for superior garment care. Higher disposable incomes and an appetite for improved fragrance and longer lasting garment freshness fuelled growth in the fabric conditioner market in which Comfort Intense, the ultra-concentrated fabric conditioner, continued to grow.

Urbanisation combined with water stress and pollution results in consumers becoming more concerned about health, hygiene and the environment. Although existing brands such as Domestos and Pureit were already responding to this concern, in 2016 Home Care stepped up its response to these issues through strategic acquisitions. These comprised Blueair, a pioneer of premium air purifiers which also introduced a new and fast-growing product category into Home Care, and Seventh Generation, a leading manufacturer of plant-based products with a strong Millennial following.

As consumers grow increasingly aware of the impact their choices have on the world around them, the need for a brand to also be meaningful and have a strong purpose becomes imperative. To this end the category’s brands are key to realising Unilever’s Purpose of making sustainable living commonplace.

In 2016, Surf established a three-year partnership with Oxfam to alleviate the burden of unpaid care work on women and Sunlight introduced a revolutionary water-saving formulation in South Africa, halving the amount of water and time required for laundry. Meanwhile, Domestos and its partners, including UNICEF, continued their work to help around 6 million people gain improved access to a toilet through behaviour change interventions and capacity-building initiatives.

The connected, digital world is not only changing how consumers buy Home Care products but also giving rise to stronger local competition. Home Care is building digital capabilities to enhance its brands and innovations while utilising digital retail channels such as direct to consumer. It used this channel successfully in 2016 to launch the Neutral brand into the UK, offering household, face, skin and baby care products, all free from perfumes or colourants.

Underpinning these achievements was a strong focus on end to end value creation to improve margins and cash generation, driving profitability through lower costs and simpler, more efficient operations.

REFRESHMENT

REFRESHMENT GENERATED TURNOVER OF 10.0 BILLION IN 2016, ACCOUNTING FOR 19% OF UNILEVER’S TURNOVER AND 12% OF OPERATING PROFIT.

It includes 1 billion brands such as Heartbrand (e.g. Wall’s), Magnum and Lipton. Lipton, Ben & Jerry’s and Breyers are Sustainable Living brands.

Refreshment’s strategic role is to grow ice cream returns on capital and accelerate growth in tea. Underlying sales grew 3.5% in 2016 as a result of a focus on our core brands, premiumising the portfolio and delivering best in class retail execution, both in customers’ stores and Unilever’s own retail channels.

In 2016 ice cream delivered strong growth and profitability, increasing its presence in a growing and dynamic sector, with continued progress in our strongholds of Europe and North America, and Asian regions and Turkey showing good results. Brazil fared less well due to growing economic uncertainty which impacted summer sales. Ice cream sales were helped by strong brands and new formats which address new occasions to consume, responding to consumers’ on-the-go lives.

Profitability also increased thanks to successful innovations behind premium brands. We launched the Magnum Double range and in the US Ben & Jerry’s extended into a range of non-dairy ice creams, meeting the consumer demand for plant-based alternative formats. Ben & Jerry’s also launched its ‘Wich format in Europe, extending beyond the successful pint format into a new cookie and ice cream product that can be eaten on the go.

With purpose and sustainability at its heart, Ben & Jerry’s continued to create movements for social change. For instance, advocacy campaigns in the US and UK encouraged people to exercise their right to vote in elections.

The Wall’s Talking Ice Cream campaign was extended to 30 countries in 2016, successfully driving brand growth and strengthening equity across the range. Our local brands have enjoyed particular success under the Talking Ice Cream campaign. In 2016, the UK campaign was awarded a Silver IPA Effectiveness Award in recognition of the strong ROI generated by the campaign over the past years. The ice cream sector generally continued to witness the impact of consolidation among international competitors.

Responding to the nutritional needs of our consumers remains a priority. We continue to work on ensuring that 100% of our children’s ice cream brands have fewer than 110 calories and 91% of our packaged ice cream products do not exceed 250 calories per portion (calculated based on 97% of global ice cream sales volume). We have a clear policy on marketing to children and continue to work with the wider industry. Our sugar reduction in our sweetened tea-based beverages continues, consistent with our USLP commitment to help people achieve a healthier diet.

In tea we continued to build our presence in more premium segments whilst strengthening the core products. Our Brooke Bond Family in India continued to grow, helped by a series of engaging films highlighting people coming together over a cup of tea to overcome prejudice and inequality. Together, these films generated around 10 million views during 2016 helping Brooke Bond regain its market leading position. Meanwhile, Lipton’s ‘Be A Maker’ digital campaign highlighted the lives behind the leaves of Lipton’s tea farmers in Kenya. The social media campaign ran in November 2016 with very positive engagement results amongst its target Millennial audience in key markets. PG tips in the UK had a more challenging year with negative growth.

Lipton launched Matcha into the green tea segment in the US while we also launched Pure Leaf in the US as a premium proposition in hot tea. Building on the success of Pure Leaf ready to drink brand in the US, the range has been extended into premium leaf teas.

 

 

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DELIVERING VALUE FOR OUR STAKEHOLDERS CONTINUED

    

 

The luxury tea segment, where our T2 business is positioned, experienced good growth throughout the year. T2 also added 13 new stores mainly in Australia and the UK, expanding the chain to 89 stores in total. A new e-commerce platform for T2 has also seen strong sales growth.

We announced an agreement to dispose of our AdeS soy beverage business in Latin America, continuing the active management of our brand portfolio to sharpen our focus on growth.

 

 

SOCIETY

WE ARE TAKING COLLECTIVE ACTION ACROSS OUR VALUE CHAIN TO TACKLE THE MOST PRESSING ISSUES OF OUR TIME. IT IS THE RIGHT THING TO DO, AND THE ONLY WAY TO GROW OUR BUSINESS SUSTAINABLY.

Unilever creates value for society in many ways, be they shareholders, consumers, society at large or around 169,000 employees who make a vital contribution to our Purpose of making sustainable living commonplace. Our products are sold in more than 190 countries, generating income and employment for retailers and distributors who bring our brands to consumers. We also create value for suppliers – in 2016 we purchased 34 billion of goods and services.

Taxes pay for the public goods and services that benefit each and every one of us, and effective taxation is the foundation of healthy societies. The taxes paid by businesses – and as a direct result of business activity – make an important contribution. Total taxes borne by Unilever in 2016 amounted to 4 billion, of which 2.3 billion was corporation tax. To build confidence in the tax system, it is especially important that business taxation is simple to understand, transparent, and applied consistently, and that society trusts tax authorities to administer taxes fairly for all taxpayers. Unilever fully complies with the tax laws in the countries where we operate, but where the tax law is not clear or has not kept pace with the way modern business operates Unilever interprets its tax obligations in a responsible way. At Unilever our Tax Principles provide this reference point – further information is available on our website.

We are proud of our contributions to society, because they reflect the hard work and dedication of generations of Unilever people and stakeholders. But we know that the success we enjoy, and the contribution we make, depend in turn on the success and resilience of the economies and societies we operate in.

In these volatile and uncertain times, those societies face many urgent challenges – social, political and environmental. We know that we, and business as a whole, can and must do more to address them. If we succeed, it will create the conditions for business to thrive.

That is why we introduced our Unilever Sustainable Living Plan (USLP) to leverage our scale, influence, expertise in innovation and resources to directly address issues that matter to people – an approach that strengthens our business so that it can grow sustainably.

UNILEVER SUSTAINABLE LIVING PLAN

The USLP, launched in 2010, is our blueprint for achieving our vision. By spurring innovation, strengthening our supply chain, lowering costs, reducing risks and building trust, sustainability is creating value for Unilever as well as society.

For example, we have achieved a cumulative cost avoidance of over 700 million through eco-efficiency measures in our factories since 2008, of which our waste programme has contributed to cost avoidance of around 250 million. In 2015 we had 12 Sustainable Living brands which grew 30% faster than the rest of the business. In 2016 these brands grew 40% faster than the rest and delivered nearly half of Unilever’s growth. They are brands which combine a strong purpose delivering a social or environmental benefit, with products contributing

to at least one of our USLP goals. Our Sustainable Living brands for 2016 will be announced in May 2017 once the analysis is complete.

The USLP has three clear goals: to help more than 1 billion people improve their health and well-being by 2020; to halve the environmental impact of our products across the value chain by 2030; and to enhance the livelihoods of millions as we grow our business by 2020.

To date we have made significant progress on our first big USLP goal of helping more than 1 billion people improve their health and well-being. By the end of 2016, we had reached 538 million people, led by the success of Sustainable Living brands such as Lifebuoy, Dove and Signal. In addition, 35% of our Foods portfolio met the highest nutritional standards, based on globally recognised dietary guidelines.

Our manufacturing operations are important to realising our second goal of reducing our environmental impact. Since 2008 we have cut CO 2 from energy by 43%, water abstraction by 37% and total waste disposed by 96% per tonne of production. The latter is a slight fall in performance as total waste per tonne of production disposed fell to 96% from 97% in 2015. This was due to changes in local regulation in two countries restricting recycling routes and issues at a recently acquired site that have now been resolved.

When it comes to reducing the environmental impact of how consumers use our products, we continue to find this difficult. Since 2010, the water impact of our products has reduced by around 7%, while the waste associated with consumer disposal of our products has reduced by rather more, around 28%, as recycling rates increase. But the greenhouse gas impact of our products across their lifecycle, including consumer use, continues to edge up and has now increased by around 8% since 2010. The acquisition of skin cleansing and hair care brands has increased the share of products associated with a higher greenhouse gas impact per consumer use. These products are being used by consumers while taking heated showers and baths.

Our third USLP goal – to enhance the livelihoods of millions of people – has seen good progress. 67% of procurement spend was through suppliers meeting our Responsible Sourcing Policy’s mandatory criteria. Meanwhile we are conducting a review of the accountability process to improve it based on the last two years’ experience. A project of risk-mapping across the sourcing of our key commodities, such as tea, was also started during 2016 to identify our social footprint human rights risks and the procedures we have in place to respond to any such risks identified. We continue to work to strengthen certification, particularly relating to working conditions. Our progress on embedding human rights into our organisation continued in 2016 and we have now integrated our human rights function into our supply chain organisation (more details on page 21).

In 2016, we also continued with a range of programmes to improve livelihoods. Under the Opportunities for Women pillar, we have enabled around 920,000 women to access initiatives that aimed to promote their safety, develop their skills and expand their opportunities. As part of the Inclusive Business pillar, in 2016 we have enabled around 650,000 smallholder farmers and 1.5 million small-scale retailers to access initiatives aiming to improve their agricultural practices or increase their incomes. The number of small-scale retailers has decreased from 1.8 million in 2015 following a rescoping of stores that can benefit from the Perfect Store programme in India.

In 2016 Unilever was named leader of the Household & Personal Products Industry Group in the Dow Jones Sustainability Index (DJSI), a global sustainability performance benchmark. We are one of only 24 companies to be awarded Industry Group Leader status. In 2016 we were also listed on the CDP Climate, Water and Forest A Lists.

The USLP continues to evolve in response to the changing landscape. In January 2017 we announced a commitment to ensure that all of our plastic packaging is fully reusable, recyclable or compostable by 2025. We will report on progress against this commitment in future reports.

 

 

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Despite our progress to date, there is still much to be done. While we are on track to achieve most of our USLP commitments, we are also aware that the biggest challenges facing the world cannot be addressed by one company acting alone. We are changing ourselves as a business but we want to play a part in changing the way business is done more broadly.

ADVOCATING A ‘NEW SOCIAL CONTRACT’ FOR BUSINESS

The need for collective action and partnership between businesses and other stakeholders, and between businesses themselves, has never been greater. By doing the right thing and being part of the solution to the world’s challenges, businesses have the opportunity to win the trust of consumers while helping create societies and economies in which they can grow and succeed.

The Paris Agreement and the publication of the UN’s 17 Global Goals for Sustainable Development (referred to as the ‘Global Goals’) in 2015 showed the world there was a movement towards combating climate change, eradicating poverty, and promoting greater inclusion and economic prosperity – one that would require widespread co-operation to succeed.

Throughout 2016, we sought to build on the momentum of these historic global accords. We did so within our business, for example by mapping our USLP with the Global Goals (see page 19). In January 2016, we co-founded the Business & Sustainable Development Commission (BSDC). It brings together businesses and other stakeholders who share our belief that implementation of the Global Goals will help create a world where responsible business can continue to thrive. While business is key to generating the economic growth, job creation, and investment in innovation that will unlock the US$3.3-4.5 trillion needed to deliver the Global Goals, BSDC research shows that successful delivery of the Global Goals will create market opportunities of up to US$12 trillion a year. The BSDC’s report, Better Business, Better World, published in January 2017, aims to launch a global movement of CEOs and business leaders who place sustainability at the core of business strategy.

Increasingly, we are finding new ways to contribute to the systemic changes needed to address global challenges. This is a responsibility but also an opportunity, because resilient societies and economies are ones in which businesses such as Unilever can flourish. We aim to use our scale and influence to help bring about transformational change in four key areas where we believe we can make the biggest difference:

  taking action on climate change and halting deforestation
  improving livelihoods and creating more opportunities for women
  improving health and well-being
  championing sustainable agriculture and food security.

TAKING ACTION ON CLIMATE CHANGE AND HALTING DEFORESTATION

World leaders assembled in Marrakech for COP22 in November 2016, by which time enough states had ratified the Paris Agreement for it to achieve ‘entry-into-force’, making it a binding agreement.

Unilever welcomed the Paris agreement and its legal status, having worked with many others at COP21 and beforehand to help create the conditions in which it could be achieved. At COP22, we called for faster transformation of our energy, food, transport and urban systems into ones consistent with the ambition of transforming our economy by the middle of the century. We believe businesses must contribute to climate action and that they will benefit by doing so.

Addressing our own greenhouse gas emissions is a key element of our USLP, and we have been working to reduce our impact for many years. In 2016 we made progress towards our Carbon Positive 2030 ambition, announced in 2015. We know consumers rightly expect businesses to act responsibly on climate, and that reducing our energy usage and switching to renewables can create cost savings and make our business more resilient.

We also worked with others on the systemic changes needed for climate action. For example, commercial agriculture is the main driver of deforestation, which accounts for up to 15% of global greenhouse gas emissions. Together with others in our industry, we have committed to achieving zero net deforestation associated with four commodities – palm oil, soy, paper and board, and beef – no later than 2020. We have extended this commitment to our tea businesses and supply chains.

We work closely on climate action with a number of strategic partners: the We Mean Business coalition including the World Business Council for Sustainable Development (WBCSD); HRH The Prince of Wales’ Corporate Leaders Group on Climate Change, The B-Team, and CERES; the World Economic Forum; the Consumer Goods Forum (CGF) and the United Nations Global Compact Caring for Climate initiative.

We also worked with the World Bank Group on the formal launch of the Carbon Pricing Leadership Coalition at the World Bank Spring Meetings in Washington DC in April 2016, which will advance the pricing of carbon emissions and removal of market-distorting fossil fuel subsidies.

Unilever holds the Vice-Chair of the industry-led Task Force on Climate–related Financial Disclosures, which aims to develop voluntary and consistent climate risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. We have developed metrics to assess climate related risks and opportunities in line with our strategy and risk management process. These are outlined on page 13.

CREATING MORE OPPORTUNITIES FOR WOMEN AND ENHANCING LIVELIHOODS

Women control a significant portion of consumer spending. Building greater trust in our brands among our consumer base is critical – and women make up a large number of our consumers.

Creating opportunities for women is also a core element of our USLP, our partnership work, and our overall ambition to enhance the livelihoods of millions of people. Empowering women has the potential to contribute substantially to many of the Global Goals because including more women in the economic cycle has a positive impact on growth and the progress of families and communities.

Our goal is to empower 5 million women by 2020. We aim to do this by respecting women’s rights, promoting their safety, developing skills and advancing economic opportunities.

Unilever has built partnerships to help achieve this with many stakeholders, including the Clinton Guistra Enterprise Partnership (CGEP), BoP Innovation Center (BoPInc), Global Alliance for Improved Nutrition (GAIN) and Population Services International (PSI).

We are working with UN Women to create a global violence-prevention framework to advance the implementation of human rights in our tea value chain in Kenya and other places. The programme aims to apply the global framework to Unilever’s supply chain and extend into the wider tea industry and other commodities over time. Unilever, through its Pond’s brand, joined No Ceilings: The Full Participation Project, an initiative of the Clinton Foundation, Vital Voices Global Partnership, WEConnect International to announce a collective commitment “Girls, Women and the Global Goals”. This is a coalition of over 30 partners securing new commitments that aim to address significant gender gaps and advance the gender equality targets of the Sustainable Development Goals.

We know it is important to reflect this commitment in our brands’ actions. In 2016 we listened to consumers and looked at the way we portray gender in our advertising and realised we needed to change. We launched #unstereotype, a major global campaign to lead advertising away from stereotypical portrayals of gender. Brands including Axe, Dirt is Good and Sunsilk have led the way with this initiative.

 

 

Annual Report on Form 20-F 2016   Strategic Report   17


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PROMOTING HEALTH & WELL-BEING

We aim to help improve the health and well-being of more than 1 billion people by 2020. As part of this ambition, we have a strong focus on Water, Sanitation, and Hygiene (‘WASH’). Together with our partners, we aim to change people’s hygiene behaviours by raising awareness of the benefits of handwashing with soap, helping people gain improved access to a toilet through promoting the benefits of using clean toilets and making them accessible, and providing people with safe drinking water. Our leading brands, including Lifebuoy and Domestos, provide us with a unique opportunity to make a difference in these areas.

Cost-effective WASH solutions can lift people out of poverty and give them greater opportunities for a successful future. With partners such as UNICEF we have helped around 6 million people gain improved access to a toilet through behaviour-change interventions and capacity-building initiatives (results are reported by our partners in accordance with their respective methodologies and include reach from direct and indirect initiatives between 2012 and 2015).

In 2016, we continued our efforts to raise awareness of the importance of handwashing with soap and access to improved sanitation, through campaigns on Global Handwashing Day and World Toilet Day. On World Toilet Day in 2016, we opened Suvidha, a sustainable hygiene and sanitation community centre in one of Mumbai’s largest slums, which will address the hygiene needs of 1,500 people from low-income urban households who face severe challenges due to lack of infrastructure and facilities. The centre provides toilets that flush, handwashing facilities with soap, clean showers, safe drinking water and laundry facilities at an affordable cost. The Suvidha Centre uses circular economy principles to reduce water use. Fresh water is first used for brushing teeth, bathing, handwashing and laundry. The waste water from these activities is then used for flushing toilets.

Lifebuoy’s new partnership with the World Association of Girl Guides and Girl Scouts will help over 4 million children gain a better understanding of the importance of handwashing with soap, while WASH4Work, a multi-stakeholder coalition, will mobilise greater private sector engagement in the provision of adequate and accessible WASH solutions in business operations, supply chains and surrounding communities.

A key enabler to achieve our Health & Wellbeing targets is more inclusive partnership models, such as ‘Transform’ – a partnership with Unilever, the UK’s Department for International Development and Clinton Guistra Enterprise Partnership (CGEP) designed to improve the health and well-being of 100 million people in Africa and South Asia by increasing household access to water, sanitation and hygiene as well as energy through effective market-based solutions.

CHAMPIONING SUSTAINABLE AGRICULTURE AND IMPROVING FOOD SECURITY

Agriculture and the people who practise it are vital to the world, and to our business. The world needs to double food production by 2050 to help feed a population that will likely exceed 9 billion people.

What is more, of the 3.4 billion people living in rural areas in the world today, up to 600 million may be undernourished. We therefore see agriculture as sitting at the heart of the climate and development challenge, and view changes to the current systems as a vital way to help meet the aims of the Global Goals in eradicating hunger and poverty, while making our supply of ingredients more resilient. We advocate a move away from purely production-led approaches, which run at the expense of people and planet, to a more integrated, holistic approach that can both improve livelihoods and enable sustainable agriculture.

We are committed to sourcing all our agricultural raw materials sustainably. By working with others, we aim to ensure all the major commodities on which we depend – notably palm oil, soy, paper and board, and tea – are produced sustainably for mainstream consumer markets.

In 2016 we refreshed our Palm Oil Policy and brought forward our target for purchasing 100% physically certified palm oil from 2020 to 2019. We also stopped buying GreenPalm certificates, which accounted for 18% of our sustainably sourced agricultural raw materials in 2015. However, our goal to source 100% of our palm oil sustainably from physical, certified sources by 2019 is still on track with 36% of our palm volumes already physically certified in 2016 (representing 9% of all agricultural raw materials). We aim to repurpose US$50 million over five years that would have been spent on GreenPalm certificates and invest it in place-based partnerships. This is to increase the availability of physically certified sustainable palm oil and scale up direct sourcing from smallholder farmers.

This has created a temporary dip in our sustainably sourced agricultural raw materials performance from 60% in 2015 to 51% in 2016. Had we continued to buy GreenPalm certificates at the same level our overall sustainable sourcing performance in 2016 would have been 66%. Instead, we have increased our purchasing of sustainable physical agricultural raw materials from 39% in 2015 to 48% in 2016 whilst maintaining the same proportion of certificates purchased for soy and sugar (3% in 2015 and 2016).

We are also focusing on reducing food loss and waste, as a third of the food the world currently produces is lost or wasted. According to WRAP, a waste and resource think tank, reducing consumer food waste could save US$120-300 billion, and reduce greenhouse gas emissions by 1 billion tonnes of CO 2 emissions per year by 2030. We are members of ‘Champions 12.3’, a coalition of business, government and civil society leaders, and signatories to the Consumer Goods Forum Resolution on Food Waste to halve food waste in direct operations by 2025.

We want the debate on food and agriculture to be high on the political and business agenda, and in 2016 we contributed to the Business and Sustainable Development Commission report ‘Valuing the SDG Prize in Food and Agriculture’, which found that achieving food security could create 80 million jobs and unlock 14 major business opportunities worth US$2.3 trillion annually by 2030. To help unlock this potential, we supported the World Business Council for Sustainable Development (WBCSD) and EAT Foundation partnership, launched at the EAT Forum in June 2016, which seeks to better link production through consumption.

 

 

18   Strategic Report    Annual Report on Form 20-F 2016


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THE GLOBAL GOALS FOR SUSTAINABLE DEVELOPMENT

Through our Unilever Sustainable Living Plan, Sustainable Living brands and our transformational change agenda we contribute to the Global Goals.

 

 

GLOBAL GOALS

 

  

 

RELATED USLP PILLARS

 

Goal 1: No poverty

  

 

Fairness in the workplace

Inclusive business

Opportunities for women

 

 

Goal 2: Zero hunger

  

 

Improving nutrition

Inclusive business

Opportunities for women

Sustainable sourcing

 

 

Goal 3: Good health and well-being

  

 

Fairness in the workplace

Health & hygiene

Improving nutrition

 

 

Goal 4: Quality education

  

 

Inclusive business

Opportunities for women

Sustainable sourcing

 

 

Goal 5: Gender equality

  

 

Opportunities for women

 

 

Goal 6: Clean water and sanitation

  

 

Health & hygiene

Water use

 

 

Goal 7: Affordable and clean energy

  

 

Greenhouse gases

 

 

Goal 8: Decent work and economic growth

  

 

All USLP pillars

 

 

Goal 9: Industry, innovation and infrastructure

  

 

Greenhouse gases

Inclusive business

Opportunities for women

Waste & packaging

Water use

 

 

Goal 10: Reduce inequality

  

 

Fairness in the workplace

Opportunities for women

Inclusive business

 

 

Goal 11: Sustainable cities and communities

  

 

Health & hygiene

Waste & packaging

 

 

Goal 12: Responsible consumption and production

  

 

Greenhouse gases

Waste & packaging

Water use

 

 

Goal 13: Climate action

  

 

Greenhouse gases

Sustainable sourcing

Water use

 

 

Goal 14: Life below water

  

 

Waste & packaging

 

 

Goal 15: Life on land

  

 

Sustainable sourcing

 

 

Goal 16: Peace, justice and strong institutions

  

 

Fairness in the workplace

 

 

Goal 17: Partnerships for the goals

  

 

All USLP pillars

 

 

Annual Report on Form 20-F 2016   Strategic Report   19


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DELIVERING VALUE FOR OUR STAKEHOLDERS CONTINUED

    

 

 

OUR PEOPLE

PEOPLE ARE OUR MOST POWERFUL RESOURCE TO TRANSFORM OUR BUSINESS, DRIVEN BY OUR CLEAR PURPOSE TO MAKE SUSTAINABLE LIVING COMMONPLACE.

Our continued success is constantly challenged in a world where change is happening at an ever faster pace fuelled by the rapid take-up of digital technology. Consumers are far more responsive and sensitive to changing trends and attitudes, opening up new opportunities for entrepreneurial competitors who are agile and flexible in approach.

During 2016 our people have been at the centre of a major organisational change programme, Connected 4 Growth (C4G), one of the largest and most significant change initiatives undertaken by Unilever. The key objectives are to create an organisation that is faster, more agile and more competitive. Through C4G we want our people to think and behave differently, making them more empowered, giving them the opportunity to experiment and encouraging them to think and act like entrepreneurs and business owners. These changes will be key in attracting the right people to achieve our goals.

By 2020, 60% of our employees are expected to be Millennials and we need new employment strategies that reflect both their changing attitudes to work and the fast changing world in which we expect our people to compete and perform. The skills our people need are also changing rapidly. According to the World Economic Forum, on average, by 2020 more than a third of the desired core skill sets will have changed and nearly 35% of the core skills required for key roles in future are currently missing from the equivalent roles today.

The vision of our Human Resources function is to be simpler, with more impact in order to accelerate business growth. This is being realised through three priorities. First, we are focusing our activities on Well-being, Talent, Learning and Reward. Second, we are developing an agile and empowered organisation to build connected teams through technology-driven approaches and, thirdly, we are building an organisation powered by purpose where all our people are able to reach their potential and thrive in the increasingly connected world. A priority during 2016 was to define the profile of future talent required by the business and plan for the skills and capabilities required.

To support our vision we have also made a step-change in the use of data and analytics to generate more accurate insights. We are using more sophisticated digital and mobile processes while applying new performance and reward systems to offer more career development opportunities and create a more empowered workforce. Finally, through C4G, we are encouraging our people to experiment and collaborate more to improve our top-line growth.

ATTRACTING TALENT

Unilever’s reputation as an employer of choice continues despite a highly competitive market place. Our purpose-led goals consistently support our position as employer of choice across the world. During 2016, we were the number one FMCG Graduate Employer of Choice in 34 of the 60 countries that we recruit from.

Unilever’s Future Leaders’ League, our global competition for students, continues to grow. For the 2016 finals, almost 40,000 applications were received across 59 countries and 1,120 universities.

The recent launch of our social media campaign #PutItRight generated 108 million impressions and reached 9.8 million unique users globally. Our objective is to change the conversation around how Millennials are defined, helping them reach their full potential. Our commitment to sustainability, brought to life through the Unilever Sustainable Living Plan, is critical to engaging with this generation.

This year we have seen our LinkedIn presence grow significantly, reaching the key milestone of 2 million followers, highlighting how LinkedIn followers are engaging with our content. Half of our followers are entry level professionals.

We were ranked the number one FMCG company and the number 8 company overall to work for on the LinkedIn Top Attractors global list based on our ability to attract and retain talent. More than 100,000 of our employees are active LinkedIn users. We have also raised visibility of the LinkedIn Elevate platform where Unilever curated content can be shared by Unilever people with their social networks, allowing them to act as ambassadors for the business, enhancing our visibility, creating brand awareness and communicating our values. The initiative has reached more than 190 million members of LinkedIn, Twitter and Facebook.

In July 2016 we launched our new digital selection process for graduate hires that uses the latest technology to help select candidates that best meet Unilever’s requirements. The new process removes the potential for unconscious bias in recruitment. The flexible process is quick and interactive, with candidates receiving feedback at every stage.

First, candidates complete an online application form. Successful candidates are then invited to complete a series of games over a 20-minute period which allows Unilever to gain insight into the candidate’s potential and how well they connect with the Unilever’s goals and purpose. The best candidates will then take part in a video interview.

For the final stage of the process, candidates are invited to a Discovery Centre to collaborate and experience a ‘day in the life’ of Unilever. At every stage feedback is provided to help them in their career whether or not they are successful in joining Unilever.

RETAINING TALENT

In line with C4G we have also introduced significant changes to performance management to encourage feedback and development. The objective is to encourage new ways of thinking, and build a more agile and empowered organisation, with managers better able to support people who are being encouraged to experiment, fail, learn and collaborate. We are inverting the traditional structures, pushing responsibility and opportunity outwards into the organisation so people can be more entrepreneurial with performance management that reflects this culture shift.

As part of C4G, managers are now equipped to understand individual requirements, set targets and help navigate the necessary changes with the right training and support, linked to our Learning Hub. ‘Always On’ conversations are encouraged more than ever so that managers and their teams have more open discussions on performance and feedback throughout the year and not just at mid or year-end.

We are working to create a culture of development for all by removing labels and categorisations in our talent processes and promoting individuals’ development needs. Our reward principles are becoming simpler with fewer reward elements which are in turn focused on short-term performance and long-term value creation to encourage a more entrepreneurial approach and an owner’s attitude.

We recognise that to get the best out of our people and help them thrive in the world of work, we need to look after more than just their professional development. Their physical, mental, and emotional well-being also needs attention to help engender a strong sense of purpose, matching Unilever’s own clear Purpose of making sustainable living commonplace. Since 2015, more than 41,430 people have been through our Thrive Programme to help improve well-being including issues such as eating healthily in a busy work environment, sleep, fitness, well-being and practical ways of managing energy levels.

 

 

20   Strategic Report    Annual Report on Form 20-F 2016


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LEARNING

Learning and building capability is critical in the connected world, with skills evolving at pace. In response, our Learning team has focused on igniting a passion for learning and fostering an ‘Always On’ learning culture. The Learning Hub, our collaborative digital learning platform, is supporting this shift. Our people can access bite-sized, just-in-time learning that is both engaging and mobile-enabled, featuring industry experts.

Building on the work done with our senior leaders in recent years, we are giving all our people an opportunity to discover their unique purpose, with pilots in five countries to encourage better performance and well-being.

“Four Acres”, our leadership development centres in London and Singapore, continue to make a critical contribution to our business performance. They also provide next steps to focus on the importance of purpose with impact. Our development of leaders for the connected world has never been more focused, and more than 1,600 executives have attended leadership development programmes in 2016.

SAFETY

We continue to focus on our Vision Zero strategy: Zero Fatalities; Zero Injuries; Zero Motor Vehicle Accidents; Zero Process Incidents; and Zero Tolerance of Unsafe Behaviour and Practices. Vision Zero is designed to ensure we meet our USLP commitment to reduce workplace injuries and accidents.

In 2015 we put new measures in place to create an interdependent safety culture. In 2016 we pressed ahead with adding capability, building professionalism and focusing on leadership responsibility to implement our safety culture.

A priority has been to ensure safety is a responsibility throughout Unilever. We have rolled out a mandatory safety leadership programme, which builds awareness of safety from the top down, to help managers instil best practice throughout their teams.

Our process and construction safety director, appointed in mid-2015, has delivered process safety training and certification programmes that are important career development qualifications for the supply chain. Additionally, an enhanced set of process safety global standards will be launched in 2017. Process safety oversight compliance audits have been extended to all high and medium-hazard sites overseen and facilitated by the global Process Safety Leadership Team.

We continue to implement our mandatory Motor On Mobile Off policy through new training for joiners and refreshers for existing workers at risk from using mobile phones when driving. We also continue to integrate our BeSafE programme into our World Class Manufacturing (WCM) methodology.

Unilever reports safety data from October to September. Our Total Recordable Frequency Rate (TRFR) from 1 October 2015 to 30 September 2016 went from 1.12 accidents per 1 million hours worked to 1.01, as a result of the continuous focus on safety in WCM methodology and the BeSafE programme in our non-manufacturing sites.

HUMAN RIGHTS

Respecting human rights is enshrined in the USLP. To comprehensively implement and embed our human rights approach we have now integrated our human rights function into our supply chain organisation. The resulting team has been renamed Integrated Social Sustainability, reflecting our commitment to creating a positive social impact as part of Unilever’s Vision and highlighting the social dimension of the sustainability agenda.

Under the Global VP Integrated Social Sustainability, this team now has responsibility for all areas of Supply Chain Social Sustainability including accountability, compliance and audit which have moved from the procurement function. The team continues to lead on the global human rights agenda for Unilever.

We continue to work to strengthen certification, particularly relating to working conditions. In 2013 we gave Oxfam access to our supply chain in order to assess labour rights and help us understand how to realise the UN Guiding Principles. It focused on our operations in Vietnam. We agreed an update with Oxfam in 2016, which was published in July, highlighting the substantial progress made in Vietnam and the broader work undertaken to embed human rights across our organisation. It also highlights areas where we, and other companies, can improve.

During 2016 we rolled out our new Framework for Fair Compensation to all our Country HR Leadership teams. The Framework outlines how the existing elements of our compensation packages deliver fair compensation to our employees. In 2016 we announced that we want to achieve full Living Wage compliance for all our employees by 2020. The Framework also reinforces our commitment to no discrimination between genders on pay or career development. We will build on our existing equal pay practices through gender pay gap analysis to identify future initiatives in support of this.

DIVERSITY AND INCLUSION

On gender equality we continue to make progress, although work remains. By the end of 2016, 46% of our total management were women, up from 45% in 2015. At the most senior levels, however, the ratios are not as high. Among the ‘Top 100’ executives, 22 (22%) were women compared with 23% in 2015. If you include employees who are statutory directors of the corporate entities whose financial information is included in the Group’s 2016 consolidated accounts in this Annual Report and Accounts, the number increases to 410 males and 157 (28%) females. 43% (six out of 14) of the Board is female, compared with 50% (six out of 12) in 2015.

Of our total workforce of 168,832, 112,618 (67%) were male and 56,214 (33%) were female at the end of 2016,

 

 

Annual Report on Form 20-F 2016   Strategic Report   21


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OUR SHAREHOLDERS

UNILEVER’S STRATEGY FOR LONG-TERM VALUE CREATION HAS ENSURED ANOTHER YEAR OF GROWTH THAT IS CONSISTENT, COMPETITIVE, PROFITABLE AND RESPONSIBLE – SUPPORTING CONTINUED GROWTH IN THE DIVIDEND FOR SHAREHOLDERS.

2016 brought to the fore the volatile, disruptive and complex forces at play that affect Unilever’s business. Slower global economic growth and intensifying geopolitical instability provided a challenging backdrop to our operations while competitive pressures continued to intensify globally and locally.

Despite this uncertainty our priorities remain unchanged: to deliver consistent growth ahead of our markets, steady margin improvement, and strong free cash flow.

In delivering these priorities we are led by our Purpose – to make sustainable living commonplace – which inspires our Vision to accelerate growth in our business, while reducing our environmental footprint and increasing our positive social impact. To achieve these ambitions, we have placed the USLP at the heart of our business model and we have based our strategy for long-term growth on it.

Thanks to initiatives such as the Coalition for Inclusive Capitalism, which Unilever is part of, the importance of sustainability in driving returns has become a mainstream idea in capital markets, reinforced by research which also shows the increasing relevance of sustainability to consumers.

Sustainability is also integrated in our financial decision making – we have set an internal cost of carbon, so that greenhouse gas emissions are factored into capital projects.

PERFORMANCE

Despite volatility in the operating and financial environment, we delivered another year of steady returns for shareholders. Over the last 5 years our dividends have increased 7% per annum and our share price is up by around 50% for both PLC and NV shares.

This reinforces our medium-term performance over the past five years 2012-2016 which has witnessed underlying sales growth of 4.4% per year, which was ahead of our markets, and core operating margin up, on average 0.4 percentage points per year. Over the same period turnover growth averaged 2.7% per year and operating margin was up 0.2 percentage points per year; Core earnings per share grew 7% per year on average. Constant core EPS, which is at constant exchange rates, grew by an average of 10% per year. Average working capital as a percentage of turnover improved by 1 percentage point per year and we have delivered cumulative free cash flow of 21 billion over the 5 years. Return on invested capital has remained in the range of 18-19%.

Reliable long-term returns for shareholders result from our focus on four categories with distinct but complementary priorities that fulfil specific objectives across our portfolio of brands. The largest category is Personal Care, accounting for 38% of turnover in 2016 which has a strategy of growing its core business while extending into premium ranges. Foods, which accounts for 24% of turnover, has the objective of accelerating growth while preserving the value of its strong cash flows. Home Care, 19% of turnover, is improving profitability and scaling its household cleaning business while Refreshment, 19%, is tasked with growing ice cream Return on Invested Capital and accelerating top line growth in tea.

ACTIVE PORTFOLIO MANAGEMENT

Our brand portfolio is not set in stone and continues to evolve to match our categories’ strategic priorities, resulting in the sale of assets that no longer fit our growth model or the acquisition of assets that take us into new market segments and build new market positions. This active portfolio management means that in the past eight years we have sold 2.8 billion of turnover, mainly in the lower growth Foods businesses. During that same period we have acquired 4 billion of turnover

mainly in higher-growth Personal Care brands, which has helped make Personal Care our biggest category.

Our categories are supported by innovation that targets high growth, on-trend segments, which are critical to staying ahead of the competition, and our research and development capabilities which are embedded within each category. We are focused on faster innovation so ideas reach market more quickly. We are aiming to make global roll-outs 30% faster and up to 50% faster for local innovations, while we are also simplifying innovation processes to have 30% fewer touch-points in decision-making.

Marketing drives consumer demand-led sales and requires content that is ever more personal and specific to consumers, served to them at the most appropriate time and place to trigger purchase intent and sales. Digital technology enables such targeted approaches and also adds more sophisticated data and insight into consumers’ habits and interests, which are crucial as e-commerce and direct-to-consumer channels become more significant.

Our broader customer development programmes further ensure our presence in the appropriate channels from supermarket chains to websites driven by our Perfect Stores programme of brilliant execution.

DEVELOPMENTS IN 2016

We have taken significant steps this year to support and enhance our growth model by responding to the rapidly changing world in which we operate. The action we have taken means we can maintain our competitive advantage in the marketplace and maintain our track record for long-term delivery of steady and consistent shareholder returns.

During the year we continued our policy of investment in the business, including bolt-on acquisitions, rather than share buy backs or special dividends. Acquisitions play a key role in our quest for innovation alongside those breakthroughs we make ourselves through research and development. The brands we acquire take us into new growth segments but can also bring innovative business models that we continue to operate separately from the core where appropriate.

In Personal Care we have acquired the male grooming online subscription business, Dollar Shave Club. This is a direct-to-consumer model where we will preserve its entrepreneurial approach, taking valuable lessons for the rest of our portfolio. We also announced an agreement to acquire Living Proof in 2016, the US hair care brand which will also join our Prestige business. The deal completed on 1 February 2017.

In Home Care we acquired Seventh Generation, a Vermont-based business producing plant-based detergents and household cleaners, complementing our responsible growth goal and supplementing our own innovation efforts. We also bought Blueair, the Swedish air purifier business active in markets such as China and India, addressing the issue of air quality and pollution.

In Refreshment we announced an agreement to dispose of AdeS, the Latin American soy beverage business, continuing the active management of our brand portfolio.

The adoption of new flexible business models is one part of the Connected 4 Growth transformation programme which will make us more agile with lower costs. This is a series of self-help changes that will make Unilever fit for the future, maximising our global scale and expertise while making us quicker and more agile to respond locally where local competition is becoming more sophisticated and successful at growing market share. We are simplifying our organisation to empower Unilever people to be more experimental.

At the same time we are rolling out Zero-Based Budgeting, which benchmarks our expenditure against peers and identifies savings to further support our business. It is a deep dive into our cost base and, with the cost saving elements of the organisational change, aims to deliver savings of 1 billion by 2018. In addition, we are continuing to take a further 1 billion per year of costs out of our supply chain to offset cost inflation, reducing the need for price increases and making our brands more competitive.

 

 

22   Strategic Report    Annual Report on Form 20-F 2016


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FINANCIAL REVIEW   

    

 

FINANCIAL OVERVIEW 2016

CONSOLIDATED INCOME STATEMENT

Turnover declined 1.0% to 52.7 billion including a negative currency impact of 5.1% (2015: 5.9% favourable currency impact) primarily from Latin America and the UK. Underlying sales growth was 3.7% (2015: 4.1%) coming from volume growth of 0.9% (2015: 2.1%) and price growth of 2.8% (2015: 1.9%). Acquisitions and disposals had a positive impact of 0.6% (2015: negative 0.1%) coming from the businesses acquired in the last two years including Dermalogica, Murad, Dollar Shave Club, Zest & Camay and Seventh Generation. Emerging markets contributed 57% of total turnover with underlying sales growth of 6.5% (2015: 7.1%) driven by price growth of 5.4% (2015: 4.3%). Developed markets underlying sales growth declined by 0.2% with volume growth in North America offset by negative pricing in Europe.

Core operating margin improved 0.5 percentage points to 15.3%. Gross margin improved 0.5 percentage points driven by margin-accretive innovation, acquisitions and savings programmes. Brand and marketing investment as a percentage of turnover was down 0.4 percentage points due to sales leverage and efficiencies from Zero Based Budgeting. Higher gross margin and lower brand and marketing investment were partially offset by a 0.4 percentage points increase in overheads driven by increased restructuring costs related to the implementation of the ‘Connected 4 Growth’ programme and the higher overheads ratio of acquired businesses.

Operating profit was up 3.8% at 7.8 billion (2015: 7.5 billion) including 245 million (2015: 350 million) of non-core charges mainly being acquisition and disposal-related costs and losses on business disposals.

Highlights for the year ended 31 December

 

      2016      2015     

%
change

 

 

 

Turnover ( million)

     52,713        53,272        (1

Operating profit ( million)

     7,801        7,515        4  

Core operating profit ( million)*

     8,046        7,865        2  

Profit before tax ( million)

     7,469        7,220        3  

Net profit ( million)

     5,547        5,259        6  

Diluted earnings per share ( )

     1.82        1.72        6  

Core earnings per share ( )*

     1.88        1.82        3  

Net cost of financing borrowings was 469 million compared with 372 million in 2015. The increase was driven by higher borrowing levels and reduced interest on cash deposits. The average interest rate on net debt increased to 3.5% compared with 3.0% in 2015. The charge for pension financing decreased by 27 million to 94 million (2015: 121 million) as a result of a lower net deficit at the beginning of the year.

The effective tax rate was 26.2% compared with 27.6% in 2015. This included the impact of favourable tax audit settlements.

Net profit from joint ventures and associates contributed 127 million compared with 107 million in 2015 due to higher profits from the Pepsi Lipton joint venture. Other income from non-current investment and associates increased to 104 million compared with 91 million in 2015, primarily driven by a gain of 107 million from the sale of financial assets. Diluted earnings per share increased by 5.7% to 1.82 largely due to improved margin. Core earnings per share increased by 3.1% to 1.88 including an adverse currency impact of 3.7%.

 

 

The independent auditors’ reports issued by KPMG Accountants N.V. and KPMG LLP on the consolidated results of the Group, as set out in the financial statements, were unqualified and contained no exceptions or emphasis of matter. For more details see pages 79 to 83.

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU and IFRS as issued by the International Accounting Standards Board. The critical accounting policies and those that are most significant in connection with our financial reporting are set out in note 1 on pages 88 to 90 and are consistent with those applied in 2015.

 

 

 

* Certain measures used in our reporting are not defined under IFRS. For further information about these measures, please refer to the commentary on non-GAAP measures on pages 26 to 28.

 

Annual Report on Form 20-F 2016   Strategic Report   23


Table of Contents

FINANCIAL REVIEW CONTINUED

    

 

PERSONAL CARE

 

      2016      2015      %
change
 

Turnover ( million)

     20,172        20,074        0.5  

Operating profit ( million)

     3,704        3,637        1.8  

Core operating profit ( million)

     3,844        3,788        1.5  

Operating margin (%)

     18.4        18.1        0.3  

Core operating margin (%)

     19.1        18.9        0.2  

Underlying sales growth (%)

     4.2        4.1     

Underlying volume growth (%)

     1.6        2.3     

Underlying price growth (%)

     2.6        1.8           

KEY DEVELOPMENTS

  Turnover growth was 0.5% including an adverse currency impact of 4.9%. Acquisitions and disposals contributed 1.4% which included brands such as Dollar Shave Club acquired in 2016 and the Prestige skin care brands acquired in 2015. Underlying sales growth was 4.2%, in line with 4.1% in 2015. Personal Care benefited from innovations and extending into more premium brands through acquisitions. Deodorants performed well following the success of dry sprays in North America and Rexona Antibacterial with 10x more odour protection. Hair benefited from the successful Sunsilk re-launch and from innovations such as TRESemmé Beauty-Full Volume range. Lifebuoy demonstrated strong growth across emerging markets while Dove had a good year supported by strong growth of the premium and Men+Care ranges.
  Core operating profit increased by 56 million; this includes a 466 million adverse impact from exchange rate movements. Acquisition and disposal activities contributed 323 million while underlying sales growth and core operating margin improvement added 161 million and 38 million respectively. Core operating margin improvement was principally driven by higher gross margins and brand and marketing efficiencies partly offset by a higher overheads ratio reflecting the impact of acquisitions and higher restructuring costs.

HOME CARE

 

      2016      2015      %
change
 

Turnover ( million)

     10,009        10,159        (1.5

Operating profit ( million)

     949        740        28.2  

Core operating profit ( million)

     967        775        24.8  

Operating margin (%)

     9.5        7.3        2.2  

Core operating margin (%)

     9.7        7.6        2.1  

Underlying sales growth (%)

     4.9        5.9     

Underlying volume growth (%)

     1.3        4.0     

Underlying price growth (%)

 

     3.6        1.9           

KEY DEVELOPMENTS

  Turnover for Home Care declined by 1.5% which includes an adverse currency impact of 6.5%. Acquisitions and disposals contributed a positive 0.4%. Underlying sales growth was 4.9% split between volume growth of 1.3% and price growth of 3.6%. Surf grew double-digit helped by the launch of Surf Sensations. Other innovations, including Omo with enhanced formulation, Comfort Intense and Domestos toilet blocks, were rolled out to new markets contributing volume growth. The Brilhante brand contributed to good volume growth in Latin America.
  Core operating profit increased by 192 million including a 62 million decrease from exchange rate movements. Underlying sales growth contributed 49 million while improved core operating margin added 203 million. Acquisition and disposal activities contributed 2 million. Gross margin improved as a result of improved mix and cost savings.

FOODS

 

      2016     2015      %
change
 

Turnover ( million)

     12,524       12,919        (3.1

Operating profit ( million)

     2,180       2,298        (5.1

Core operating profit ( million)

     2,240       2,354        (4.8

Operating margin (%)

     17.4       17.8        (0.4

Core operating margin (%)

     17.9       18.2        (0.3

Underlying sales growth (%)

     2.1       1.5     

Underlying volume growth (%)

     (0.5     0.8     

Underlying price growth (%)

 

     2.6       0.8           

KEY DEVELOPMENTS

  Turnover declined by 3.1% including a 4.7% adverse currency impact and 0.3% negative impact from acquisitions and disposals. Underlying sales growth was 2.1%, an improvement of 0.6 percentage points from 2015 led by 2.6% price growth. The category sustained its return to positive growth helped by strong performances from Hellmann’s and Knorr. The two brands successfully modernised their ranges with extension into organic variants and with packaging that highlights the naturalness of their ingredients. Sales in spreads declined as modest growth in emerging markets was offset by the continued but slowing decline in developed markets.
  Core operating profit declined by 114 million. Underlying sales growth added 48 million and exchange rates had an adverse impact of 117 million. Core operating margin and acquisition and disposal activities had a negative impact of 42 million and 3 million respectively. Core operating margin declined as a result of higher overheads which included higher restructuring costs coming from programmes such as Connected 4 Growth, partly offset by reduced brand and marketing investment spend.

 

REFRESHMENT

 

      2016      2015     

%

change

 

Turnover ( million)

     10,008        10,120        (1.1

Operating profit ( million)

     968        840        15.2  

Core operating profit ( million)

     995        948        5.0  

Operating margin (%)

     9.7        8.3        1.4  

Core operating margin (%)

     9.9        9.4        0.5  

Underlying sales growth (%)

     3.5        5.4     

Underlying volume growth (%)

     1.0        1.5     

Underlying price growth (%)

 

     2.6        3.9           

KEY DEVELOPMENTS

  Refreshment turnover declined by 1.1% including a 4.6% adverse impact from currency and a 0.1% positive contribution from acquisitions and disposals. Underlying sales growth was 3.5%, a drop of 1.9 percentage points from 2015. Growth in ice cream was driven by margin-accretive innovations behind premium brands including the Magnum Double range, the Ben & Jerry’s ‘Wich sandwich and dairy free range as well as new variants of Talenti. Leaf tea growth improved in emerging markets but was held back by the black tea business in developed markets. Tea continued to build its presence in more premium segments with good growth from T2 specialty teas.
  Core operating profit was 47 million higher coming from underlying sales growth which contributed 36 million, core operating margin improvement of 57 million and a 11 million increase from acquisition and disposal activities net of adverse exchange rate movements of 57 million. Core operating margin was up primarily due to improvements in gross margin in ice cream.
 

 

24   Strategic Report    Annual Report on Form 20-F 2016


Table of Contents

    

    

 

CASH FLOW

Free cash flow of 4.8 billion was in line with the strong delivery in 2015. Cash flow from operating activities was in line with prior year reflecting a 0.3 billion increase in operating profit net of outflows from trade payables and other liabilities within working capital. Net capital expenditure as a percentage of turnover was 3.6% (2015: 3.9%).

 

      € million
2016
     million
2015
 

Operating profit

     7,801       7,515  

Depreciation, amortisation and impairment

     1,464       1,370  

Changes in working capital

     51       720  

Pensions and similar obligations less payments

     (327     (385

Provisions less payments

     65       (94

Elimination of (profits)/losses on disposals

     127       26  

Non-cash charge for share-based compensation

     198       150  

Other adjustments

     (81     49  

Cash flow from operating activities

     9,298       9,351  

Income tax paid

     (2,251     (2,021

Net capital expenditure

     (1,878     (2,074

Net interest and preference dividends paid

     (367     (460

Free cash flow*

     4,802       4,796  

Net cash flow (used in)/from investing activities

     (3,188     (3,539

Net cash flow (used in)/from financing activities

     (3,073     (3,032

 

* Certain measures used in our reporting are not defined under IFRS. For further information about these measures, please refer to the commentary on non-GAAP measures on pages 26 to 28.

Net outflow from investing activities was 3.2 billion (2015: 3.5 billion) primarily being spend on business acquisitions and capital expenditure on property, plant and equipment.

Net outflow from financing activities was in line with prior year at 3.1 billion.

BALANCE SHEET

At 31 December 2016, Unilever’s combined market capitalisation was 110.2 billion compared with 113.4 billion at the end of 2015.

Goodwill and intangible assets increased by 2.4 billion mainly driven by the acquisitions of Dollar Shave Club, Seventh Generation and Blueair. All material goodwill and indefinite-life intangible assets have been tested for impairment with no charge recognised during the year. Other non-current assets increased by 0.5 billion primarily due to increases in deferred tax assets and a higher property, plant and equipment partly offset by a decrease in pension assets.

 

     

€ million

2016

      million
2015
 

Goodwill and intangible assets

     27,433        25,059  

Other non-current assets

     15,112        14,553  

Current assets

     13,884        12,686  

Total assets

     56,429        52,298  

Current liabilities

     20,556        20,019  

Non-current liabilities

     18,893        16,197  

Total liabilities

     39,449        36,216  

Shareholders’ equity

     16,354        15,439  

Non-controlling interest

     626        643  

Total equity

     16,980        16,082  

Total liabilities and equity

     56,429        52,298  

Current assets were higher by 1.2 billion primarily due to an improved cash and cash equivalent balance which increased from 2.3 billion at the beginning of the year to 3.4 billion at 31 December 2016 including the impact of favourable exchange rates. Trade and other current receivables also increased by 0.3 billion due to increased sales in some of our key markets, extended credit terms following challenging market conditions, and currency impact.

Current liabilities were 20.6 billion. The 0.6 billion increase compared to 2015 is primarily from the recognition of the portion of long-term financial liabilities that fall due within 2017.

Non-current liabilities were 18.9 billion compared with 16.2 billion at the end of 2015. The increase of 2.7 billion reflects additional borrowings to finance acquisitions. On 25 April 2016 we issued 700 million 1.125% fixed rate notes due on 29 April 2028, 500 million 0.5% fixed rate notes due on 29 April 2024 and 300 million 0.00% fixed rate notes due 29 April 2020. On 27 July 2016 we issued US$700 million 2% fixed rate notes due on 28 July 2026 and US$550 million 1.375% fixed rate notes due on 28 July 2021.

The table below shows the movement in net pension liability during the year. The increase from 2.3 billion at the beginning of the year to 3.2 billion at the end of 2016 was primarily due to higher liabilities driven by lower discount rates. The increase was partly offset by investment returns and cash contributions. Cash expenditure on pensions was 0.7 billion, the same as in the prior year.

 

    

€ million

2016

 

1 January

    (2,320

Current service cost

    (226

Employee contributions

    16  

Actual return on plan assets (excluding interest)

    1,877  

Net interest cost

    (94

Actuarial loss

    (3,098

Employer contributions

    512  

Currency retranslation

    135  

Other movements (a)

    25  

31 December

 

    (3,173

 

(a)   Other movements relate to special termination benefits, past service costs including losses/(gains) on curtailment, settlements and reclassification of benefits. For more detail see note 4B on pages 94 to 99.

FINANCE AND LIQUIDITY

Approximately 1.5 billion (or 43%) of the Group’s cash and cash equivalents are held in the parent and central finance companies, for maximum flexibility. These companies provide loans to our subsidiaries that are also funded through retained earnings and third party borrowings. We maintain access to global debt markets through an infrastructure of short and long-term debt programmes. We make use of plain vanilla derivatives, such as interest rate swaps and foreign exchange contracts, to help mitigate risks. More detail is provided in notes 16, 16A, 16B and 16C on pages 115 to 120.

The remaining 1.9 billion (57%) of the Group’s cash and cash equivalents are held in foreign subsidiaries which repatriate distributable reserves on a regular basis. For most countries, this is done through dividends which are in some cases subject to withholding or distribution tax. This balance includes 240 million (2015: 284 million, 2014: 452 million) of cash that is held in a few countries where we face cross-border foreign exchange controls and/or other legal restrictions that inhibit our ability to make these balances available for general use by the wider business. The cash will generally be invested or held in the relevant country and, given the other capital resources available to the Group, does not significantly affect the ability of the Group to meet its cash obligations.

We closely monitor all our exposures and counter-party limits. Unilever has committed credit facilities in place for general corporate purposes. The undrawn bilateral committed credit facilities in place on 31 December 2016 were US$6,550 million.

 

 

Annual Report on Form 20-F 2016   Strategic Report   25


Table of Contents

FINANCIAL REVIEW CONTINUED

    

 

 

CONTRACTUAL OBLIGATIONS AT 31 DECEMBER 2016

 

    

€ million

    

    

Total

    

 million

Due

within

1 year

    

 million

Due in

1-3

years

    

 million

Due in

3-5

years

    

 million

Due in

over

5 years

 

Long-term debt

    16,408        5,278        2,719        3,147        5,264  

Interest on financial liabilities

    2,793        335        540        377        1,541  

Operating lease obligations

    2,841        457        782        611        991  

Purchase obligations (a)

    414        346        68        -        -  

Finance leases

    220        24        36        33        127  

Other long-term commitments

    2,051        858        847        316        30  

Total

 

    24,727        7,298        4,992        4,484        7,953  

 

(a)   For raw and packaging materials and finished goods.

Further details are set out in the following notes to the consolidated financial statements: note 10 on pages 106 and 107, note 15C on page 114, and note 20 on pages 125 and 126. Unilever is satisfied that its financing arrangements are adequate to meet its working capital needs for the foreseeable future. In relation to the facilities available to the Group, borrowing requirements do not fluctuate materially during the year and are not seasonal.

AUDIT FEES

Included within operating profit is 15 million (2015: 15 million) paid to the external auditor, of which 14 million (2015: 14 million) related to statutory audit services.

NON-GAAP MEASURES

Certain discussions and analyses set out in this Annual Report and Accounts (and the Additional Information for US Listing Purposes) include measures which 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, and our 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. Wherever appropriate and practical, we provide reconciliations to relevant GAAP measures.

Unilever uses ‘constant rate’, ‘underlying’ and ‘core’ measures primarily for internal performance analysis and targeting purposes. We present certain items, percentages and movements, using constant exchange rates, which exclude the impact of fluctuations in foreign currency exchange rates. We calculate constant currency values by translating both the current and the prior period local currency amounts into euro using the prior period average exchange rates.

The table below shows exchange rate movements in our key markets.

 

    

Annual

average rate

in 2016

     Annual
average rate
in 2015
 

  US dollar ( 1 = US$)

    1.111        1.111  

  Indian rupee ( 1 = INR)

    74.588        71.047  

  Brazilian real ( 1 = BRL)

    3.889        3.607  

  UK pound sterling ( 1 = GBP)

    0.815        0.725  

  Indonesia rupiah ( 1 = IDR)

    14770        14820  

  Chinese yuan ( 1 = CNY)

    7.355        6.967  

  Argentine peso ( 1 = ARS)

    16.292        10.087  

In the following sections we set out our definitions of the following non-GAAP measures and provide reconciliations to relevant GAAP measures:

  underlying sales growth;
  underlying volume growth;
  underlying price growth;
  core operating profit and core operating margin;
  core earnings per share;
  core effective tax rate;
  constant core earnings per share;
  free cash flow;
  net debt; and
  return on invested capital.

UNDERLYING SALES GROWTH

Underlying sales growth (USG) refers to the increase in turnover for the period, excluding any change in turnover resulting from acquisitions, disposals and changes in currency. The impact of acquisitions and disposals is excluded from USG for a period of 12 calendar months from the applicable closing date. Turnover from acquired brands that are launched in countries where they were not previously sold is included in USG, as such turnover is more attributable to our existing sales and distribution network than the acquisition itself. We believe this measure provides valuable additional information on the underlying sales performance of the business and is a key measure used internally.

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

 

TOTAL GROUP   2016
vs 2015
    2015
vs 2014
 

Turnover growth (%) (a)

    (1.0     10.0  

Effect of acquisitions (%)

    0.8       0.7  

Effect of disposals (%)

    (0.2     (0.8

Effect of exchange rates (%)

    (5.1     5.9  

Underlying sales growth (%)

 

   

 

3.7

 

 

 

   

 

4.1

 

 

 

PERSONAL CARE

 

  2016
vs 2015
    2015
vs 2014
 

Turnover growth (%) (a)

    0.5       13.2  

Effect of acquisitions (%)

    1.7       1.0  

Effect of disposals (%)

    (0.3      

Effect of exchange rates (%)

    (4.9     7.6  

Underlying sales growth (%)

 

   

 

4.2

 

 

 

   

 

4.1

 

 

 

FOODS

 

  2016
vs 2015
    2015
vs 2014
 

Turnover growth (%) (a)

    (3.1     4.5  

Effect of acquisitions (%)

           

Effect of disposals (%)

    (0.3     (2.5

Effect of exchange rates (%)

    (4.7     5.6  

Underlying sales growth (%)

    2.1         1.5  
 

 

26   Strategic Report    Annual Report on Form 20-F 2016


Table of Contents

    

    

 

HOME CARE   

2016

vs 2015

   

2015

vs 2014

 

Turnover growth (%) (a)

     (1.5     10.9  

Effect of acquisitions (%)

     0.6       0.2  

Effect of disposals (%)

     (0.2     (0.1

Effect of exchange rates (%)

     (6.5     4.5  

Underlying sales growth (%)

     4.9       5.9  
REFRESHMENT   

2016

vs 2015

   

2015

vs 2014

 

Turnover growth (%) (a)

     (1.1     10.3  

Effect of acquisitions (%)

     0.2       1.3  

Effect of disposals (%)

     (0.1     (0.7

Effect of exchange rates (%)

     (4.6     4.1  

Underlying sales growth (%)

     3.5       5.4  

 

(a)   Turnover growth is made up of distinct individual growth components, namely underlying sales, currency impact, acquisitions and disposals. Turnover growth is arrived at by multiplying these individual components on a compounded basis as there is a currency impact on each of the other components. Accordingly, turnover growth is more than just the sum of the individual components.

UNDERLYING VOLUME GROWTH

Underlying volume growth (UVG) is part of USG and means, for the applicable period, the increase in turnover in such period calculated as the sum of (i) the increase in turnover attributable to the volume of products sold; and (ii) the increase in turnover attributable to the composition of products sold during such period. UVG therefore excludes any impact on USG due to changes in prices.

UNDERLYING PRICE GROWTH

Underlying price growth (UPG) is part of USG and means, for the applicable period, the increase in turnover attributable to changes in prices during the period. UPG therefore excludes the impact to USG due to (i) the volume of products sold; and (ii) the composition of products sold during the period.

The relationship between USG, UVG and UPG is set out below:

 

     

2016

vs 2015

    

2015

vs 2014

 

Underlying volume growth (%)

     0.9        2.1  

Underlying price growth (%)

     2.8        1.9  

Underlying sales growth (%)

     3.7        4.1  

Refer to page 24 for the relationship between USG, UVG and UPG for each of the categories.

CORE OPERATING PROFIT AND CORE OPERATING MARGIN

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, due to their nature and/or frequency of occurrence. Core operating profit represents our measure of segment profit or loss as it is the primary measure used for the purpose of making decisions about allocating resources and assessing performance of segments.

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

 

      € million
2016
     million
2015
 

Operating profit

     7,801       7,515  

Acquisition and disposal related costs

     132       105  

(Gain)/loss on disposal of group companies

     95       9  

Impairments and other one-off items

     18       236  

Core operating profit

     8,046       7,865  

Turnover

     52,713       53,272  

Operating margin

     14.8     14.1

Core operating margin

     15.3     14.8

Further details of non-core items can be found in note 3 on pages 92 to 93 of the consolidated financial statements.

 

CORE EARNINGS PER SHARE

Core earnings per share (core EPS) is calculated as core profit attributable to shareholders’ equity divided by the diluted combined average number of share units. In calculating core earnings, net profit attributable to shareholders’ equity is adjusted to eliminate the post-tax impact of non-core items. This measure reflects the underlying earnings for each share unit of the Group. Refer to note 7 on page 103 for reconciliation of core earnings to net profit attributable to shareholders’ equity.

CORE EFFECTIVE TAX RATE

The core effective tax rate is calculated by dividing taxation excluding the tax impact of non-core items by profit before tax excluding non-core items and share of net profit/(loss) of joint ventures and associates. This measure reflects the underlying tax rate in relation to profit before tax, non-core items, joint ventures and associates.

The reconciliation of taxation to taxation before non-core items is as follows:

 

      € million
2016
     million
2015
 

Taxation

     1,922       1,961  

Tax impact of non-core items

     60       49  

Taxation before non-core items

     1,982       2,010  

Profit before taxation

     7,469       7,220  

Non-core items before tax

     245       350  

Share of net profit/loss of joint ventures and associates

     (127     (107

Profit before tax, joint ventures, associates and non-core items

     7,587       7,463  

Core effective tax rate

     26.1%       26.9

CONSTANT CORE EARNINGS PER SHARE

Constant core earnings per share (constant core EPS) is calculated as core profit attributable to shareholders’ equity at constant exchange rates and excluding the impact of translational hedges divided by the diluted combined average number of share units. This measure reflects the underlying earnings for each share unit of the Group in constant exchange rates.

The reconciliation of core profit attributable to shareholders’ equity to constant core earnings attributable to shareholders’ equity and the calculation of constant core EPS is as follows:

 

     

€ million

2016

    

 million

2015

 

Core profit attributable to shareholders’ equity (see note 7)

     5,370        5,210  

Impact of translation of earnings between constant and current exchange rates and translational hedges

     169        (125

Constant core earnings attributable to shareholders’ equity

     5,539        5,085  

Diluted combined average number of share units (millions of units)

     2,853.9        2,855.4  

Constant core EPS (€)

     1.94        1.78  

In calculating the movement in constant core EPS, the constant core EPS for 2016 is compared to the core EPS for 2015 as adjusted for the impact of translational hedges, which was 1.82.

FREE CASH FLOW

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. FCF 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.

 

 

Annual Report on Form 20-F 2016   Strategic Report   27


Table of Contents

FINANCIAL REVIEW CONTINUED

    

 

The reconciliation of net profit to FCF is as follows:

 

      € million
2016
     million
2015
 

Net profit

     5,547       5,259  

Taxation

     1,922       1,961  

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

     (231     (198

Net finance costs

     563       493  

Depreciation, amortisation and impairment

     1,464       1,370  

Changes in working capital

     51       720  

Pensions and similar obligations less payments

     (327     (385

Provisions less payments

     65       (94

Elimination of (profits)/losses on disposals

     127       26  

Non-cash charge for share-based compensation

     198       150  

Other adjustments

     (81     49  

Cash flow from operating activities

     9,298       9,351  

Income tax paid

     (2,251     (2,021

Net capital expenditure

     (1,878     (2,074

Net interest and preference dividends paid

     (367     (460

Free cash flow

     4,802       4,796  

Net cash flow (used in)/from investing activities

     (3,188     (3,539

Net cash flow (used in)/from financing activities

     (3,073     (3,032

NET DEBT

Net debt is defined as the excess of total financial liabilities, excluding trade payables and other current liabilities, over cash, cash equivalents and other current financial assets, excluding trade and other current receivables. It is a measure that provides valuable additional information on the summary presentation of the Group’s net financial liabilities and is a measure in common use elsewhere.

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

 

      € million
2016
     million
2015
 

Total financial liabilities

     (16,595     (14,643

Current financial liabilities

     (5,450     (4,789

Non-current financial liabilities

     (11,145     (9,854

Cash and cash equivalents as per balance sheet

     3,382       2,302  

Cash and cash equivalents as per cash flow statement

     3,198       2,128  

Add bank overdrafts deducted therein

     184       174  

Other current financial assets

     599       836  

Net debt

     (12,614     (11,505

 

RETURN ON INVESTED CAPITAL

Return on invested capital (ROIC) is a measure of the return generated on capital invested by the Group. The measure provides a guide rail for long-term value creation and encourages compounding reinvestment within the business and discipline around acquisitions with low returns and long payback. ROIC is calculated as core operating profit after tax divided by the annual average of: goodwill, intangible assets, property, plant and equipment, net non-current assets held for sale, inventories, trade and other current receivables, and trade payables and other current liabilities.

 

      € million
2016
     million
2015
 

 Core operating profit before tax

     8,046       7,865  

 Tax on core operating profit (a)

     (2,102     (2,118

 Core operating profit after tax

     5,944       5,747  

 Goodwill

     17,624       16,213  

 Intangible assets

     9,809       8,846  

 Property, plant and equipment

     11,673       11,058  

 Net non-current assets held for sale

     205       173  

 Inventories

     4,278       4,335  

 Trade and other current receivables

     5,102       4,804  

 Trade payables and other current liabilities

     (13,871     (13,788

 Period-end invested capital

     34,820       31,641  

 Average invested capital for the period

     33,231       30,462  

 Return on average invested capital

     17.9     18.9

 

(a)   Tax on core operating profit is calculated as core operating profit before tax multiplied by core effective tax rate of 26.1% (2015: 26.9%) which is shown on page 27.
 

 

28   Strategic Report    Annual Report on Form 20-F 2016


Table of Contents

GOVERNANCE

CORPORATE GOVERNANCE

    

 

 

GOVERNANCE OF UNILEVER

ABOUT UNILEVER

Unilever N.V. (NV) and Unilever PLC (PLC), together with their group companies have, since the Unilever Group was formed in 1930, operated as nearly as practicable as a single economic entity. This is achieved by special provisions in the Articles of Association of NV and PLC, together with a series of agreements between NV and PLC which are together known as the Foundation Agreements (described below). These agreements enable Unilever to achieve unity of management, operations, shareholders’ rights, purpose and mission and can be found on our website.

The Equalisation Agreement makes the economic position of the shareholders of NV and PLC, as far as possible, the same as if they held shares in a single company and also regulates the mutual rights of the shareholders of NV* and PLC. Under this agreement, NV and PLC must adopt the same financial periods and accounting policies.

The Deed of Mutual Covenants provides that NV and PLC and their respective subsidiary companies shall co-operate in every way for the purpose of maintaining a common operating policy. They shall exchange all relevant information about their respective businesses – the intention being to create and maintain a common operating platform for the Group throughout the world. The Deed also contains provisions for the allocation of assets within the Unilever Group.

Under the Agreement for Mutual Guarantees of Borrowing between NV and PLC, each company will, if asked by the other, guarantee the borrowings of the other and the other’s subsidiaries. These arrangements are used, as a matter of financial policy, for certain significant borrowings. They enable lenders to rely on our combined financial strength.

Each NV ordinary share represents the same underlying economic interest in the Unilever Group as each PLC ordinary share. However, NV and PLC remain separate legal entities with different shareholder constituencies and separate stock exchange listings. Shareholders cannot convert or exchange the shares of one for the shares of the other. More information on the exercise of voting rights can be found in NV’s and PLC’s Articles of Association and in the Notices of Meetings for our NV and PLC AGMs, all of which can be found on our website.

 

* Throughout this report, when referring to NV shares or shareholders, the term ‘shares’ or ‘shareholder’ also encompasses a depositary receipt or a holder of depositary receipts.

 

LOGO   www.unilever.com/legalstructure

BOARDS

The Boards of NV and PLC have ultimate responsibility for the management, general affairs, direction, performance and long-term success of our business as a whole. The Boards are one-tier boards, the same people are on both Boards and the responsibility of the Directors is collective, taking into account their respective roles as Executive Directors and Non-Executive Directors. The majority of the Directors are Non-Executive Directors who essentially have a supervisory role. Until 21 April 2016 Unilever had one Executive Director, the Chief Executive Officer (CEO), who chairs the Unilever Leadership Executive (ULE). Our previous Chief Financial Officer (CFO) resigned with effect from 1 October 2015 and his successor, Graeme Pitkethly, became a member of the ULE and the CFO on 1 October 2015. Graeme became an Executive Director on 21 April 2016 upon his appointment at the 2016 AGMs. As from that date Unilever continued to have two Executive Directors.

A list of our current Directors, their roles on the Boards, their dates of appointment and their other major appointments is set out on page 3.

The Boards have delegated the operational running of the Group to the CEO with the exception of the following matters which are reserved for the Boards: structural and constitutional matters, corporate governance, approval of dividends, approval of overall strategy for the Group, approval of significant transactions or arrangements in relation to mergers, acquisitions, joint ventures and disposals, capital expenditure, contracts, litigation, financing and pensions. The CEO is responsible to the Boards and is able to delegate any of his powers and discretions, which he does, to members of the ULE. Members of the ULE report to the CEO. The biographies of ULE members are on page 5.

BOARD COMMITTEES

The Boards have established four Board Committees: the Audit Committee, the Compensation Committee, the Corporate Responsibility Committee and the Nominating and Corporate Governance Committee. The terms of reference of these Committees can be found on our website and the reports of each Committee, including attendance at meetings in 2016, can be found on pages 42 to 77.

 

LOGO   www.unilever.com/committees

THE GOVERNANCE OF UNILEVER

Further details of the roles and responsibilities of the Chairman, Vice-Chairman, CEO and other corporate officers and how our Boards effectively operate as one board, govern themselves and delegate their authorities are set out in the document entitled ‘The Governance of Unilever’, which can be found on our website.

The Governance of Unilever also describes the Foundation Agreements, Directors’ appointment, tenure, induction and training, Directors’ ability to seek independent advice at Unilever’s expense and details about Board and Management Committees (including the Disclosure Committee).

 

LOGO   www.unilever.com/corporategovernance

 

 

BOARD EFFECTIVENESS

BOARD MEETINGS

A minimum of six face-to-face meetings are planned throughout the calendar year to consider, for example, the half-year and full-year results announcements of the Group and the strategy of the Group. Other ad hoc Board meetings are convened to discuss strategic, transactional and governance matters that arise. Meetings of the Boards may be held either in London or in Rotterdam or such other locations as the Boards think fit, with one or two off-site Board meetings a year. The Chairman sets the Boards’ agenda, ensures the Directors receive accurate, timely and clear information, and promotes effective relationships and open communication between the Executive and Non-Executive Directors.

In 2016 the Boards met physically in January, February, April, July, September and November and considered important corporate events and actions, such as:

  developing and approval of the overall strategy;
  oversight of the performance of the business;
  review of risks and internal risk management and control systems;
  authorisation of major transactions;
  declaration of dividends;
  convening of shareholders’ meetings;
  nominations for Board appointments, including the new Chairman;
  review of the functioning of the Boards and their Committees; and
  review of corporate responsibility and sustainability, in particular the Unilever Sustainable Living Plan.
 

 

Annual Report on Form 20-F 2016   Governance   29


Table of Contents

CORPORATE GOVERNANCE CONTINUED

    

 

ATTENDANCE

The table showing the attendance of current Directors at Board meetings in 2016 can be found on page 3. If Directors are unable to attend a Board meeting they have the opportunity beforehand to discuss any agenda items with the Chairman. Both Michael Treschow and Hixonia Nyasulu attended the three Board meetings they were eligible to attend, before retiring from the Boards on 21 April 2016.

NON-EXECUTIVE DIRECTOR MEETINGS

The Non-Executive Directors meet as a group, without the Executive Directors present, to consider specific agenda items set by them, usually four or five times a year. In 2016 they met six times. The Chairman, or in his absence the Vice-Chairman/Senior Independent Director, chairs such meetings.

BOARD EVALUATION

Each year the Boards formally assess their own performance with the aim of helping to improve the effectiveness of both the Boards and the Committees and at least once every three years an independent third party facilitates the evaluation. The last external evaluation was performed in 2014. The evaluation consists of individual interviews with the Directors by the Chairman and, when relevant, by the external evaluator. These interviews are complemented by the completion by all Directors of three confidential online evaluation questionnaires on our Boards, CEO and Chairman. However, this year only two questionnaires were completed, on the CEO and the Boards, the latter questionnaire inviting comments on a number of key areas including strategy, board composition, effectiveness, training and knowledge. Given the Chairman was only appointed in April 2016, the Senior Independent Director/Vice-Chairman led a collective discussion with the Non-Executive Directors on the Chairman’s performance and the results of the Chairman’s effectiveness review were then discussed between the Chairman and the Vice-Chairman. Committees of the Boards evaluate themselves annually under supervision of their respective Chairmen taking into account the views of respective Committee members and the Boards. The key actions agreed by each Committee in the 2016 evaluations can be found in each Committee Report.

APPOINTMENT

In seeking to ensure that NV and PLC have the same Directors, the Articles of Association of NV and PLC contain provisions which are designed to ensure that both NV and PLC shareholders are presented with the same candidates for election as Directors. Anyone being elected as a Director of NV must also be elected as a Director of PLC and vice versa. Therefore, if an individual fails to be elected to both companies he or she will be unable to take his or her place on either Board.

The report of the Nominating and Corporate Governance Committee (NCGC) on pages 46 to 47 describes the work of the NCGC in Board appointments and recommendations for re-election. In addition, shareholders are able to nominate Directors. The procedure for shareholders to nominate Directors is contained within the document entitled ‘Appointment procedure for NV and PLC Directors’ which is available on our website. To do so they must put a resolution to both the NV and PLC AGMs in line with local requirements. Directors are appointed by shareholders by a simple majority vote at each AGM.

 

LOGO   www.unilever.com/boardsofunilever

DIRECTOR INDUCTION AND TRAINING

All new Directors participate in a comprehensive induction programme when they join the Boards. The Chairman ensures that ongoing training is provided for Directors by way of site visits, presentations and circulated updates at (and between) Board and Board Committee meetings on, among other things, Unilever’s business, environmental, social, corporate governance, regulatory developments and investor relations matters. Details of the training provided to the Directors in 2016 can be found in the Chairman’s Statement on page 2.

INDEPENDENCE AND CONFLICTS

As the Non-Executive Directors make up the Committees of the Boards, it is important that they can be considered to be independent. Each year the Boards conduct a thorough review of the Non-Executive Directors’, and their related or connected persons’, relevant relationships referencing the criteria set out in ‘The Governance of Unilever’ which is derived from the relevant best practice guidelines in the Netherlands, UK and US. The Boards currently consider all our Non-Executive Directors to be independent of Unilever.

We attach special importance to avoiding conflicts of interest between NV and PLC and their respective Directors. The Boards ensure that there are effective procedures in place to avoid conflicts of interest by Board members. If appropriate, authorisation of situational conflicts is given by the Boards to the relevant Director. The authorisation includes conditions relating to keeping Unilever information confidential and to the Director’s exclusion from receiving and discussing relevant information at Board meetings. Situational conflicts are reviewed annually by the Boards as part of the determination of Director independence. In between those reviews Directors have a duty to inform the Boards of any relevant changes to their situation. A Director may not vote on, or be counted in a quorum in relation to, any resolution of the Boards in respect of any situation in which he or she has a conflict of interest. The procedures that Unilever has put in place to deal with conflicts of interest operate effectively.

Unilever recognises the benefit to the individual and the Group of senior executives acting as directors of other companies but, to ensure outside directorships of our Executive Directors do not involve an excessive commitment or conflict of interest, the number of outside directorships of listed companies is generally limited to one per Executive Director and approval is required from the Chairman.

INDEMNIFICATION

The terms of NV Directors’ indemnification are provided for in NV’s Articles of Association. The power to indemnify PLC Directors is provided for in PLC’s Articles of Association and deeds of indemnity have been agreed with all PLC Directors. Third party directors’ and officers’ liability insurance was in place for all Unilever Directors throughout 2016 and is currently in force.

In addition, PLC provides indemnities (including, where applicable, a qualifying pension scheme indemnity provision) to the Directors of three subsidiaries each of which acts as trustee of a Unilever UK pension fund. Appropriate trustee liability insurance is also in place.

 

 

OUR SHARES

NV SHARES

SHARE CAPITAL

NV’s issued share capital on 31 December 2016 was made up of:

  274,356,432 split into 1,714,727,700 ordinary shares of 0.16 each;
  1,028,568 split into 2,400 special ordinary shares numbered 1 – 2,400 known as special ordinary shares; and
  81,454,014 split into two classes (6% and 7%) of cumulative preference shares*.

 

* These shares are included within liabilities (note 15C).

LISTINGS

NV has listings of ordinary shares, 6% and 7% cumulative preference shares and depositary receipts for such ordinary shares and 7% cumulative preference shares on Euronext Amsterdam and a listing of New York Registry Shares* on the New York Stock Exchange.

 

* One New York Registry Share represents one NV ordinary share with a nominal value of 0.16.
 

 

30   Governance    Annual Report on Form 20-F 2016


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VOTING RIGHTS

NV shareholders can cast one vote for each 0.16 nominal capital they hold and can vote in person or by proxy. The voting rights attached to NV’s outstanding shares are split as follows:

 

      Total number of votes     % of issued capital  

1,714,727,700 ordinary shares

     1,714,727,700 (a)       76.89  

2,400 special shares

     6,428,550       0.29  

161,060 6% cumulative preference shares

     431,409,276 (b)       19.34  

29,000 7% cumulative preference shares

     77,678,313 (c)       3.48  

As at 31 December 2016:

(a)   141,560,629 shares were held in treasury and 10,392,782 shares were held to satisfy obligations under share-based incentive schemes.
(b)   37,679 6% cumulative preference shares were held in treasury.
(c)   7,562 7% cumulative preference shares were held in treasury.

The special shares and the shares under (a), (b) and (c) are not voted on.

SHARE ISSUES AND BUY BACKS

NV may issue shares not yet issued and grant rights to subscribe for shares only pursuant to a resolution of the General Meeting or of another corporate body designated for such purpose by a resolution of the General Meeting. At the NV AGM held on 21 April 2016 the Board of NV was designated as the corporate body authorised to resolve on the issue of, or on the granting of rights to subscribe for, shares not yet issued and to restrict or exclude the statutory pre-emption rights that accrue to shareholders upon issue of shares, on the understanding that this authority is limited to 10% of the issued share capital of NV, plus an additional 10% of the issued share capital of NV in connection with or on the occasion of mergers, acquisitions or strategic alliances.

At the 2016 NV AGM the Board of NV was also authorised to cause NV to buy back its own shares or depositary receipts thereof, with a maximum of 10% of issued share capital, either through purchase on a stock exchange or otherwise, at a price, excluding expenses, not lower than 0.01 (one euro cent) and not higher than 10% above the average of the closing price of the shares on the trading venue where the purchase is carried out for the five business days before the day on which the purchase is made.

These authorities expire on the earlier of the conclusion of the 2017 NV AGM or the close of business on 30 June 2017 (the last date by which NV must hold an AGM in 2017). Such authorities are renewed annually and authority will be sought at NV’s 2017 AGM.

During 2016 Unilever group companies purchased 2,930,000 NV ordinary shares, representing 0.17% of the issued ordinary share capital, for 118,119,958 and 972,584 NV New York Registry Shares, representing 0.06% of the issued ordinary share capital, for 38,947,918. These purchases were made to facilitate grants made in connection with Unilever’s employee compensation programmes. No NV 6% cumulative preference shares nor NV 7% cumulative preference shares were purchased by Unilever group companies during 2016. Further information on these purchases can be found in note 4C to the consolidated accounts on pages 99 to 100.

NV SPECIAL ORDINARY SHARES

To ensure unity of management, the provisions within the NV Articles of Association containing the rules for appointing NV Directors cannot be changed without the permission of the holders of the special ordinary shares numbered 1 – 2,400 inclusive. These NV special ordinary shares may only be transferred to one or more other holders of such shares. The joint holders of these shares are N.V. Elma and United Holdings Limited, which are subsidiaries of NV and PLC respectively. The Boards of N.V. Elma and United Holdings Limited comprise three Directors of the Unilever Boards.

TRUST OFFICE

The Foundation Unilever N.V. Trust Office (Stichting Administratiekantoor Unilever N.V.) is a trust office with a board independent of Unilever. As part of its corporate objects, the Trust Office issues depositary receipts in exchange for the NV ordinary shares and NV 7% cumulative preference shares. These depositary receipts are listed on Euronext Amsterdam, as are the NV ordinary and 7% cumulative preference shares themselves.

Holders of depositary receipts can under all circumstances exchange their depositary receipts for the underlying shares (and vice versa) and are entitled to dividends and all economic benefits on the underlying shares held by the Trust Office. There are no limitations on the holders’ voting rights, they can attend all General Meetings of NV, either personally or by proxy, and have the right to speak. The Trust Office only votes shares that are not represented at a General Meeting. The Trust Office votes in such a way as it deems to be in the long-term interests of the holders of the depositary receipts. This voting policy is laid down in the Conditions of Administration that apply to the depositary receipts.

The Trust Office’s shareholding fluctuates daily. Its holdings on 31 December 2016 were 1,366,248,487 NV ordinary shares (79.68%) and 9,817 NV 7% cumulative preference shares (33.85%). At the 2016 NV AGM, the Trust Office represented 28.86% of all votes present at the meeting.

The members of the board at the Trust Office are Mr J H Schraven (chairman), Mr P Frentrop, Mr A Nühn and Ms C M S Smits-Nusteling. The Trust Office reports periodically on its activities. Further information on the Trust Office, including its Articles of Association, Conditions of Administration and Voting Policy, can be found on its website.

Unilever considers the arrangements of the Trust Office to be appropriate and in the interests of NV and its shareholders given the size of the voting rights attached to the financing preference shares and the relatively low attendance of holders of ordinary shares at the General Meetings of NV.

 

LOGO   www.administratiekantoor-unilever.nl

PLC SHARES

SHARE CAPITAL

PLC’s issued share capital on 31 December 2016 was made up of:

  £40,760,420 split into 1,310,156,361 ordinary shares of 3 1 / 9 p each; and
  £100,000 of deferred stock of £1 each.

LISTINGS

PLC has shares listed on the London Stock Exchange and, as American Depositary Receipts*, on the New York Stock Exchange.

 

* One American Depository Receipt represents one PLC ordinary share with a nominal value of 3 1 / 9 p.

VOTING RIGHTS

PLC shareholders can cast one vote for each 3 1 / 9 p nominal capital they hold, and can vote in person or by proxy. This means that shareholders can cast one vote for each PLC ordinary share or PLC American Depositary Receipt of Shares. Therefore, the total number of voting rights attached to PLC’s outstanding shares is as follows:

 

     Total number of votes     % of issued capital  

1,310,156,361 ordinary shares

    1,310,156,361 (a)       99.76  

£100,000 deferred stock

    3,214,285       0.24  

As at 31 December 2016:

(a)   Of which 26,696,994 shares were held by PLC in treasury and 6,544,015 shares were held by NV group companies. These shares are not voted on.
 

 

Annual Report on Form 20-F 2016   Governance   31


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CORPORATE GOVERNANCE CONTINUED

    

 

SHARE ISSUES AND BUY BACKS

The PLC Board may, subject to the UK Companies Act 2006 and the passing of the appropriate resolutions at a General Meeting, issue shares within the limits prescribed within the resolutions. At the PLC 2016 AGM held on 20 April 2016 the PLC Directors were authorised to issue new shares, up to a maximum of £13,300,000 nominal value (which at the time represented approximately 33% of PLC’s issued ordinary share capital) and to disapply pre-emption rights up to approximately 5% of PLC’s issued ordinary share capital and an additional 5% authority only in connection with an acquisition or specified capital investment.

In addition, at PLC’s 2016 AGM the PLC Board was authorised to make market purchases of its ordinary shares, up to a maximum of 128,345,000 shares representing just under 10% of PLC’s issued ordinary share capital and within the limits prescribed in the resolution until the earlier of the conclusion of PLC’s 2017 AGM and 30 June 2017. These authorities are renewed annually and authority will be sought at PLC’s 2017 AGM.

During 2016 Unilever group companies purchased 2,268,600 PLC ordinary shares, representing 0.17% of the issued share capital, for 91,805,226. These purchases were made to facilitate grants made in connection with its employee compensation programmes. Further information on these purchases can be found in note 4C to the consolidated accounts on pages 99 to 100.

PLC DEFERRED STOCK

The joint holders of the PLC deferred stock are N.V. Elma and United Holdings Limited, which are subsidiaries of NV and PLC respectively. The Boards of N.V. Elma and United Holdings Limited comprise three Directors of the Unilever Boards. The provisions within the PLC Articles of Association containing the rules for appointing PLC Directors cannot be changed without the permission of the holders of PLC’s deferred stock.

 

 

OUR SHAREHOLDERS

SIGNIFICANT SHAREHOLDERS OF NV

As far as Unilever is aware, the only holders of more than 3% of, or 3% of voting rights attributable to, NV’s share capital on 31 December 2016 (apart from the Foundation Unilever N.V. Trust Office, see page 31, and shares held in treasury by NV, see page 31) are NN Group N.V. (NN), ASR Nederland N.V. (ASR) and BlackRock, Inc. (BlackRock) as indicated in the table below.

 

Shareholder   Class of shares  

Total number of

shares held

   

% of relevant

class

 

NN

  ordinary shares     5,432,423       0.32  
 

7% cumulative preference shares

    20,665       71.26  
   

6% cumulative preference shares

 

    74,088       46.0  

ASR

  ordinary shares     2,348,205       0.14  
   

6% cumulative preference shares

 

    46,000       28.56  

BlackRock

 

ordinary shares

 

    66,947,018       3.90  

As far as Unilever is aware, no disclosable changes in interests in the share capital of NV have been notified to the AFM between 1 January 2017 and 21 February 2017 (the latest practicable date for inclusion in this report). Between 1 January 2014 and 21 February 2017, ING Group N.V. (ING), BlackRock and ASR have held more than 3% in the share capital of NV. During 2015, ING transferred its holdings to NN as part of the demerger of NN from ING.

SIGNIFICANT SHAREHOLDERS OF PLC

As far as Unilever is aware, the only holders of more than 3% of, or 3% of voting rights attributable to, PLC’s ordinary share capital on 31 December 2016 (apart from shares held in treasury by PLC, see page 31), are BlackRock and the Leverhulme Trust as indicated in the table below.

 

Shareholder    Class of shares  

Total number of

shares held

   

% of relevant

class

 

BlackRock

  

ordinary shares    

    82,085,616       6.4  

The Leverhulme Trust

  

ordinary shares

    68,531,182       5.3  

No disclosable changes in interests in the share capital of PLC have been notified to PLC between 1 January 2017 and 21 February 2017 (the latest practicable date for inclusion in this report). Between 1 January 2014 and 21 February 2017, (i) BlackRock, and (ii) together the trustees of the Leverhulme Trust and the Leverhulme Trade Charities Trust, have held more than 3% of, or 3% of voting rights attributable to, PLC’s ordinary shares.

During 2014, the trustees of the Leverhulme Trust and the trustees of the Leverhulme Trade Charities Trust (comprising the same individuals (together the ‘Trustees’)) together held 70,566,764 ordinary shares amounting to 5.5% of the voting rights of PLC. On 31 December 2014 the Leverhulme Trust and the Leverhulme Trade Charities Trust became charitable incorporated organisations. As a consequence of these changes, the balance of shares held by the Trustees has reduced to zero and only the Leverhulme Trust has a disclosable interest as shown in the table above.

SHAREHOLDER ENGAGEMENT

Unilever values open, constructive and effective communication with our shareholders. Our shareholders can raise issues directly with the Chairman and, if appropriate, the Vice-Chairman and Senior Independent Director. The CFO has lead responsibility for investor relations, with the active involvement of the CEO. They are supported by our Investor Relations department which organises presentations for analysts and investors. These and other materials (e.g. an Introduction to Unilever and AGM materials) are generally made available on our website.

Principal shareholders: the Executive Directors’ investor relations programme continued in 2016 with meetings in eleven major cities in Europe, North America and Asia. In all, they met more than 100 investors during these roadshows. In addition, our new Chairman, Marijn Dekkers, was introduced to principal shareholders in September.

Quarterly announcements: briefings on quarterly results are given via teleconference and are accessible by telephone or via our website.

Annual investor seminar: this annual event was held in our Research and Development centre and factory in Port Sunlight in the UK, in November. It focused on long-term value creation, innovation and agility. The event was attended by the Chairman, CEO, CFO and other senior management. The slides shown and an audio recording of the presentations were made available and can be accessed on our website. This allows those investors not attending in person to access the information provided at the event.

Investor conferences: the Executive Directors and members of the Investor Relations team also meet a large number of investors at the industry conferences they attend. In 2016 the conferences that were attended by Unilever representatives included broker sponsored conferences in London, Paris, San Francisco, Boston, New York, Toronto and Singapore.

 

 

32   Governance    Annual Report on Form 20-F 2016


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Feedback from shareholders: we maintain a frequent dialogue with our principal shareholders and regularly collect feedback. In 2016 we also conducted an investor perception study among large institutional shareholders, as well as a broader investor survey. We use this feedback to help shape our investor programme and future shareholder communications. Private shareholders are encouraged to give feedback via shareholder.services@unilever.com. The Chairman, Executive Directors and Chairmen of the Committees are also generally available to answer questions from the shareholders at the AGMs each year.

Board awareness: the Boards are briefed on investor reactions to the Group’s quarterly results announcements and are briefed on any issues raised by shareholders that are relevant to their responsibilities.

 

LOGO   www.unilever.com/investorrelations

GENERAL MEETINGS

Both NV and PLC hold an AGM each year. At the AGMs the Chairman gives his thoughts on governance aspects of the preceding year and the CEO gives a detailed review of the performance of the Group over the last year. Shareholders are encouraged to attend the relevant meeting and to ask questions at or in advance of the meeting. Indeed, the question and answer session forms an important part of each meeting. The external auditors are welcomed to the AGMs and are entitled to address the meetings.

The 2016 AGMs were held in Rotterdam and Leatherhead in April and the topics raised by shareholders included: Acquisition policy, progress of the Unilever Sustainable Living Plan, the Baking, Cooking and Spreads business, tax transparency, the NV cumulative preference shares, remuneration policy, Brexit, innovation and risk assessment.

SHAREHOLDER PROPOSED RESOLUTIONS

Shareholders of NV may propose resolutions if they individually or together hold at least 1% of NV’s issued capital in the form of shares or depositary receipts issued for NV shares. Shareholders who together represent at least 10% of the issued capital of NV can, under certain circumstances, also requisition the District Court to allow them to convene an Extraordinary General Meeting to deal with specific resolutions.

Shareholders of PLC may propose resolutions if they individually or together hold shares representing at least 5% of the total voting rights of PLC, or 100 shareholders who hold on average £100 each in nominal value of PLC share capital can require PLC to propose a resolution at a General Meeting. PLC shareholders holding in aggregate 5% of the issued PLC ordinary shares are able to convene a General Meeting of PLC.

REQUIRED MAJORITIES

Resolutions are usually adopted at NV and PLC General Meetings by an absolute majority of votes cast, unless there are other requirements under the applicable laws or NV’s or PLC’s Articles of Association. For example, there are special requirements for resolutions relating to the alteration of the Articles of Association, the liquidation of NV or PLC and the alteration of the Equalisation Agreement.

A proposal to alter the Articles of Association of NV can only be made by the NV Board. A proposal to alter the Articles of Association of PLC can be made either by the PLC Board or by requisition of shareholders in accordance with the UK Companies Act 2006. Unless expressly specified to the contrary in PLC’s Articles of Association, PLC’s Articles of Association may be amended by a special resolution. Proposals to alter the provisions in the Articles of Association of NV and PLC respectively relating to the unity of management require the prior approval of meetings of the holders of the NV special ordinary shares and the PLC deferred stock. The Articles of Association of both NV and PLC can be found on our website.

 

LOGO   www.unilever.com/corporategovernance

RIGHT TO HOLD SHARES

Unilever’s constitutional documents place no limitations on the right to hold NV and PLC shares. There are no limitations on the right to hold or exercise voting rights on the ordinary shares of NV and PLC imposed by Dutch or English law.

 

 

CORPORATE GOVERNANCE COMPLIANCE

GENERAL

We conduct our operations in accordance with internationally accepted principles of good governance and best practice, whilst ensuring compliance with the corporate governance requirements applicable in the countries in which we operate. Unilever is subject to corporate governance requirements (legislation, codes and/or standards) in the Netherlands, the UK and the US and in this section we report on our compliance against these.

MATERIAL CONTRACTS

Under the European Takeover Directive as implemented in the Netherlands and the UK, the UK Companies Act 2006 and rules of the US Securities and Exchange Commission, Unilever is required to provide information on contracts and other arrangements essential or material to the business of the Group. Other than the Foundation Agreements referred to on page 29, we believe we do not have any such contracts or arrangements.

THE NETHERLANDS

NV complies with almost all of the principles and best practice provisions of the Dutch Corporate Governance Code (Dutch Code), which is available on the Commissie Corporate Governance’s website.

 

LOGO  

 

www.commissiecorporategovernance.nl

Statements required by the Dutch Code and explanations of the NV compliance position are set out below.

Non-Financial Performance Indicator: In determining the level and structure of the remuneration of the Executive Directors, among other things, the results, the share price performance and non-financial indicators relevant to the long-term objectives of the Company, with due regard for the risks to which variable remuneration may expose the enterprise, shall be taken into account (bpp II.2.3).

Unilever places a great deal of importance on corporate responsibility and sustainability and is keen to ensure focus on key financial performance measures which we believe to be the drivers of shareholder value creation and relative total shareholder return. Unilever therefore believes that the interests of the business and shareholders are best served by linking our long-term share plans to such measures as described above, which are further set out in the Directors’ Remuneration Report (pages 48 to 77), and has therefore not included a non-financial performance indicator.

Risk Management and Control: With regard to financial reporting risks, as advised by the Audit Committee (as described in its report on pages 42 to 43), the NV Board believes that the risk management and control systems provide reasonable assurance that the financial statements do not contain any errors of material importance and the risk management and control systems have worked properly in 2016 (bpp II.1.5). The statements in this paragraph are not statements in accordance with the requirements of Section 404 of the US Sarbanes-Oxley Act of 2002.

 

 

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CORPORATE GOVERNANCE CONTINUED

    

 

Retention Period of Shares: The Dutch Code recommends that shares granted to the Executive Directors without financial consideration shall be retained for a period of at least five years or until at least the end of the employment, if this period is shorter (bpp II.2.5).

Our current Remuneration Policy requires Executive Directors to build and retain a personal shareholding in Unilever. In addition, Executive Directors are required to hold 100% of the shares needed to maintain their minimum shareholding requirement until 12 months after they leave Unilever and 50% of these shares for 24 months after they leave Unilever.

Severance Pay: It is our policy to set the level of severance payments for Directors at no more than one year’s salary, unless the Boards, on the recommendation of the Compensation Committee, find this manifestly unreasonable given circumstances or unless otherwise dictated by applicable law (bpp II 2.8).

Financing Preference Shares: The voting rights of the 6% and 7% cumulative preference shares issued by NV are based on their nominal value, as prescribed by Dutch law. NV agrees with the principle in the Dutch Code that the voting rights of any newly issued preference shares should be based on their economic value rather than on their nominal value (bpp IV.1.2), but cannot unilaterally reduce voting rights of its outstanding preference shares.

Corporate Governance Statement: NV is required to make a statement concerning corporate governance as referred to in article 2a of the decree on additional requirements for annual reports (Vaststellingsbesluit nadere voorschriften inhoud jaarverslag) with effect from 1 January 2010 (the Decree). The information required to be included in this corporate governance statement as described in articles 3, 3a and 3b of the Decree can be found on our website.

 

LOGO   www.unilever.com/corporategovernance

THE UNITED KINGDOM

PLC, being a company that is incorporated in the UK and listed on the London Stock Exchange, is required to state how it has applied the main principles and how far it has complied with the provisions set out in the 2014 UK Corporate Governance Code (UK Code), which is available on the Financial Reporting Council’s (FRC) website. In 2016 PLC complied with all UK Code provisions.

 

LOGO  

 

www.frc.org.uk

Risk Management and Control: Our approach to risk management and systems of internal control is in line with the recommendations in the FRC’s revised guidance ‘Risk management, internal control and related financial and business reporting’ (the Risk Guidance). It is Unilever’s practice to review acquired companies’ governance procedures after acquisition and to align them to the Group’s governance procedures as soon as is practicable.

Greenhouse Gas (GHG) Emissions: In line with the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 our greenhouse gas performance is set out below. We report our CO2 emissions with reference to the latest Greenhouse Gas (GHG) Protocol Corporate Accounting and Reporting Standard (GHG Protocol) to calculate emissions of carbon dioxide from the combustion of fuels (Scope 1) and from purchased electricity, heat, steam and cooling (Scope 2, market-based method) for our manufacturing facilities.

Carbon emission factors are used to convert energy used in manufacturing to emissions of CO 2 . Carbon emission factors for fuels are provided by the Intergovernmental Panel on Climate Change (IPCC).

Carbon emission factors for grid electricity calculated according to the ‘market-based method’ are supplier-specific emissions factors reflecting contractual arrangements with electricity suppliers. Where supplier-specific emissions factors are not available, carbon emissions factors reflect the country or sub-region where each manufacturing site is located and are provided by the International Energy Agency (IEA). We have selected an intensity ratio based on production; this aligns with our long-standing reporting of manufacturing performance.

The GHG data relates to emissions during the 12-month period from 1 October 2015 to 30 September 2016. This period is different from that for which the remainder of the Directors’ Report is prepared (which is the calendar year 2016).

 

EMISSIONS OF CO 2 FROM MANUFACTURING,

1 OCTOBER 2015 TO 30 SEPTEMBER 2016

 

(1 OCTOBER 2014 TO 30 SEPTEMBER 2015)

Scope 1    840,633 tonnes CO 2 (852,672 tonnes CO 2 )
Scope 2    864,936 tonnes CO 2 (918,301 tonnes CO 2 )
(market-based method)
Total Scope 1 & 2    1,705,569 tonnes CO 2 + (1,770,973 tonnes
  CO 2 + )
Intensity ratio    83.52 kg CO 2 per tonne of production +
    

  (88.49 kg CO 2 per tonne of production + )

 

 

+   PwC assured. For further details and the basis of preparation see our website.

Emissions data includes material sources of Scope 1 and 2 emissions that have been subject to external assurance, i.e. emissions of CO 2 from energy used in manufacturing. Emissions from the combustion of biogenic fuels (biomass, fuel crops etc) at our manufacturing sites are reported separately to other Scope 1 and 2 emissions, as recommended by the GHG Protocol, and excluded from our intensity ratio calculation.

Our GHG data does not include minor emissions sources that are beyond our boundary of operational control or that are not material. For example, emissions of CO 2 from energy used in our offices and warehouses are excluded, although we continue to drive improvements in these areas through our USLP targets. The data also excludes Scope 3 emissions (including consumer use of our products) which we report as part of our USLP.

 

LOGO   www.unilever.com/sustainable-living

Employee Involvement and Communication: Unilever’s UK companies maintain formal processes to inform, consult and involve employees and their representatives. A National Consultative Forum comprising employees and management representatives meets regularly to provide a forum for discussing issues relating to all Unilever sites in the United Kingdom. We recognise collective bargaining on a number of sites and engage with employees via the Sourcing Unit Forum, which includes national officer representation from the three recognised trade unions. A European Works Council, embracing employee and management representatives from countries within Europe, has been in existence for several years and provides a forum for discussing issues that extend across national boundaries.

Equal Opportunities and Diversity: Consistent with our Code of Business Principles, Unilever aims to ensure that applications for employment from everyone are given full and fair consideration and that everyone is given access to training, development and career opportunities. Every effort is made to retrain and support employees who become disabled while working within the Group.

 

 

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Independent Auditors and Disclosure of Information to Auditors: To the best of each of the Directors’ knowledge and belief, and having made appropriate enquiries, all information relevant to enabling the auditors to provide their opinions on PLC’s consolidated and parent company accounts has been provided. Each of the Directors has taken all reasonable steps to ensure their awareness of any relevant audit information and to establish that Unilever PLC’s auditors are aware of any such information.

THE UNITED STATES

Both NV and PLC are listed on the New York Stock Exchange (NYSE). As such, both companies must comply with the requirements of US legislation, such as the Sarbanes-Oxley Act of 2002, regulations enacted under US securities laws and the Listing Standards of the NYSE, that are applicable to foreign private issuers, copies of which are available on their websites.

 

LOGO  

 

www.sec.gov

 

LOGO  

 

www.nyse.com

We are substantially compliant with the Listing Standards of the NYSE applicable to foreign private issuers except as set out below.

We are required to disclose any significant ways in which our corporate governance practices differ from those typically followed by US companies listed on the NYSE. Our corporate governance practices are primarily based on the requirements of the UK Listing Rules, the UK Code and the Dutch Code but substantially conform to those required of US companies listed on the NYSE. The only significant way in which our corporate governance practices differ from those followed by domestic companies under Section 303A Corporate Governance Standards of the NYSE is that the NYSE rules require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with certain limited exemptions. The UK Listing Rules require shareholder approval of equity-compensation plans only if new or treasury shares are issued for the purpose of satisfying obligations under the plan or if the plan is a long-term incentive plan in which a director may participate. Amendments to plans approved by shareholders generally only require approval if they are to the advantage of the plan participants. Furthermore, Dutch law and NV’s Articles of Association require shareholder approval of equity-compensation plans only if the Executive Directors are able to participate in such plans. Under Dutch law, shareholder approval is not required for material revisions to equity-compensation plans unless the Executive Directors participate in a plan and the plan does not contain its own procedure for revisions.

Attention is drawn to the Report of the Audit Committee on pages 42 to 43. In addition, further details about our corporate governance are provided in the document entitled ‘The Governance of Unilever’ which can be found on our website.

All senior executives and senior financial officers have declared their understanding of and compliance with Unilever’s Code of Business Principles and the related Code Policies. No waiver from any provision of the Code of Business Principles or Code Policies was granted in 2016 to any of the persons falling within the scope of the SEC requirements. The Code of Business Principles and related Code Policies were refreshed in 2016, and for the first time the Code Policies were also published on our website together with the Code of Business Principles.

 

LOGO   www.unilever.com/corporategovernance

Risk Management and Control: Following a review by the Disclosure Committee, Audit Committee and Boards, the CEO and the CFO concluded that the design and operation of the Group’s disclosure controls and procedures, including those defined in the United States Securities Exchange Act of 1934 – Rule 13a – 15(e), as at 31 December 2016 were effective, and that subsequently until 24 February 2017 (the date of the approval of this Annual Report and Accounts (and the Additional Information for US Listing Purposes) by the Boards) there have been no significant changes in the Group’s internal controls, or in other factors that could significantly affect those controls.

Unilever is required by Section 404 of the US Sarbanes-Oxley Act of 2002 to report on the effectiveness of its internal control over financial reporting. This requirement is reported on within the section entitled ‘Management’s Report on Internal Control over Financial Reporting’ on page 167.

In 2016 and 2015, the Group did not receive any public takeover offers by third parties in respect of NV or PLC shares or make any public takeover offers in respect of other companies’ shares.

 

 

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RISKS

    

    

 

 

OUR RISK APPETITE AND APPROACH TO RISK MANAGEMENT

Risk management is integral to Unilever’s strategy and to the achievement of Unilever’s long-term goals. Our success as an organisation depends on our ability to identify and exploit the opportunities generated by our business and the markets we are in. In doing this we take an embedded approach to risk management which puts risk and opportunity assessment at the core of the leadership team agenda, which is where we believe it should be.

Unilever adopts a risk profile that is aligned to our Vision to accelerate growth in the business while reducing our environmental footprint and increasing our positive social impact. Our appetite for risk is driven by the following:

  Our growth should be consistent, competitive, profitable and responsible.
  Our behaviours must be in line with our Code of Business Principles and Code Policies.
  We strive to continuously improve our operational efficiency and effectiveness.
  We aim to maintain a strong single A credit rating on a long-term basis.

Our approach to risk management is designed to provide reasonable, but not absolute, assurance that our assets are safeguarded, the risks facing the business are being assessed and mitigated and all information that may be required to be disclosed is reported to Unilever’s senior management including, where appropriate, the Chief Executive Officer and Chief Financial Officer.

ORGANISATION

The Unilever Boards assume overall accountability for the management of risk and for reviewing the effectiveness of Unilever’s risk management and internal control systems.

The Boards have established a clear organisational structure with well defined accountabilities for the principal risks that Unilever faces in the short, medium and long-term. This organisational structure and distribution of accountabilities and responsibilities ensure that every country in which we operate has specific resources and processes for risk review and risk mitigation. This is supported by the Unilever Leadership Executive, which takes active responsibility for focusing on the principal areas of risk to Unilever. The Boards regularly review these risk areas, including consideration of environmental, social and governance matters, and retain responsibility for determining the nature and extent of the significant risks that Unilever is prepared to take to achieve its strategic objectives.

FOUNDATION AND PRINCIPLES

Unilever’s approach to doing business is framed by our Purpose and values. Our Code of Business Principles sets out the standards of behaviour that we expect all employees to adhere to. Day-to-day responsibility for ensuring these principles are applied throughout Unilever rests with senior management across categories, geographies and functions. A network of Business Integrity Officers and Committees supports the activities necessary to communicate the Code, deliver training, maintain processes and procedures (including support lines) to report and respond to alleged breaches, and to capture and communicate learnings.

We have a framework of Code Policies that underpin the Code of Business Principles and set out the non-negotiable standards of behaviour expected from all our employees.

For each of our principal risks we have a risk management framework detailing the controls we have in place and who is responsible for managing both the overall risk and the individual controls mitigating that risk.

Unilever’s functional standards define mandatory requirements across a range of specialist areas such as health and safety, accounting and reporting and financial risk management.

PROCESSES

Unilever operates a wide range of processes and activities across all its operations covering strategy, planning, execution and performance management. Risk management is integrated into every stage of this business cycle. These procedures are formalised and documented and are increasingly being centralised and automated into transactional and other information technology systems.

ASSURANCE AND RE-ASSURANCE

Assurance on compliance with the Code of Business Principles and all of our Code Policies is obtained annually from Unilever management via a formal Code declaration. In addition, there are specialist awareness and training programmes which are run throughout the year and vary depending on the business priorities. These specialist compliance programmes supplement the Code declaration. Our Corporate Audit function plays a vital role in providing to both management and the Boards an objective and independent review of the effectiveness of risk management and internal control systems throughout Unilever.

 

 

BOARDS’ ASSESSMENT OF COMPLIANCE WITH THE RISK MANAGEMENT FRAMEWORKS

The Boards, advised by the Committees where appropriate, regularly review the significant risks and decisions that could have a material impact on Unilever. These reviews consider the level of risk that Unilever is prepared to take in pursuit of the business strategy and the effectiveness of the management controls in place to mitigate the risk exposure.

The Boards, through the Audit Committee, have reviewed the assessment of risks, internal controls and disclosure controls and procedures in operation within Unilever. They have also considered the effectiveness of any remedial actions taken for the year covered by this report and up to the date of its approval by the Boards.

Details of the activities of the Audit Committee in relation to this can be found in the Report of the Audit Committee on pages 42 to 43.

Further statements on compliance with the specific risk management and control requirements in the Dutch Corporate Governance Code, the UK Corporate Governance Code, the US Securities Exchange Act (1934) and the Sarbanes-Oxley (2002) Act can be found on pages 33 to 35.

 

 

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VIABILITY STATEMENT

The activities of the Group, together with the factors likely to affect its future development, performance, the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described on pages 1 to 28. In addition, we describe in notes 15 to 18 on pages 110 to 124 the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit and liquidity risk.

ASSESSMENT

In order to report on the long-term viability of the Group, the Directors carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. This assessment included reviewing and understanding the mitigation factors in respect of each of those risks. The risks and mitigating factors are summarised on pages 37 to 41.

The viability assessment has two parts:

  First, the Directors considered the period over which they have a reasonable expectation that the Group will continue to operate and meet its liabilities; and
  Second, they considered the potential impact of severe but plausible scenarios over this period, including:
    assessing scenarios for each individual principal risk, for example the termination of our relationships with the three largest global customers; the loss of all material litigation cases; and the destruction of three of our largest sourcing units; and
    assessing scenarios that involve more than one principal risk such as:
  a contamination issue with one of our products, leading to a fine equal to 1% of Group turnover, lower sales of impacted products and temporary closure of our largest sourcing unit;
  a major IT data breach resulting in a fine equal to 2% of Group turnover along with an outage in a key system resulting in the temporary inability to sell products; and
  a global economic downturn leading to an increase in funding costs and the loss of our three largest customers.

FINDINGS

A three-year period is considered appropriate for this assessment because it is the period covered by the strategic plan; and it enables a high level of confidence in assessing viability, even in extreme adverse events, due to a number of factors such as:

  the Group has considerable financial resources together with established business relationships with many customers and suppliers in countries throughout the world;
  high cash generation by the Group’s operations;
  flexibility of cash outflow including significant marketing and capital expenditure; and
  the Group’s diverse product and geographical operations.

Taking into account the Group’s current positon and plans, the Directors believe that there is no plausible scenario that would threaten our business model, future performance, solvency or liquidity over the next three years.

CONCLUSION

On the basis described above, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

 

PRINCIPAL RISK FACTORS

Our business is subject to risks and uncertainties. On the following pages we have identified the risks that we regard as the most relevant to our business. These are the risks that we see as most material to Unilever’s business and performance at this time. There may be other risks that could emerge in the future.

Our risk profile has not fundamentally changed this year but we have now more clearly highlighted that Climate Change is one of our principal risk factors. For a number of years we have recognised that changes in climate pose a risk to our business and hence as a part of our Unilever Sustainable Living Plan we are trying to both reduce our impact on climate change and to prepare ourselves for the impact climate change will have on our business in the coming years, and this risk and our management approach were outlined within our Sustainability risk factor. However following discussions at the United Nations Convention on Climate Change, 21st Conference and the Financial Services Board Taskforce on Climate Related Financial Disclosures, it is clear that the impacts of climate change itself and the potential actions government may take are of such significance that Climate Risk should be separately identified.

As well as identifying the most relevant risks for our business we reflect on whether we think the level of risk associated with each of our principal risk factors is increasing or decreasing. There are two areas where we believe there is an increased level of risk which are;

  Information Protection: the digital revolution is happening at such a pace both in terms of technological capabilities and in our ability to collect and use consumer data such that we believe the risk around security of information, including the privacy of consumer data is increasing.
  Business Transformation: we are continuously transforming our business to remain competitive, however with Connected 4 Growth we are implementing a particularly large transformation so we believe the level of risk is currently heightened and will remain so for 2017.

If the circumstances in these risks occur, our cash flow, 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, which may include forward-looking statements, or could impact on our ability to meet our targets or be detrimental to our profitability or reputation.

 

 

Annual Report on Form 20-F 2016   Governance   37


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RISKS CONTINUED

    

 

 

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 around 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 accelerate growth in the business while reducing our environmental footprint and increasing our positive social impact will require more sustainable ways of doing business. In a world where resources are scarce and demand for them continues to increase it is critical that we succeed in reducing our resource consumption and converting to sustainably sourced supplies. In doing this we are dependent on the efforts of partners and various certification bodies. We are also committed to improving health and well-being and enhancing livelihoods around the world so Unilever and our communities grow successfully together. 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.

 

 

CLIMATE CHANGE

 

Climate changes and governmental actions to reduce such changes may disrupt our operations and/or reduce consumer demand for our products.

 

Climate changes are occurring around the globe which may impact our business in various ways.

 

They could lead to water shortages which would reduce demand for those of our products that require a significant amount of water during consumer use. They could also lead to an increase in raw material prices or reduced availability.

 

Governments may take action to reduce climate change such as the introduction of a carbon tax which could impact our business through higher costs or reduced flexibility of operations.

 

Climate change could result therefore in making products less affordable or less available for our consumers resulting in reduced growth and profitability.

 

 

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DESCRIPTION OF RISK

 

 

CUSTOMER RELATIONSHIPS

 

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

 

Maintaining strong relationships with our existing customers and building relationships with new customers who serve changing shopper habits are necessary to ensure our brands are 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 competitive trade terms. Failure to maintain strong relationships with customers could negatively impact our terms of business with affected customers and reduce the availability of our products to consumers.

 

 

 

TALENT AND ORGANISATION

 

A skilled workforce and agile organisation are essential for the continued success of our business.

 

Our ability to attract, develop, organise 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.

 

 

Annual Report on Form 20-F 2016   Governance   39


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RISKS CONTINUED

    

 

 

DESCRIPTION OF RISK

 

SYSTEMS AND INFORMATION

 

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

 

Increasing digital interactions with customers, suppliers and consumers 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.

 

 

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, disposals and organisational transformation, to drive continuous improvement in our business and to strengthen our portfolio and capabilities.

 

Failure to execute such transactions or change projects successfully could result in under-delivery of the expected benefits. Furthermore, disruption may be caused in other parts of the business.

 

 

ECONOMIC AND POLITICAL INSTABILITY

 

Unilever operates around the globe and is exposed to economic and political instability that may reduce consumer demand for our products, disrupt sales operations and/or impact the profitability of our operations.

 

Adverse economic conditions may affect one or more countries within a region, or may extend globally.

 

Government actions such as foreign exchange or price controls can impact on the growth and profitability of our local operations.

 

In 2016, more than half of Unilever’s turnover came from emerging markets which can offer greater growth opportunities but also expose Unilever to related economic and political volatility.

 

 

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DESCRIPTION OF RISK

 

TREASURY AND PENSIONS

 

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

 

The relative values 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.

 

Unilever may face liquidity risk, ie 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 national and regional 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 exposures. International tax reform remains a key focus of attention with the OECD’s Base Erosion & Profit Shifting project and further potential tax reform in the EU and the United States.

 

 

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REPORT OF THE AUDIT COMMITTEE

    

    

 

 

COMMITTEE MEMBERS AND ATTENDANCE

 

   
     ATTENDANCE

 

   

John Rishton

   
   

Chair

  7 / 7
   

Nils Andersen (Member since April 2016)

  3 / 3
   

Judith Hartmann

  7 / 7
   

Mary Ma

  7 / 7
   

Hixonia Nyasulu (Member until April 2016)

  4 / 4
 

This table shows the membership of the Committee together with their attendance at meetings during 2016. If Directors are unable to attend a meeting, they have the opportunity beforehand to discuss any agenda items with the Committee Chair. Attendance is expressed as the number of meetings attended out of the number eligible to be attended.

 

 

 

HIGHLIGHTS OF 2016

 

 

•    Annual Report and Accounts

•    Viability assessment

•    Tax regulations and disclosure

•    Foreign Exchange Management

•    Information security and IT resilience

•    Supply Chain continuity of supply

 

 

 

PRIORITIES FOR 2017

 

 

•    Tax

•    Information Security

•    Supply Chain continuity and flexibility

•    Connected 4 Growth Programme

 

MEMBERSHIP OF THE COMMITTEE

The Audit Committee is comprised only of independent Non-Executive Directors with a minimum requirement of three such members. It is chaired by John Rishton. The composition of the Committee changed after the AGMs in April 2016 when Hixonia Nyasulu retired from the Committee and Nils Andersen joined the Committee. The other members are Judith Hartmann and Mary Ma. For the purposes of the US Sarbanes-Oxley Act of 2002 John Rishton is the Audit Committee’s financial expert. The Boards have satisfied themselves that the current members of the Audit Committee are competent in financial matters and have recent and relevant experience. Other attendees at Committee meetings (or part thereof) were the Chief Financial Officer, Chief Auditor, EVP Financial Control, Risk Management, Pensions & Sustainability, Chief Legal Officer, Group Secretary and the external auditors. Throughout the year the Committee members periodically met without others present and also held separate private sessions with the Chief Financial Officer, Chief Auditor and the external auditors, allowing the Committee to discuss any issues in more detail directly.

ROLE OF THE COMMITTEE

The role and responsibilities of the Audit Committee are set out in written terms of reference which are reviewed annually by the Committee taking into account relevant legislation and recommended good practice. The terms of reference are contained within ‘The Governance of Unilever’ which is available on our website at www.unilever.com/ corporategovernance . The Committee’s responsibilities include, but are not limited to, the following matters with a view to bringing any relevant issues to the attention of the Boards:

  oversight of the integrity of Unilever’s financial statements;
  review of Unilever’s quarterly and annual financial statements (including clarity and completeness of disclosure) and approval of the quarterly trading statements for quarter 1 and quarter 3;
  oversight of risk management and internal control arrangements;
  oversight of compliance with legal and regulatory requirements;
  oversight of the external auditors’ performance, objectivity, qualifications and independence; the approval process of non-audit services; recommendation to the Boards of the nomination of the external auditors for shareholder approval; and approval of their fees, refer to note 25 on page 130;
  the performance of the internal audit function; and
  approval of the Unilever Leadership Executive (ULE) expense policy and the review of Executive Director expenses.

In order to help the Committee meet its oversight responsibilities, each year management organise knowledge sessions for the Committee on subject areas within its remit. In 2016, a joint session was held with the Corporate Responsibility Committee on the Unilever Sustainable Living Plan (USLP), which included an update on how the USLP has evolved, how it is governed and how its progress is assessed. In addition, Committee members visited one of our key IT, accounting and reporting centres in Bangalore.

HOW THE COMMITTEE HAS DISCHARGED ITS RESPONSIBILITIES

During the year, the Committee’s principal activities were as follows:

FINANCIAL STATEMENTS

The Committee reviewed prior to publication the quarterly financial press releases together with the associated internal quarterly reports from the Chief Financial Officer and the Disclosure Committee and, with respect to the half-year and full-year results, the external auditors’ reports. It also reviewed this Annual Report and Accounts and the Annual Report on Form 20-F 2016. These reviews incorporated the accounting policies and significant judgements and estimates underpinning the financial statements as disclosed within note 1 on pages 88 to 90. Particular attention was paid to the following significant issues in relation to the financial statements:

  revenue recognition – estimation of discounts, incentives on sales made during the year, refer to note 2 on pages 90 to 92;
  direct tax provisions and contingencies, refer to note 6 on pages 101 to 103; and
  indirect tax provisions and contingencies, refer to note 19 on page 124.

The external auditors have agreed the list of significant issues discussed by the Audit Committee.

For each of the above areas the Committee considered the key facts and judgements outlined by management. Members of management attended the section of the meeting of the Committee where their item was discussed to answer any questions or challenges posed by the Committee. The issues were also discussed with the external auditors and further information can be found on pages 79 to 83. The Committee was satisfied that there are relevant accounting policies in place in relation to these significant issues and management have correctly applied these policies.

At the request of the Boards the Committee undertook to:

  review the appropriateness of adopting the going concern basis of accounting in preparing the annual financial statements; and
  assess whether the business was viable in accordance with the requirement of the UK Corporate Governance Code. The assessment included a review of the principal risks facing Unilever, their potential impact, how they were being managed, together with a discussion as to the appropriate period for the assessment. The Committee recommended to the Boards that there is a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period (consistent with the period of the strategic plan) of the assessment.

At the request of the Boards the Committee also considered whether the Unilever Annual Report and Accounts 2016 was fair, balanced and understandable and whether it provided the necessary information for shareholders to assess the Group’s position and performance, business model and strategy. The Committee was satisfied that, taken as a whole, the Unilever Annual Report and Accounts 2016 is fair, balanced and understandable.

 

 

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RISK MANAGEMENT AND INTERNAL CONTROL ARRANGEMENTS

The Committee reviewed Unilever’s overall approach to risk management and control, and its processes, outcomes and disclosure. It reviewed:

  the Controller’s Quarterly Risk and Control Status Report, including Code of Business Principles cases relating to frauds and financial crimes and significant complaints received through the Unilever Code Support Line;
  the 2016 corporate risks for which the Audit Committee had oversight and the proposed 2017 corporate risks identified by the ULE;
  management’s improvements to reporting and internal financial control arrangements, through further automation and centralisation;
  processes related to information security, including cyber security;
  tax planning, insurance arrangements and related risk management;
  treasury policies, including debt issuance and hedging; and
  litigation and regulatory investigations.

The Committee reviewed the application of the requirements under Section 404 of the US Sarbanes-Oxley Act of 2002 with respect to internal controls over financial reporting. In addition, the Committee reviewed the annual financial plan and Unilever’s dividend policy and dividend proposals.

During 2016 the Committee continued its oversight of the independent assurance work that is performed on a number of our USLP metrics (selected on the basis of their materiality to the USLP).

In fulfilling its oversight responsibilities in relation to risk management, internal control and the financial statements, the Committee met regularly with senior members of management and is satisfied with the key judgements taken.

INTERNAL AUDIT FUNCTION

The Committee reviewed Corporate Audit’s audit plan for the year and agreed its budget and resource requirements. It reviewed interim and year-end summary reports and management’s response. The Committee carried out an evaluation of the performance of the internal audit function and was satisfied with the effectiveness of the function. The Committee met independently with the Chief Auditor during the year and discussed the results of the audits performed during the year.

AUDIT OF THE ANNUAL ACCOUNTS

KPMG, Unilever’s external auditors and independent registered public accounting firm, reported in depth to the Committee on the scope and outcome of the annual audit, including their audit of internal controls over financial reporting as required by Section 404 of the US Sarbanes-Oxley Act of 2002. Their reports included audit and accounting matters, governance and control, and accounting developments.

The Committee held independent meetings with the external auditors during the year and reviewed, agreed, discussed and challenged their audit plan, including their assessment of the financial reporting risk profile of the Group. The Committee discussed the views and conclusions of KPMG regarding management’s treatment of significant transactions and areas of judgement during the year and KPMG confirmed they were satisfied that these had been treated appropriately in the financial statements.

EXTERNAL AUDITORS

Shareholders approved the re-appointment of KPMG as the Group’s external auditors at the 2016 AGMs. On the recommendation of the Committee, the Directors will be proposing the re-appointment of KPMG at the AGMs in April 2017.

Both Unilever and KPMG have safeguards in place to avoid the possibility that the external auditors’ objectivity and independence could be compromised, such as audit partner rotation and the restriction on non-audit services that the external auditors can perform as described below. The Committee reviewed the report from KPMG on the actions they take to comply with the professional and regulatory requirements and best practice designed to ensure their independence from Unilever.

Each year, the Committee assesses the effectiveness of the external audit process which includes discussing feedback from the members of the Committee and stakeholders at all levels across Unilever. Interviews are also held with key senior management within both Unilever and KPMG.

The Committee also reviewed the statutory audit, audit related and non-audit related services provided by KPMG and compliance with Unilever’s documented approach, which prescribes in detail the types of engagements, listed below, for which the external auditors can be used:

  statutory audit services, including audit of subsidiaries;
  audit related engagements – services that involve attestation, assurance or certification of factual information that may be required by external parties;
  non-audit related services – work that our external auditors are best placed to undertake, which may include:
  tax services – all significant tax work is put to tender;
  acquisition and disposal services, including related due diligence, audits and accountants’ reports; and
  internal control reviews.

Unilever has for many years maintained a policy which prescribes in detail the types of engagements for which the external auditors can be used and prohibits several types of engagements, including:

  bookkeeping or similar services;
  design and/or implementation of systems or processes related to financial information or risk management;
  valuation, actuarial and legal services;
  internal audit;
  broker, dealer, investment adviser or investment bank services;
  transfer pricing advisory services; and
  staff secondments of any kind.

This policy was updated during 2016 to reflect the European Union Audit Directive and now additionally prohibits most services relating to Tax. All audit related engagements over 250,000 and non-audit related engagements over 100,000 required specific advance approval by the Audit Committee Chairman. The Committee further approved all engagements below these levels which have been authorised by the EVP Financial Control, Risk Management, Pension & Sustainability. These authorities are reviewed regularly and, where necessary, updated in the light of internal developments, external developments and best practice.

The Committee confirms that the Group is in compliance with The Statutory Audit Services for Large Companies Market Investigation (Mandatory use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. The last tender for the audit of the annual accounts was performed in 2013.

The FRC’s Audit Quality Review (AQR) team monitors the quality of audit work of certain UK audit firms through inspections of a sample of audits and related procedures at individual audit firms. During the year, the 2015 external audit of the Group by KPMG was reviewed by the AQR. The Committee and KPMG have discussed the review findings, which noted a small number of recommendations for improvement and also areas of high standard. The recommendations were incorporated into the 2016 audit work. The Committee do not consider any of the findings to have a significant impact on KPMG’s audit approach.

EVALUATION OF THE AUDIT COMMITTEE

As part of the internal Board evaluation carried out in 2016, the Boards evaluated the performance of the Committee. The Committee also carried out an assessment of its own performance in 2016. Whilst overall the Committee members concluded that the Committee is performing effectively, the Committee agreed that to further enhance its effectiveness it needed to ensure the Directors continued to develop their knowledge of business operations.

John Rishton

Chair of the Audit Committee

Nils Andersen

Judith Hartmann

Mary Ma

 

 

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REPORT OF THE CORPORATE RESPONSIBILITY COMMITTEE

    

 

 

COMMITTEE MEMBERS AND ATTENDANCE

 

   
     ATTENDANCE

 

Louise Fresco

   

Chair

  4 / 4
   

Laura Cha

  4 / 4

Youngme Moon (Member since April 2016)

  2 / 2

Feike Sijbesma

  4 / 4
 
This table shows the membership of the Committee together with their attendance at meetings during 2016. If Directors are unable to attend a meeting, they have the opportunity beforehand to discuss any agenda items with the Committee Chair. Attendance is expressed as the number of meetings attended out of the number eligible to be attended.

 

 

HIGHLIGHTS OF 2016

 

 

•    Review of Unilever’s Code of Business Principles, Responsible Sourcing Policy and business integrity plans

•    Unilever Sustainable Living Plan

 

 

 

PRIORITIES FOR 2017

 

 

•    Compliance with Code of Business Principles

•    Progress on the Unilever Sustainable Living Plan (USLP)

-   Climate strategy

-   Enhancing livelihoods

•    Product quality and safety

 

TERMS OF REFERENCE

The Corporate Responsibility Committee oversees Unilever’s conduct as a responsible multinational business. The Committee is also charged with ensuring that Unilever’s reputation is protected and enhanced. A central element of the Committee’s role is the need to identify any external developments that are likely to have an influence upon Unilever’s standing in society and to bring these to the attention of the Boards.

The Committee comprises four Non-Executive Directors: Louise Fresco, who chairs the Committee, Laura Cha, Feike Sijbesma and Youngme Moon, who was appointed to the Committee on 21 April 2016. The Chief Marketing & Communications Officer attends the Committee’s meetings.

The Committee’s discussions are informed by the perspectives of the Group’s two sustainability leadership groups, both of which are chaired by the Chief Marketing & Communications Officer. The first is the Unilever Sustainable Living Plan Council – a group of experts from outside the Group who advise Unilever’s senior leadership on its sustainability strategy. The second is the Unilever Sustainable Living Plan Steering Team – the group of Unilever’s senior executives who are accountable for driving sustainable growth. The insights from these groups, and the subsequent reports from the Committee to the Boards, help to keep the Boards informed of current and emerging trends and any potential risks arising from sustainability issues.

During 2016 the Committee reviewed its terms of reference and, on the recommendation of the Committee, the Boards approved minor changes to the terms.

The Committee’s terms of reference and details of the Unilever Sustainable Living Plan Council are available on Unilever’s website at www.unilever.com/corporategovernance and www.unilever.com/sustainable-living/governance respectively.

MEETINGS

Meetings are held quarterly and ad hoc as required. The Committee Chairman reports the conclusions to the Boards. Four meetings were held in 2016. Taking into account the Committee’s terms of reference, Unilever’s corporate risks and the priorities the Committee sets itself for the year, the Committee works to a structured agenda, enabling members to focus in detail on the responsibilities assigned to them.

The agenda covers Unilever’s Code of Business Principles (the Code), litigation and investigations alongside occupational safety, product safety and quality, the Unilever Sustainable Living Plan (USLP) and corporate reputation as well as a range of strategic and current issues. In order to help the Committee meet its oversight responsibilities, each year management organise knowledge sessions for the Committee on subject areas within its remit. In 2016 a joint session was held with the Audit Committee on the USLP, which included an update on how the USLP has evolved, how it is governed and how its progress is assessed.

CODE OF BUSINESS PRINCIPLES

The Code and associated Code Policies set out the standards of conduct expected of all employees in their business endeavours. Compliance with these is an essential element in ensuring Unilever’s continued business success. The Chief Executive Officer is responsible for implementing these principles, supported by the Global Code and Policy Committee which is chaired by the Chief Legal Officer.

The Committee is responsible for the oversight of the Code and Code Policies, ensuring that they remain fit for purpose and are appropriately applied. The Audit Committee also considers the Code as part of its remit to review financial and accounting issues. In 2016 the Code and updated Code Policies were published in a single document on Unilever’s website.

The Committee maintains close scrutiny of mechanisms for implementing the Code and Code Policies as ongoing compliance is essential to promote and protect Unilever’s values and standards, and hence the good reputation of the Group. At each meeting the Committee reviews the information on investigations into alleged non-compliance with the Code and Code Policies and is alerted to any trends arising from such investigations and findings.

In addition, the Committee monitors compliance with Unilever’s Responsible Sourcing Policy for suppliers and the roll-out of its Responsible Business Partner Policy for other third-party business partners.

The Committee studied the Group’s new roadmap to enhance business integrity, which has a particular focus on supporting responsible growth across Unilever’s businesses worldwide. This captures an enhanced understanding of priority focus areas and targeted solutions to address these. Alongside this, enhanced tools for reporting whistleblowing and tracking the review of alleged breaches of the Code have been put in place. To complement this improved capability, state of the art training materials have been developed – including specialist guidance for roll-out through Unilever’s Legal Academy.

Equally importantly, Unilever continues to push for collective action externally to uphold human rights and fight corruption. It is represented in key arenas and contributes to consolidating contacts between chief compliance officers from European multinationals to drive momentum in this field.

SAFETY

The Committee reviews quarterly scorecard analyses of progress on occupational safety and product safety. These scorecards are complemented by regular in-depth discussions so that Committee members may reassure themselves that Unilever’s systems and processes remain robust.

 

 

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In 2016, the Committee noted that Unilever’s Security function is working hard to keep employees safe in a world where terror attacks and security challenges are on the increase. It works closely with country teams and Unilever’s Workplace Services function to ensure that its safe travel and security practices are adhered to.

UNILEVER SUSTAINABLE LIVING PLAN (USLP)

Unilever’s Purpose is to make sustainable living commonplace and the USLP is at the heart of Unilever’s vision to accelerate growth in the business whilst reducing its environmental footprint and increasing its positive social impact. Given its strategic importance, the Committee monitors progress against the USLP and any potential risks arising from it. In 2016 the Committee scrutinised performance across the ambitious environmental pillars of the USLP, studying in depth its progress and plans for combating greenhouse gas emissions and reducing water use and waste.

Unilever recognises that change needs to be driven on a much wider scale to tackle the world’s major social, environmental and economic issues – what is needed is fundamental ‘transformational’ change to broader systems. The adoption of the United Nations’ Sustainable Development Goals has brought new impetus to this agenda and reflects the growing support for an integrated approach to these issues. Unilever continues to combine its own actions with external advocacy on public policy and joint working with partners. It is tackling four areas where it has the scale, influence and resources to make a difference:

 

  taking action on climate change and halting deforestation
  improving livelihoods and creating more opportunities for women
  improving health and well-being
  championing sustainable agriculture and food security.

MONITORING REPUTATION

A global business working in many countries experiences numerous issues that may impact the business. It is crucial therefore that the Committee is briefed on the processes in place for managing these. Unilever has a well-established system for identifying and responding to issues, both short and longer-term. In addition, the Committee reviews a selection of the top issues in more detail each year.

LITIGATION REVIEW

The Chief Legal Officer reports to the Committee on litigation and regulatory matters which may have a reputational impact including environmental issues, bribery and corruption compliance and competition law compliance. For further information please see notes 19 and 20 to the consolidated financial statements.

EVALUATION OF THE CORPORATE RESPONSIBILITY COMMITTEE

As part of the internal Board evaluation carried out in 2016, the Boards evaluated the performance of the Committee. The Committee also carried out an assessment of its own performance in 2016. Whilst overall the Committee members concluded that the Committee is performing effectively, the Committee agreed that to further enhance its effectiveness it will step up oversight of safety and security given the importance of protecting the people working for Unilever. The Corporate Responsibility Committee will maintain its independent view of Unilever, and will keep this view centre-stage in its critique of the Group’s reputation and standing in society.

Louise Fresco

Chair of the Corporate Responsibility Committee

Laura Cha

Youngme Moon

Feike Sijbesma

Further details on the USLP will be set out in Unilever’s online Sustainable Living Report 2016, to be published in May 2017.

 

LOGO   www.unilever.com/sustainable-living
 

 

Annual Report on Form 20-F 2016   Governance   45


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REPORT OF THE NOMINATING AND

CORPORATE GOVERNANCE COMMITTEE

    

 

 

COMMITTEE MEMBERS, MEMBERSHIP STATUS AND
ATTENDANCE

 

   
     ATTENDANCE

 

Feike Sijbesma

   

Chair

  5 / 5
   

Laura Cha

  4 / 5

Michael Treschow (Member until April 2016)

  2 / 2

Marijn Dekkers (Member since April 2016)

  3 / 3
 
This table shows the membership of the Committee together with their attendance at meetings during 2016. If Directors are unable to attend a meeting, they have the opportunity beforehand to discuss any agenda items with the Committee Chair. Attendance is expressed as the number of meetings attended out of the number eligible to be attended.

 

 

HIGHLIGHTS OF 2016

 

 

•    Appointment of new Chairman

•    Induction programme for Chairman and new Non-Executive Directors

•    Develop pipeline of potential (Non-Executive and Executive) Director candidates

•    Follow the introduction of the new EU Market Abuse Regulation

 

 

 

PRIORITIES FOR 2017

 

 

•    Continued focus on development of a strong pipeline of potential Non-Executive and Executive Director candidates

•    Follow up on actions agreed from the external Board evaluation

•    Further develop the Directors’ skills and expertise matrix

 

ROLE AND MEMBERSHIP OF THE COMMITTEE

The Nominating and Corporate Governance Committee is responsible for evaluating the balance of skills, experience, independence and knowledge on the Boards and for drawing up selection criteria, ongoing succession planning and appointment procedures for both internal and external appointments. It also has oversight of all matters relating to corporate governance and brings any issues in this respect to the attention of the Boards.

The Committee’s terms of reference are set out in ‘The Governance of Unilever’ which can be found on our website at www.unilever.com/corporategovernance . During the year, the Committee reviewed its own terms of reference to determine whether its responsibilities are properly described. The amended terms became effective on 1 January 2017.

The Committee is comprised of two Non-Executive Directors and the Chairman. The Group Secretary acts as secretary to the Committee. Other attendees at Committee meetings in 2016 (or part thereof) were the Chief Executive Officer and the Chief HR Officer.

In 2016 the Committee met five times. At the start of the year the Committee considered the results of the Committee’s annual self-evaluation for 2015 and its priorities for the year and used these to help create an annual plan for meetings for 2016.

APPOINTMENT AND REAPPOINTMENT OF DIRECTORS

Reappointment: All Directors (unless they are retiring) are nominated by the Boards for re-election at the AGMs each year on the recommendation of the Committee who, in deciding whether to nominate a Director, takes into consideration the outcomes of the Chairman’s discussions with each Director on individual performance, the evaluation of the Boards and its Committees and the continued good performance of individual Directors. Non-Executive Directors normally serve for a period of up to nine years. The average tenure of the Non-Executive Directors who have retired from the Boards over the past ten years has been seven years. The schedule the Committee uses for orderly succession planning of Non-Executive Directors can be found on our website at www.unilever.com/committees . In 2016, Hixonia Nyasulu and Michael Treschow did not put themselves forward for re-election at the 2016 AGMs in April 2016. They had each served nine years on the Boards. The Committee proposed the reappointment of all other Directors. Directors are appointed by shareholders by a simple majority vote at the AGMs.

The Committee also recommends to the Boards candidates for election as Chairman and Vice-Chairman and Senior Independent Director. After being reappointed as Non-Executive Directors at the 2016 AGMs, Ann Fudge remained the Vice-Chairman and Senior Independent Director and the following remained Chairs of their respective committees: John Rishton (Audit Committee), Ann Fudge (Compensation Committee), Feike Sijbesma (Nominating and Corporate Governance Committee) and Louise Fresco (Corporate Responsibility Committee).

Succession Planning and Appointment: In consultation with the Committee, the Boards review both the adequacy of succession planning processes and the actual succession planning at each of Board and ULE level.

When recruiting, the Committee will take into account the profile of Unilever’s Boards of Directors set out in ‘The Governance of Unilever’ which is in line with the recommendations of applicable governance regulations and best practice. Pursuant to the profile the Boards should comprise a majority of Non-Executive Directors who are independent of Unilever, free from any conflicts of interest and able to allocate sufficient time to carry out their responsibilities effectively. With respect to composition and qualities, the Boards should be in keeping with the size of Unilever, its strategy, portfolio, culture, geographical spread and its status as a listed company. The objective pursued by the Boards is to have a variety of nationality, race, gender and relevant expertise and the Non-Executive Directors in aggregate should reflect Unilever’s consumer base, have sufficient financial literacy and have sufficient understanding of the markets where Unilever is active in order to understand the key trends and developments relevant for Unilever.

In 2016, the Committee engaged the services of Russell Reynolds Associates and MWM Consulting (both executive search agencies which also assist Unilever with the recruitment of senior executives) to assist with the recruitment of the new Chairman and new Non-Executive Directors with the appropriate skills and expertise. The Committee, on behalf of the Boards, continued during 2016 to work on succession planning for the Boards.

 

 

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Chairman Succession: As reported in last year’s Committee report, in view of Unilever’s objectives and activities it was important to the Committee and the Boards that the profile of Unilever’s new Chairman included a proven track record as a CEO, board experience, deep knowledge of industry, experience of working at more than one company, ability to spend sufficient time in Europe and support for the Unilever Sustainable Living Plan.

During the search, the experience of each potential candidate was matched against the profile agreed by the Board; the views of Russell Reynolds and MWM on the shortlists of candidates drawn up by the Committee were shared with the Boards; and Marijn Dekkers, the preferred candidate, met with all Directors.

2016 appointments: The Committee recommended to the Boards to nominate Marijn Dekkers as a new Non-Executive Director at the 2016 AGMs and, on his appointment, that he become Chairman. The Committee also recommended to the Boards that both Strive Masiyiwa and Youngme Moon be nominated as new Non-Executive Directors at the 2016 AGMs. In April 2016 the AGMs resolved to appoint Marijn, Strive and Youngme with immediate effect. Marijn, Strive and Youngme have further strengthened the financial and digital expertise and industry experience of the Boards and increased the diversity of nationality on the Boards.

Unilever Leadership Executive: During 2016, the Committee consulted with the Chief Executive Officer on the selection criteria and appointment procedures for senior management changes, including changes to the ULE. In particular, the Committee was consulted on the appointments of Marc Engel (Chief Supply Chain Officer) and Leena Nair (Chief HR Officer) to the ULE.

DIVERSITY POLICY

Unilever has long understood the importance of diversity within our workforce because of the wide range of consumers we connect with globally. This goes right through our organisation, starting with the Boards. The Boards feel that, whilst gender is an important part of diversity, Unilever Directors will continue to be selected on the basis of their wide-ranging experience, backgrounds, skills, knowledge and insight.

Unilever’s Board Diversity Policy, which is reviewed by the Committee each year, can be found on our website at www.unilever.com/boardsofunilever . The Committee also reviewed and considered relevant recommendations on diversity and remains pleased that over a third of our Non-Executive Directors are women and that there are eight nationalities represented on the Boards.

CORPORATE GOVERNANCE DEVELOPMENTS

The Committee reviews relevant proposed legislation and changes to relevant corporate governance codes at least twice a year. It carefully considers whether and how the proposed laws/rules would impact upon Unilever and whether Unilever should participate in consultations on the proposed changes.

For example, during 2016 the subject of corporate culture, the impact of the new EU Market Abuse Regulation on Unilever’s compliance procedures and the draft Dutch Corporate Governance Code were all considered by the Committee.

EVALUATION

As part of the internal Board evaluation carried out in 2016, the Boards evaluated the performance of the Committee. The Committee also carried out an assessment of its own performance in 2016. The Committee members concluded that the Committee is performing well.

Feike Sijbesma

Chair of the Nominating and Corporate

Governance Committee

Laura Cha

Marijn Dekkers

 

 

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DIRECTORS’ REMUNERATION REPORT

    

    

 

 

COMMITTEE MEMBERS AND ATTENDANCE

 

   
     ATTENDANCE

 

   

Ann Fudge (Chair)

  7 / 7

Vittorio Colao

  7 / 7

Michael Treschow (Member until April 2016)

  3 / 3

Marijn Dekkers (Member since April 2016)

  4 / 4

Nils Andersen (Member until April 2016)

  3 / 3

Strive Masiyiwa (Member since April 2016)

  3 / 4
 
This table shows the attendance of Directors at Committee meetings held in the year ended 31 December 2016. If Directors are unable to attend a meeting, they have the opportunity beforehand to discuss any agenda items with the Committee Chair. Attendance is expressed as the number of meetings attended out of the number eligible to be attended.

 

 

HIGHLIGHTS OF 2016

 

 

•    Further review and shaping of Unilever’s future reward framework to ensure that it remains aligned with strategy and long-term shareholder value creation, resulting in the new Remuneration Policy presented for shareholder approval at the 2017 AGMs (further details on pages 52 to 64).

•    Productive engagement with shareholders and stakeholders during the year in advance of the 2017 renewal of Unilever’s Remuneration Policy.

•    Review of the development of Unilever’s ‘Fair Compensation Framework’ and alignment with Living Wages that will be used to shape the way Unilever pays its people, to ensure that all of our people are treated with responsibility, respect and integrity.

•    Review of progress in implementing and extending employee share ownership through ‘SHARES’ (Unilever’s ‘buy 3 get 1 free’ share purchase plan) which is now offered to our non-senior management employees in 104 countries.

 

 

PRIORITIES FOR 2017

 

 

•    Review of progress on communicating and implementing the new remuneration framework (if approved by shareholders).

•    Gender pay gap reporting.

•    Fair Compensation Framework principles and developments.

 

 

 

FORMAT OF THE DIRECTORS’ REMUNERATION REPORT

 

 

Our Directors’ Remuneration Report is split into the following sections:

•     Letter from the Chair (pages 49 to 50)

•     At a Glance: How the Remuneration Policy will be applied to Executive Directors in 2017 (page 51)

•     New Remuneration Policy (pages 52 to 64)

•     Annual Remuneration Report – 2016 (pages 65 to 77).

 

 

 

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LETTER FROM THE CHAIR

DEAR SHAREHOLDERS,

I am pleased to present Unilever’s 2016 Directors’ Remuneration Report. Outlined below is our performance and the decisions we have made on remuneration.

BUSINESS PERFORMANCE AND REMUNERATION OUTCOMES FOR 2016

ANNUAL BONUS: ANOTHER YEAR OF GOOD ALL-ROUND PERFORMANCE DELIVERY

Despite another year of tough economic conditions where the global landscape remained volatile, 2016 saw a good all-round performance and strong delivery of our targets, demonstrating the progress made in transforming Unilever into a more resilient business. Despite the increasingly volatile environment, we achieved underlying sales growth of 3.7%, ahead of our markets and broadly in line with target, together with above-target core operating margin improvement of 50 basis points. For the annual bonus calculations, free cash flow (FCF) is calculated on a constant currency basis at 4.7 billion (equivalent to the reported 4.8 billion at current rates), driven by the increase in core operating profit and improvement in working capital, also broadly in line with target.

This performance led to a formulaic outcome of 121% of target for the performance factor, which applies to bonuses across Unilever (including Executive Directors). However, management recommended a downwards adjustment to 110%, in light of overall quality of results as we ended the year with slower growth in a tougher economic environment. The Committee believes this represents a fair assessment of Unilever’s overall performance over the year. Following application of personal performance multipliers, a bonus of 185% of salary was awarded for the CEO and a bonus of 121% of salary for the CFO.

GLOBAL SHARE INCENTIVE PLAN (GSIP) AND MANAGEMENT CO-INVESTMENT PLAN (MCIP): SUSTAINED PERFORMANCE DELIVERY

Over the past three years, Unilever has delivered consistent financial performance. Underlying sales growth during this period was 3.6% per annum and core operating margin improvement over the period was an average of 40 basis points per year, demonstrating management’s continued drive for consistent top- and bottom-line growth. Unilever also generated strong operating cash flow in the period, with cumulative operating cash flow of 18.1 billion. Total shareholder return (TSR) over this three-year period was in the middle third of the peer group but below the threshold for vesting.

On the basis of this performance, the Committee determined that the GSIP and MCIP awards to the end of 2016 will vest at 70% of initial target award levels (i.e. 35% of maximum for GSIP and 47% of maximum for MCIP).

A REWARD FRAMEWORK FOR THE FUTURE

During the year, the Committee undertook an extensive review of Unilever’s Reward Framework. During this process I have been privileged to meet and engage with many of our investors and other stakeholders. I would like to express my thanks to all those who have contributed so constructively to this exercise.

We reviewed our Reward Framework in light of four key principles:

  simplify reward;
  increase shareholding levels throughout Unilever’s management population;
  ensure consistent alignment of performance measures with our strategy; and
  increase the timeframe over which incentives are delivered.

We are therefore making several changes to Unilever’s Reward Framework for our senior leadership team below Board level, specifically members of the Unilever Leadership Executive (ULE) and our ‘Top 500’ managers. These changes are set out in this letter. We are also proposing to make some changes to how the Executive Directors are paid as part of the new Remuneration Policy to be presented to shareholders at our 2017 AGMs (set out on pages 52 to 64).

NEW REWARD FRAMEWORK FOR THE ULE AND ‘TOP 500’ MANAGERS

Our existing Reward Framework has served Unilever very well. Unilever has embedded a strong performance culture and has consistently delivered good results over the longer term. The Committee now sees an opportunity to place a greater emphasis on long-term employee share ownership to support Unilever’s ‘Connected 4 Growth’ initiative. In our new Reward Framework, longer-term personal commitment through share ownership drives reward.

For our ULE members (excluding the Executive Directors) and ‘Top 500’ managers, we will simplify their reward arrangements by consolidating fixed pay into a single figure and discontinuing the GSIP. Pay for this population (effective from mid-2017) will comprise three elements:

  fixed pay;
  annual bonus; and
  MCIP.

To achieve a genuinely longer-term performance horizon of five years, we will encourage our managers to invest a proportion of their annual bonus after tax in Unilever shares through a revised longer-term version of Unilever’s MCIP, for which approval will be sought at the 2017 AGMs. The maximum investment is 100% of a manager’s annual bonus. The performance period on the MCIP has been increased from three years to four years. MCIP matching shares will vest as currently in the range of zero to 200%, depending on Unilever’s performance.

The total time horizon of the annual bonus and subsequent MCIP in which it is invested is therefore five years. The Committee discussed performance measures with key investors during the consultation process and has amended performance measures on the MCIP to support the achievement of our longer-term business strategy, as set out on page 59.

 

 

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For our ULE members (excluding the Executive Directors) and

‘Top 500’ managers this new MCIP is the only long-term incentive. These individuals will receive increases in fixed pay and bonus opportunity to ensure that the total value of their package is unchanged at target under the new Reward Framework if they continue to invest 60% of their annual bonus in Unilever shares through the MCIP.

We intend to apply the principles driving these proposals to the way we pay all of our managers. Further, over the last two years we have offered our “buy 3 get 1 free” global share purchase plan “SHARES” to staff below senior management level across 104 of the 109 countries in which we employ people. While continuing to advance SHARES, we also intend to extend the reach of our executive share incentives from 3,000 senior managers to all of our 15,000+ managers worldwide from 2018 onwards.

Through these initiatives we will encourage all our employees fully to adopt an owner’s mindset with the goal of achieving our growth ambition, so they can continuously reinvest and share in the future long-term success of Unilever.

NEW REWARD FRAMEWORK FOR EXECUTIVE DIRECTORS

We had extensive and constructive consultation with our shareholders on how best to apply the new pay framework to our Executive Directors. Our aim is, in due course, to apply the new Reward Framework to Executive Directors in the same way as to other senior leaders. The intention is to do this without any structural increase in the target or maximum levels of pay.

To make the MCIP our only long-term incentive plan for Executive Directors, while avoiding a reduction in target pay levels, will require significant changes to the balance of the package, and in particular more focus within the package on fixed pay and investment of annual bonus in Unilever shares through MCIP. We have decided to adopt the new framework in two steps:

(1) Lengthen MCIP horizon and increase shareholding requirements

For 2017 this will mean:

  a four-year performance period on the MCIP, making it a five-year plan in total when combined with the year in which bonus is earned;
  new performance measures will apply for the MCIP. The current cap of 150% in respect of the vesting of Executive Directors’ MCIP matching shares will continue to apply, as will their current MCIP investment limits of 25-60% of annual bonus;
  increased shareholding requirements of 5 x salary for the CEO and 4 x salary for the CFO;
  the current level and structure of fixed pay will be retained, other than a 5% salary increase for the CFO (see below); and
  GSIP will be retained, but with a two-year post-vesting holding period.

Post-employment holding periods, requiring 100% of the shareholding requirement to be retained for a year and 50% to be retained for two years, will continue to apply.

(2) Simplify and rebalance

This will involve, as for other Unilever senior managers, discontinuing GSIP so that MCIP is the only long-term incentive plan, and simplifying fixed pay into a single consolidated fixed pay number. To maintain target levels of pay this will require a rebalancing of the package towards fixed pay and bonus invested in Unilever shares.

In 2017 we will consult further with investors regarding the details and timing of this full alignment to the approach we are already applying to our most senior managers below Executive Director level.

The CFO was recently promoted to the Board and has performed strongly in role since appointment. The Committee has therefore determined, in line with our existing remuneration policy, to award him a salary increase of 5%. The Committee will continue to review the CFO’s salary in view of his performance and development in role, and may continue to make salary increases that exceed that of the wider workforce over the life of our new Remuneration Policy, although any further salary increases awarded will not exceed 15% in aggregate over the course of this Remuneration Policy.

FRAMEWORK FOR FAIR COMPENSATION

The Committee is aware of and takes into consideration reward conditions elsewhere in the group. We are also aware of the developing regulatory environment on executive pay in the UK, Europe and the US, and will continue to monitor this over the coming year so that we can respond to new requirements and best practice. We are proud of the Framework for Fair Compensation introduced by Unilever in December 2015 ( https://www.unilever.com/sustainable-living/the-sustainable-living-plan/enhancing-livelihoods/fairness-in-the-workplace/fair-compensation/ ). Through this framework, last year Unilever announced the target to achieve living wage compliance for all our employees globally by 2020.

Following extensive discussions with key shareholders and other stakeholders, the Committee recommends these proposed changes for your approval at the 2017 AGMs.

Ann Fudge

Chair of the Compensation Committee

 

 

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AT A GLANCE: HOW THE REMUNERATION POLICY WILL BE APPLIED TO EXECUTIVE DIRECTORS IN 2017

The table below sets out a summary of the new remuneration structure that will apply during the 2017 financial year subject to shareholder approval at our 2017 AGMs. Further details are set out in the Directors’ Remuneration Policy on pages 65-77.

 

      CEO    CFO
Base salary    £1,010,000    £656,250
     No change    Increase of 5% from current £625,000
Fixed allowances    Fixed allowance –£250,000    Fixed allowance – £200,000
and other benefits    Other benefits operated in line with policy    Other benefits operated in line with policy
     No change    No change
Annual bonus    120% of base salary at target, 200% at maximum    100% of base salary at target, 150% at maximum
     No change    No change
MCIP    Can invest up to the value of 60% of the gross 2016 annual bonus into the MCIP.
   MCIP awards matching shares in the range of zero to 150% based on Unilever’s performance over 4 years.
     Performance period has increased from current 3 years and has revised performance measures.
GSIP    Target award: 200% of salary,    Target award: 150% of salary,
   Maximum award: 400% of salary    Maximum award: 300% of salary
   Performance assessed over 3 years with    Performance assessed over 3 years with
   a subsequent 2 year holding period    a subsequent 2 year holding period
   Holding period is an additional requirement    Holding period is an additional requirement
     under the new Remuneration Policy    under the new Remuneration Policy
Conditional    £117,123    n/a
supplemental    No change    No change
pension          
Shareholding    5 x base salary = £5.05m    4 x base salary = £2.625m
requirement    Increase from 4 x salary    Increase from 3 x salary

INCENTIVE PERFORMANCE MEASURES

Performance measures for Executive Directors that will apply to MCIP and GSIP granted in 2017 and the 2017 bonus are as follows:

ANNUAL BONUS –      
performance measures   Weight  

Underlying Sales Growth

    33

(USG)

 
Core Operating Margin Improvement     33

(COM)

 

Free Cash Flow

    33

(FCF)

       
MCIP –       
performance measures    Weight  

Underlying Sales Growth

     25

(USG)

  

Core Earnings Per Share

     25

(EPS)

  

Sustainability Progress Index

     25

(USLP)

  

Return on Invested Capital

     25

(ROIC)

        
GSIP –      
performance measures   Weight  

Underlying Sales Growth

    25

(USG)

 

Core Operating Margin

    25

(COM)

 
Cumulative Operating Cash Flow     25

(COCF)

 

Total Shareholder Return

    25

(TSR)

       
 

Performance target ranges for the Annual Bonus are considered to be commercially sensitive and will be disclosed in full in the 2017 DRR.

 

MCIP 2017 TARGETS    GSIP 2017 TARGETS
Performance conditions are assessed over a four-year period. The performance conditions and target ranges for 2017 are as follows:    Performance conditions are assessed over a three-year period. The performance conditions and target ranges for 2017 are as follows:
   

LOGO

 

   LOGO

 

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DIRECTORS’ REMUNERATION POLICY

POLICY REPORT

POLICY TABLE

The following sets out our new Directors’ Remuneration Policy (the Remuneration Policy). This new Remuneration Policy will be presented for approval by shareholders at the April 2017 AGMs and, if approved, applies to payments made after that date and replaces the existing remuneration policy in its entirety. It is intended that the new Remuneration Policy will apply for three years, although the Compensation Committee may seek approval for a new policy at an earlier point if it is considered appropriate. The supporting information section provides the rationale for any changes from the existing remuneration policy where appropriate.

 

 

BASE SALARY

 

    

PURPOSE AND LINK TO STRATEGY

Supports the recruitment and retention of Executive Directors of the calibre required to implement our strategy. Reflects the individual’s skills, experience, performance and role within the Group.

 

OPERATION

Set by the Boards on the recommendation of the Committee and generally reviewed once a year, with any changes usually effective from 1 January (although changes may be made at any other time if the Committee considers that is appropriate).

 

Salary is paid in cash and is generally paid monthly.

 

Salary is set at an appropriate level to attract and retain Executive Directors of the required calibre, taking into account:

 

i.      our policy generally to pay at around the median of an appropriate peer group of other global companies of a similar financial size and complexity to Unilever;*

 

ii.     the individual’s skills, experience and performance; and

 

iii.    pay and conditions across the wider organisation.

  

OPPORTUNITY

Any increases will normally be in line with the range of increases awarded to other employees within the Group.

 

Increases may be above this level or applied more frequently in certain circumstances, such as:

•    where there is, in the Committee’s opinion, a significant change in an Executive Director’s scope or role;

•    where a new Executive Director has been appointed to the Boards on a salary lower than the typical market level for such a role and becomes established in the role; and

•    where it is considered necessary to reflect significant changes in market practice.

 

The maximum aggregate increase for the current Executive Directors during the time in which this policy applies will be no higher than 15%. This excludes the proposed increase of salary for the CFO for 2017.

 

PERFORMANCE MEASURES

n/a.

 

SUPPORTING INFORMATION

A cap on the aggregate increase in salary over the duration of this Remuneration Policy has been set at 15% (excluding the 5% salary increase for the CFO set out in the Letter from the Chair). There are no other changes relative to the previous Remuneration Policy.

 

 

FIXED ALLOWANCE

 

    

PURPOSE AND LINK TO STRATEGY

Provides a simple competitive alternative to the provision of itemised benefits and pension, not linked to base salary.

 

OPERATION

The fixed allowance is reviewed periodically by the Committee and changes are usually effective from 1 January.

 

Set at an appropriate level taking into account the median of an appropriate peer group in line with the approach to base salary and individual circumstances (such as whether they have been required to relocate to undertake their role).

 

Normally, paid monthly in cash.

 

  

OPPORTUNITY

The fixed allowance will not exceed the value of current allowance provided as follows:

•    CEO – £250,000

•    CFO – £200,000.

 

PERFORMANCE MEASURES

n/a.

 

SUPPORTING INFORMATION

A cap on the fixed allowance has been set at the current levels provided. There are no other changes relative to the previous Remuneration Policy.

 

 

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BENEFITS

 

    

PURPOSE AND LINK TO STRATEGY

Provides certain benefits on a cost-effective basis to aid attraction and retention of Executive Directors.

 

OPERATION

Provision of death, disability and medical insurance cover, directors’ liability insurance and actual tax return preparation costs. Other benefits may be provided in the future where it is considered necessary by the Committee and/or required by legislation.

 

In the event that Unilever were to require an existing or new Executive Director to relocate, Unilever may pay appropriate relocation allowances for a specified time period of no more than three years. This may cover costs such as (but not limited to) relocation, cost of living, housing benefit, home leave, tax and social security equalisation and education assistance.

 

In line with the commitments made to the current CEO upon recruitment, Unilever pays the social security obligation in the CEO’s country of residence to protect him against the difference between the employee social security obligations in his country of residence versus the UK. He also receives a conditional supplemental pension accrual to compensate him for the arrangement forfeited on leaving his previous employer. This supplemental pension accrual is conditional on the CEO remaining in employment with Unilever to age 60 and subsequently retiring from active service or his death or total disability prior to retirement.

 

Executive Directors are entitled to participate on the same terms as all UK employees in the Unilever PLC ShareBuy plan.

 

  

OPPORTUNITY

Based on the cost to Unilever of providing the benefit and dependent on individual circumstances.

 

Relocation allowances – the level of such benefits would be set at an appropriate level by the Committee, taking into account the circumstances of the individual and typical market practice.

 

Social security obligation in the current CEO’s country of residence dependent on earnings and rates of social security.

 

The supplemental pension accrual for the CEO is capped from 2012 onwards at £117,123.

 

Awards under the all-employee Unilever PLC ShareBuy Plan may be up to HMRC-approved limits. The only change in the value of the current benefits (for single figure purposes) will reflect changes in the costs of providing those benefits.

 

PERFORMANCE MEASURES

n/a.

 

SUPPORTING INFORMATION

The ability to provide additional benefits has been restricted to only instances that the Committee considers are necessary or legally required.

 

* The current peer group includes AstraZeneca, BASF, Bayer, BHP Billiton, BMW (XET), BP, British American Tobacco, BT, Carrefour, Centrica, Daimler (XET), Danone, Diageo, GlaxoSmithKline, Henkel (XET), Imperial Brands, L’Oréal, Metro, National Grid, Nestlé, Novartis, Reckitt Benckiser, Rio Tinto, Roche, Royal Dutch Shell, SABMiller, Sanofi, Siemens, Tesco, Total and Volkswagen. The peer group used for benchmarking purposes is reviewed regularly and companies are added and/or removed at the Committee’s discretion to ensure that it remains appropriate.

 

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ANNUAL BONUS

 

    

PURPOSE AND LINK TO STRATEGY

Incentivises year-on-year delivery of stretching short-term financial, strategic and operational objectives selected to support our annual business strategy and the ongoing enhancement of shareholder value.

 

The ability to recognise performance through annual bonus enables us to control our cost base flexibly and react to events and market circumstances.

 

OPERATION

Each year Executive Directors may have the opportunity to participate in the annual bonus plan. Executive Directors are set a target opportunity that is assessed against the Business Performance Multiplier of up to 150% of target opportunity at the end of the year.

 

Executive Directors’ personal performance is also assessed at the year end and may result in a Personal Performance Multiplier of up to 150%.

 

The Business and Personal Performance Multipliers cannot result in a bonus payout greater than the maximum set out in this Remuneration Policy.

 

Unless otherwise determined by the Committee, Executive Directors are required to invest at least 25% and can invest up to a maximum of 60% of their gross annual bonus into Unilever shares under the MCIP (see the MCIP section on page 55).

 

Ultimate remedy/malus and claw-back provisions apply (see details on page 57).

  

OPPORTUNITY

Target bonus opportunities (as a percentage of base salary) are:

•    CEO – 120%

•    Other Executive Directors – 100%

 

Maximum bonus opportunities (as a percentage of base salary) are:

•    CEO – 200%

•    Other Executive Directors – 150%

 

Achievement of threshold performance results in a payout of 0% of the maximum opportunity, with straight-line vesting between threshold and maximum.

 

PERFORMANCE MEASURES

The Business Performance Multiplier is based on a range of business metrics set by the Committee on an annual basis to ensure that they are appropriately stretching for the delivery of threshold, target and maximum performance. These performance measures may include underlying sales growth (USG), core operating margin improvement (COM) and free cash flow (FCF).

 

The Committee has discretion to adjust the formulaic outcome of the Business Performance Multiplier up or down by up to plus or minus 25%, based on results, if it believes this better reflects the underlying performance of Unilever. In any event, the overall Business Performance Multiplier will not exceed 150%. The use of any discretion will be fully disclosed in the Remuneration Report for the year to which discretion relates.

 

When determining pay-outs the Committee will also consider performance against personal performance goals and the quality of results delivered in terms of both business results and leadership.

 

The Committee may introduce non-financial measures in the future subject to a minimum of 70% of targets being financial in nature.

 

Performance is normally measured over the financial year.

 

SUPPORTING INFORMATION

The maximum Personal Performance Multiplier is 150%. The Committee’s discretion to adjust the formulaic outcome of the Business Performance Multiplier up or down has been capped at 25%. There are no other changes relative to the previous Remuneration Policy.

 

 

 

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MANAGEMENT CO-INVESTMENT PLAN (MCIP)

 

    

PURPOSE AND LINK TO STRATEGY

The MCIP encourages senior management to invest their own money into Unilever shares, aligning their interests with shareholders, and focus on the sustained delivery of high performance results over the long-term.

 

OPERATION

The MCIP is a share matching arrangement whereby Executive Directors can invest their own after-tax money into Unilever shares (“investment shares”) and be awarded matching shares which vest at the end of a four-year performance period.

 

Depending on Unilever’s performance, Executive Directors may receive up to 1.5 x the number the shares they have purchased provided that they keep them for the duration of the four-year period.

 

Executive Directors are able to choose whether they invest in PLC or NV shares or a 50/50 mix. Executive Directors receive a corresponding number of performance-related shares (‘matching shares’). Matching shares will be awarded in the same form as the investment shares (i.e. in PLC or NV shares or a 50/50 mix).

 

Ultimate remedy/malus and claw-back provisions apply (see details on page 57).

  

OPPORTUNITY

Executive Directors are required to invest 25% and may invest up to 60% of their gross annual bonus into Unilever shares.

 

The number of matching shares received at the end of the performance period is a multiple of the number of shares invested into the MCIP which depends on performance as follows (there is straight line vesting between each of the points below):

•    Threshold – 0 x

•    Target – 1 x

•    Maximum – 1.5 x

 

The maximum possible opportunity as a % of salary is therefore:

•    CEO – 180%

•    Other Executive Directors – 135%

 

PERFORMANCE MEASURES

The Committee sets performance measures for each MCIP matching share award. These will be tested over the four financial years starting with that following the one to which the bonus relates.

 

MCIP performance measures are currently Underlying Sales Growth, Core Earnings Per Share, Return On Invested Capital, and the Unilever sustainability progress index. Each measure has a 25% weighting. The Committee retains the discretion to change these measures and/or weighting for future grants, based on strategic priorities for Unilever at that time.

 

The Committee will ensure that the targets set are appropriately stretching for the delivery of threshold, target and maximum performance.

 

SUPPORTING INFORMATION

The performance measures for the MCIP to be granted in 2017 have been amended to reflect Unilever’s strategic direction.

 

The MCIP (which will operate under a new set of plan rules for which approval will be sought at the 2017 AGMs) is now assessed over a four-year performance period. The previous MCIP was measured over a three-year performance period.

 

 

 

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GLOBAL SHARE INCENTIVE PLAN (GSIP)

 

    

PURPOSE AND LINK TO STRATEGY

The GSIP incentivises Executive Directors to achieve Unilever’s clearly stated growth ambition by delivering sustained high performance and sustainable returns for shareholders over the longer term.

 

OPERATION

Awards of shares are normally made annually with vesting conditional on Unilever’s performance against long-term targets over a three-year performance period and the quality of results delivered.

 

A two-year holding period will apply following the three-year vesting period (although shares may be sold to satisfy tax and other relevant liabilities as a result of the award vesting).

 

Prior to vesting Executive Directors are able to choose whether they receive any shares that are due to vest in PLC or NV shares or a 50/50 mix.

 

Ultimate remedy/malus and claw-back provisions apply (see details on page 57).

  

OPPORTUNITY

Target awards of conditional shares under the GSIP each year (as a percentage of base salary) are limited to:

•    CEO – 200%

•    other Executive Directors – 150%

 

The vesting range for awards of conditional shares is between 0% and 200% of target award. Accordingly, the maximum award of shares under the GSIP is (as a percentage of base salary at grant):

•    CEO – 400%

•    other Executive Directors – 300%

 

31% of the grant level would pay out at threshold performance. However, this may be amended at the discretion of the Committee if the number of companies in the TSR comparator group changes.

 

PERFORMANCE MEASURES

The Committee sets three-year performance measures for each conditional GSIP award.

 

GSIP performance measures are currently Underlying Sales Growth, Core Operating Margin, Cumulative Operating Cash Flow and Total Shareholder Return. Each measure has a 25% weighting. The Committee retains the discretion to change these measures and/or weighting for future grants, based on strategic priorities for Unilever at that time.

 

The Committee will ensure that the targets set are appropriately stretching for the delivery of threshold, target and maximum performance.

 

For the three business-focused measures, 25% of awards vest for threshold performance and for maximum performance 200% of the GSIP awards vest. The TSR measure is measured against the TSR comparator group, comprising 18 other companies (19 including Unilever): 50% vests if Unilever is ranked 10th, 100% vests if Unilever is ranked 7th and 200% of the GSIP award vests if Unilever is ranked 3rd or above. Further details of the TSR comparator group are set out on page 66.

 

SUPPORTING INFORMATION

The GSIP rules were approved by shareholders at the 2007 AGMs and will expire in May 2017. The GSIP will subsequently be operated under a new set of plan rules for which approval will be sought at the 2017 AGMs.

 

The GSIP awards made to the Executive Directors on 13 February 2017 will have a two-year post-vesting holding period beyond the three-year vesting period, making it a five-year plan, and this will also apply to GSIP awards in subsequent years under this Remuneration Policy.

 

ELEMENTS OF PREVIOUS POLICY THAT WILL CONTINUE

MCIP and GSIP awards granted under the previous Remuneration Policy will continue to operate under the terms of that policy and the relevant plan rules. Further details of the terms of the awards made are included in the Annual Remuneration Reports for their respective years. This applies to the GSIP awards granted in 2015, 2016 and 2017 and the MCIP awards granted in 2015 and 2016. This provision will cease to apply once all of these awards have vested, been exercised or been forfeited as appropriate as per the relevant policy and plan rules. Additional details are set out below.

 

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CLAW-BACK, ULTIMATE REMEDY, DISCRETION AND FLEXIBILITY

Claw-back: The Committee has discretion to reclaim or claw back some or all of the value of awards of performance-related payments to Executive Directors in the event of a significant downward restatement of the financial results of Unilever. This includes the annual bonus together with any awards that have been made and/or vested shares under the GSIP and the MCIP (awards under both this Remuneration Policy and the previous remuneration policy). This claw-back may be effected up to two years from vesting by reducing outstanding awards or requiring the return of the net value of vested awards to Unilever.

Ultimate remedy/malus: Grants under the GSIP and MCIP (under both this Remuneration Policy and the previous Remuneration Policy) are subject to ultimate remedy. Upon vesting of an award, the Committee shall have the discretionary power to adjust the value of the award if the award, in the Committee’s opinion taking all circumstances into account, produces an unfair result. In exercising this discretion, the Committee may take into account Unilever’s performance against non-financial measures. The Committee may apply malus to reduce a GSIP or MCIP award granted under this Remuneration Policy or to GSIP or MCIP awards granted from 2015 under the previous Remuneration Policy, or determine that any such award will not vest or only vest in part in the event of a significant downward restatement of the financial results of Unilever, gross misconduct or gross negligence, material breach of Unilever’s Code of Business Principles or any of the Unilever Code Policies, breach of restrictive covenants by which the individual has agreed to be bound, or conduct by the individual which results in significant losses or serious reputation damage to Unilever. The annual bonus will also be subject to malus on the same grounds as apply for MCIP awards.

For future awards under the GSIP and MCIP, the Committee may change the terms of a performance measure or target in accordance with its terms or if anything happens which causes the Committee reasonably to consider it appropriate to do so, and may adjust the number or class of shares subject to awards if certain corporate events (e.g. rights issues) occur. For legacy awards under the MCIP and GSIP, the Committee may change the terms of a performance measure or target during the performance period to take into account any structural changes relating to the shares or the Group (e.g. rights issues) in accordance with established market practice.

The Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any relevant discretions) notwithstanding that they are not in line with this Remuneration Policy where the terms of the payment were agreed before this Remuneration Policy came into effect or at a time when the relevant individual was not a Director of Unilever N.V. or PLC and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of Unilever N.V. or PLC. For these purposes, ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are ‘agreed’ at the time the award is granted.

REMUNERATION SCENARIOS - OUR EMPHASIS ON PERFORMANCE-RELATED PAY

It is Unilever’s policy that the total remuneration package for Executive Directors should be competitive with other global companies and that a significant proportion should be performance-related.

For the remuneration scenarios below, the maximum and target pay opportunities have been chosen to be consistent with the current levels for Executive Directors. In reviewing the appropriate level of pay opportunity for the Executive Directors, the Committee considers internal and external comparators. Although pay is not driven by benchmarking, the Committee is aware that pay needs to be within a reasonable range of competitive practice. The Committee notes that base salary and fixed allowance and total target pay for the Executive Directors is between median and lower quartile for the benchmark group used by the Committee (see page 53).

The Committee typically reviews, on at least an annual basis, the impact of different performance scenarios on the potential reward opportunity and payouts to be received by Executive Directors and the alignment of these with the returns that might be received by shareholders. The Committee believes that the level of remuneration that can be delivered in the various scenarios is appropriate for the level of performance delivered and the value that would be delivered to shareholders.

The charts below show hypothetical values of the remuneration package for Executive Directors in the first year of the policy under three assumed performance scenarios:

 

LOGO

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

DETAILS OF FIXED ELEMENT OF REMUNERATION FOR CEO AND CFO AND ASSUMPTIONS FOR SCENARIO CHARTS

 

 

FIXED REMUNERATION (FIXED PAY AND BENEFITS)  

 

 

Assumptions as follows (for actual Executive Director pay details please see Implementation Report below):

 

•    Base salary for CEO = £1,010,000.

 

•    Base salary for CFO effective from 1 May 2017 = £656,250.

   

•    Fixed allowance = £250,000 for CEO and £200,000 for CFO.

   

•    CEO supplemental pension = £117,123.

   

•    Benefits assumed to be £447,000 for CEO and £19,000 for CFO in line with 2016.

 

 

VARIABLE REMUNERATION

 

 

BELOW

THRESHOLD

 

  

 

•    No bonus payout and no vesting under the MCIP or the GSIP.

   
    ON TARGET   

•    Target payout of the annual bonus (120% of base salary for the CEO and 100% of base salary for the CFO).

      

•    Target vesting under the MCIP (1 x matching shares of the target 2017 annual bonus for CEO and CFO).

      

•    Target vesting under the GSIP (200% of base salary for the CEO and 150% of base salary for the CFO).

        

•    Scenarios assume 60% of the gross annual bonus is invested.

 

   
    MAXIMUM   

•    Maximum payout of the annual bonus (200% of base salary for the CEO and 150% of base salary for the CFO).

      

•    Maximum vesting under the MCIP (1.5 x matching of the maximum 2017 annual bonus for CEO and CFO).

      

•    Maximum vesting under the GSIP (400% of 2016 base salary for the CEO and 300% of 2016 base salary for the CFO).

        

•    Scenarios assume 60% of the gross annual bonus is invested.

 

   
   

NOTES TO

VARIABLE REMUNERATION

  

•    Dividends, dividend equivalents and share price movements are ignored for the purposes of the illustrations above.

LEGACY ARRANGEMENTS

For the duration of this Remuneration Policy, entitlements arising before the adoption of this Remuneration Policy will continue to be honoured in line with the approved remuneration policy under which they were granted, or their contractual terms. The last award under the legacy MCIP was made on 11 February 2016, relating to the annual bonus earned in 2015, which will vest on 11 February 2018. The last award under the GSIP rules approved at the 2007 AGMs was made on 13 February 2017 and will vest on 13 February 2020. Further details of these awards can be found within the existing remuneration policy approved at the 2014 AGMs and included within the 2013 and subsequent Annual Report and Accounts.

PERFORMANCE MEASURES AND THE LINK TO STRATEGY

Performance measures are selected to align with Unilever’s short-term performance targets and long-term business strategy objectives. Unilever’s primary business objective is to create value in a sustainable way. Performance measures focus management on the delivery of a combination of top-line revenue growth and bottom-line profit growth that Unilever believes will build shareholder value over the longer term.

The measures chosen for the incentives will support the delivery of this objective, with distinct measures for each of the annual and longer-term incentive programmes. For the annual incentive, we continue to have a balanced set of performance measures in terms of sales, profitability and cash flow. Performance measures for our long-term incentive relate to the key objectives driving long-term value creation for investors: growth (in the form of USG) is fundamental to our model; core earnings per share (EPS) gives clear line of sight to share price via the Price/Earnings multiple; sustainability (USLP) is at the heart of our strategy for long-term value creation; and return on invested capital (ROIC) is an important measure of value creation, and an appropriate measure for ULE members given their decision-making responsibility regarding merger and acquisition activity. In 2017 there will be no change to the performance measures used for GSIP. For 2018, if the GSIP is maintained, it is intended that a consistent set of performance measures will be used across the MCIP and GSIP.

 

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The following sets out the performance measures for short- and long-term executive incentive plans to be awarded in 2017, as well as the business performance and the behaviours that they drive.

APPROACH TO TARGET SETTING

 

          
  INCENTIVE PLAN  

PERFORMANCE MEASURE

 

   LINK TO STRATEGY
 

  SHORT-TERM:

  ANNUAL BONUS

  Underlying sales growth (USG) at constant rates   

Clear, simple and well understood measure supporting the achievement of Unilever’s growth ambition

 

 
  Free cash flow (FCF) at constant rates   

Provides clear focus on the achievement of Unilever’s cash generation ambition and on cost reduction

 

 
    Core operating margin improvement (COM) at current rates   

Underlines the importance of achieving increasingly profitable growth

 

 

  LONG-TERM:

  MCIP

  Underlying sales growth CAGR (USG) at constant rates   

Supports the achievement of Unilever’s ambition to deliver sustainable growth over the longer term

 

 
  Core earnings per share (Core EPS) at current rates   

Provides focus on a measure which is widely understood and applied externally by investors in valuing companies

 

 
  Return on invested capital (ROIC)   

Supports disciplined investment of capital within the business and discourages acquisitions with low returns and long paybacks (an especially relevant measure for members of the ULE who make investment decisions)

 

 
    Unilever sustainability progress index (USLP)   

The Unilever Sustainable Living Plan (USLP) helps to secure long-term value creation by decoupling our growth from our environmental impact, while increasing our positive social impact. To avoid over-focus on any one element of the USLP, the progress index is an assessment made by the Committee taking into account progress towards the targets in our reported USLP scorecard

 

 

  LONG-TERM:

  GSIP

  USG at constant rates   

Supports the achievement of Unilever’s ambition to deliver sustainable growth over the longer term

 

 
  COM at current rates   

Underlines the importance of achieving sustainable profitable growth over the longer term

 

 
  Cumulative operating cash flow   

Provides clear focus on the achievement of Unilever’s cash generation ambition and on cost reduction

 

 
    Relative total shareholder return (TSR)    Provides a relative ranking of share price growth and dividend compared with a set of peer companies
        

The Committee sets performance targets for incentive plans, taking into account internal budgets, business priorities and external forecasts so that the targets are sufficiently stretching. Good performance results in target payout while maximum payout is only achieved for delivering exceptional performance.

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

DIFFERENCES IN PAY POLICY GENERALLY

As the Chairman’s letter sets out, the reward arrangements for the ULE (excluding the Executive Directors) and ‘Top 500’ managers have been significantly simplified by consolidating fixed pay into a single figure and discontinuing the GSIP. Pay for this population (effective from mid-2017) will comprise three elements:

  fixed pay;
  annual bonus; and
  MCIP.

To achieve a genuinely longer-term performance horizon of five years, we will encourage our managers to invest a proportion of their annual bonus after tax in Unilever shares through a revised longer-term version of Unilever’s MCIP, for which approval will be sought at the 2017 AGMs. The operation of this new MCIP is the same for the Executive Directors, except that the current cap of 150% will continue to apply to the vesting of Executive Directors’ MCIP matching shares. For other participants the MCIP matching shares may vest up to 200%, based upon Unilever’s performance.

For the ULE (excluding Executive Directors) and our ‘Top 500’ managers this new MCIP is the only long term incentive. These individuals have received increases in fixed pay and bonus opportunity and they can invest up to 100% of their gross annual bonus into MCIP. The new remuneration structure has been structured in a way to maintain broadly the same levels of pay for target performance, if they continue to invest 60% of their gross annual bonus in Unilever shares through the MCIP.

We plan to apply the principles driving these proposals to the way we pay all of our 15,000+ managers, not just our senior leaders. As a responsible employer with around 169,000 people in 109 countries as at year end, we are also very mindful of how we pay our many non-management staff.

Remuneration arrangements are determined throughout the Group based on the same principle - that reward should support our business strategy and should be sufficient to attract and retain high-performing individuals without paying more than is necessary. Unilever is a global organisation with employees at a number of different levels of seniority and in a number of different countries and, while this principle underpins all reward arrangements, the way it is implemented varies by geography and level.

In principle, all our managers participate in the same Unilever annual bonus scheme with the same performance measures based on Unilever’s overall performance. All middle and senior management are invited to participate in the MCIP. All other employees will have the opportunity to participate in the global “buy 3 get 1 free” employee share plan called ‘SHARES’.

Through these initiatives we will encourage all our employees fully to adopt an owner’s mindset with the goal of achieving our growth ambition, so they can continuously re-invest and share in the future long-term success of Unilever.

CONSIDERATION OF CONDITIONS ELSEWHERE IN THE GROUP

When determining the pay of Executive Directors, the Committee considers the pay arrangements for other employees in the Group, including considering the average global pay review budget for the management population, to ensure that remuneration arrangements for Executive Directors remain reasonable.

Unilever employs around 169,000 people in 109 countries as at year end and, given this geographic spread and other factors, the Committee did not consider that it was appropriate to consult employees on the Remuneration Policy for Executive Directors during the year. However, Unilever takes the views of its employees seriously and on an ongoing basis we operate the ‘Rate-My-Reward’ survey to gauge the views of employees on the different parts of their reward package.

The Committee has taken note of the Fair Compensation Unilever Framework (https://www.unilever.com/sustainable-living/the-sustainable-living-plan/enhancing-livelihoods/fairness-in-the-workplace/fair-compensation/) and the advanced living wage awareness together with responsible supplier policies within the Group. Over the last three years we have also offered the award-winning SHARES plan to our non-management staff around the world. We will continue to advance these initiatives over the year ahead and beyond to enhance the livelihoods of all our employees.

CONSIDERATION OF SHAREHOLDER VIEWS

The Committee takes the views of shareholders seriously. In a year when we are proposing to introduce this new Remuneration Policy shareholders have been consulted extensively and their views have been influential in shaping this Remuneration Policy.

We maintain an open and regular dialogue with our shareholders on remuneration matters, including consulting with our largest shareholders, when we are considering making material changes to our Remuneration Policy. As such we will be in contact with our largest shareholders during 2017 to determine how best to structure remuneration for the Executive Directors for 2018 and beyond.

MINIMUM SHAREHOLDING REQUIREMENT

The remuneration arrangements applicable to our Executive Directors require them to build and retain a personal shareholding in Unilever (by the later of 2018 or five years from the date of appointment) to align their interests with those of Unilever’s long-term shareholders. The current requirement is 5 x base salary for the CEO and 4 x base salary for the CFO.

Upon leaving Unilever, all Executive Directors will be required to maintain at least 100% of their minimum shareholding requirement for one year after leaving, and at least 50% for two years after leaving. If the leaver has not yet met their shareholding requirements on departure they will be required to retain the shares they do own up to these limits.

 

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REMUNERATION POLICY FOR NEW HIRES

 

      

  AREA

 

  

POLICY AND OPERATION

 

 
  Overall    The Committee will pay new Executive Directors in accordance with the approved Remuneration Policy and all its elements as set out herein above. The terms of service contracts will not overall be more generous than those of the current CEO and CFO summarised below. The ongoing annual remuneration arrangements for new Executive Directors will therefore comprise salary, fixed allowance, benefits, annual bonus, MCIP and GSIP. In addition, the recruitment policy below permits the Committee to take the following actions, as appropriate, in the best interests of Unilever and therefore shareholders.
 
    

For internal promotions, any variable remuneration element awarded in respect of a prior role may be paid out according to its original terms.

 

 
  Base salary   

Salary would be set at an appropriate level to recruit the best candidate based on their skills, experience and current remuneration.

 

 
  Fixed allowance   

Fixed allowance provision would be in line with the approved normal Remuneration Policy and for a new external hire may be consolidated into salary.

 

 
  Benefits   

Benefits provision would be in line with the approved normal Remuneration Policy. Where appropriate the Executive Director may also receive relocation benefits or other benefits reflective of normal market practice in the territory in which the Executive Director is employed. In addition, the Committee may agree that Unilever will pay certain allowances linked to repatriation on termination of employment.

 

 
  Incentive awards    Incentive awards would be made under the annual bonus, MCIP and GSIP in line with the normal policy.
 

  Transition awards

  and buyout awards

   In addition to normal incentive awards, additional awards may be made to align the joiner as quickly as possible with Unilever’s long-term goals, and to reflect value forfeited through an individual leaving their current employer.
 
   Transition awards
   In the event that we were to appoint a new Executive Director, the Committee’s preferred approach would be to offer a transition award in Unilever shares to immediately align the new Executive Director with the long-term goals of the business and to recognise that no other long-term incentive will be vesting in their first years of employment at Unilever. The transition award permits the joiner to potentially receive matching awards under the MCIP and GSIP awards as if they had invested a proportion of their target bonus into the in-flight MCIP cycles and had been made awards in previous GSIP cycles that started before they joined Unilever. Accordingly, the transition award may comprise two elements. The first can be worth up to 240% (4 x 60%) of the new Executive Director’s initial target annual bonus and vests 25% per year thereafter at the actual performance multiplier (0 x to 1.5 x) for the MCIP cycle ending in the corresponding year. The second element of the transition award may be worth up to 200% of the new Executive Director’s initial salary and vests 50% per year thereafter at the actual performance multiplier (0 x to 2 x) for the GSIP cycle ending in the corresponding year. Within these limits the Committee will determine the size of the transition award based on individual circumstances. To be eligible for the transition award element related to MCIP (i.e 4 x 60% of target bonus) the Executive Director must invest no less than a corresponding percentage (i.e. 60%) of actual annual bonus into new cycles of MCIP starting in each of the years that the transition award vests. The final vesting value of the transition award will be scaled back if the corresponding level of investment the new Executive Director has made into the MCIP in that year is lower than the initial commitment. If the Executive Director elects to make a higher investment in new MCIP cycles than the initial commitment, the transition award will not be increased.
 
   A transition award would only be offered if required to compensate an Executive Director for awards foregone. If an Executive Director joins without the need to compensate for awards foregone, a transition award would not be provided.
 
   Buyout awards
   The Committee’s preference is to use transition awards rather than buyout awards. However, as we need to be able to source the best talent from any market, instead of the approach set out above the Committee may elect to compensate Executive Directors hired from outside for any awards they lose by leaving previous employers broadly on a like-for-like basis (although a transition award may form part of this). Incoming Executive Directors will be required to retain all shares vesting from any share awards until their minimum shareholding requirements have been met in full.
 
   If a buyout award is required, the Committee would aim to reflect the nature, timing, and value of awards forgone in any replacement awards. Awards may be made in cash, shares or any other method as deemed appropriate by the Committee. Where possible, share awards will be replaced with share awards. Where performance measures applied to the forfeited awards, performance measures will be applied to the replacement award or the award size will be discounted accordingly. In establishing the appropriate value of any buyout the Committee would also take into account the value of the other elements of the new remuneration package.
 
   The Committee would aim to minimise the cost to Unilever, although buyout awards are not subject to a formal maximum. Any awards would be broadly no more valuable than those being replaced.
      

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

SERVICE CONTRACTS

POLICY IN RELATION TO EXECUTIVE DIRECTOR SERVICE CONTRACTS AND PAYMENTS IN THE EVENT OF LOSS OF OFFICE

 

      

  SERVICE

  CONTRACTS &

  NOTICE PERIOD

  

Current Executive Directors’ service contracts are terminable upon notice as follows:

•    12 months’ notice from Unilever; and

•    6 months’ notice from the Executive Director.

   Starting dates of the service contracts for the current CEO and CFO:
 
   CEO: 1 October 2008 (signed on 7 October 2008); and
   CFO: 1 October 2015 (signed on 16 December 2015).
 
    

Service contracts are available to shareholders to view at the AGMs or on request from the Group Secretary.

 

 

  TERMINATION

  PAYMENTS

  

A payment in lieu of notice can be made, to the value of no more than 12 months’ base salary, fixed allowance and other benefits (unless the Boards, at the proposal of the Committee, find this manifestly unreasonable given the circumstances or unless dictated by applicable law).

 

 

  OTHER

  ELEMENTS

  

•    Executive Directors may, at the discretion of the Boards, remain eligible to receive an annual bonus for the financial year in which they cease employment. Such annual bonus will be determined by the Committee taking into account time in employment and performance.

•    Treatment of share awards as set out below.

•    Any outstanding all-employee share arrangements will be treated in accordance with HMRC-approved terms.

•    Other payments, such as legal or other professional fees, repatriation or relocation costs and/or outplacement fees, may be paid if it is considered appropriate.

 

 

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LEAVER PROVISIONS IN PLAN RULES

 

       
   

 

‘GOOD LEAVERS’ AS

DETERMINED BY THE COMMITTEE IN ACCORDANCE WITH THE PLAN RULES*

 

 

 

LEAVERS IN

OTHER

CIRCUMSTANCES*  

 

 

CHANGE OF CONTROL

INVESTMENT

SHARES (MCIP)

 

Investment shares are not impacted by termination (although they may be transferred to the personal representative of the Executive Director in the event of his or her death without causing the corresponding matching shares to lapse).

 

  Investment shares are not impacted by termination.  

Investment shares may normally be disposed of in connection with a change of control without causing the corresponding matching shares to lapse.

 

Alternatively, participants may be required to exchange the investment shares for equivalent shares in the acquiring company.

 

   

MATCHING

SHARES (MCIP),

PERFORMANCE  

SHARES (GSIP)

 

Awards will normally vest following the end of the original performance period, taking into account performance and (unless the Boards on the proposal of the Committee determine otherwise) pro-rated for time in employment.

 

Alternatively, the Boards may determine that awards shall vest upon termination based on performance at that time and pro-rated for time in employment (unless the Boards on the proposal of the Committee determine otherwise). If a director dies, awards will vest at the time of death at the target level of vesting (pro-rated for time in employment if the director had previously left as a good leaver).

 

 

Awards will

normally lapse

upon termination.

 

In accordance with Dutch law, matching shares and performance shares are shares that are obtained as part of the Executive Director’s remuneration. Therefore their value is frozen for a period of four weeks before an announcement of a public offer and four weeks after the conclusion of a public offer. Under current Dutch law requirements, any increase in value in this period has to be reclaimed by Unilever from the Executive Director upon retirement or sale of these shares, if at that time the value of the shares is higher than the value four weeks before the announcement of the public offer. If the law changes, Unilever will seek to comply with any new Dutch law requirements that may apply from time to time.

 

Awards will vest based on performance at the time of the change of control and the Boards, on the proposal of the Committee, have the discretion to pro-rate for time. Alternatively, participants may be required to exchange the awards for equivalent awards over shares in the acquiring company.

 

 

* An Executive Director will usually be treated as a good leaver if he or she leaves due to ill-health, injury or disability, retirement with Unilever’s agreement or redundancy. The Boards may decide to treat an Executive Director who leaves in other circumstances as a good leaver. An Executive Director will not be treated as a good leaver if he or she chooses to leave for another job elsewhere unless the Boards determine otherwise, if he or she is summarily dismissed or leaves because of concerns about performance. In deciding whether or not to treat an Executive Director as a good leaver, the Boards will have regard to his or her performance in the role.

 

  If Unilever is affected by a demerger, special distribution or other transaction which may affect the value of awards, the Committee may allow matching shares under the current and legacy MCIP and performance shares under the GSIP to vest early over such number of shares as it shall determine (to the extent any performance measures have been met) and may be pro-rated to reflect the acceleration of vesting at the Committee’s discretion.

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

NON-EXECUTIVE DIRECTORS

KEY ASPECTS OF UNILEVER’S 2017 FEE POLICY FOR NON-EXECUTIVE DIRECTORS

 

 

  APPROACH TO

  SETTING FEES

  

 

Non-Executive Directors receive annual fees from Unilever N.V. and PLC. The Boards determine Non-Executive Director fee levels within total annual limits as approved by shareholders (as specified in PLC’s Articles, this is currently PLC £2,000,000 or its equivalent in any other currency based upon such foreign currency exchange rates as the Committee shall determine, and NV 3,000,000).

 

Unilever’s policy is to set fees at a level which is sufficient to attract, motivate and retain high-class talent of the calibre required to direct the strategy of the business. They are set taking into account:

•    Unilever’s Group-wide reward philosophy;

•    the commitment and contribution expected by the Group; and

•    fee levels paid in other global non-financial services companies based in Europe.

 

Fees are paid in cash.

 

 
  OPERATION   

Unilever applies a modular fee structure for Non-Executive Directors to ensure we fairly reflect the roles and responsibilities of Committee membership and Chairmanship. Our basic philosophy is to pay the Chairman an all-inclusive fee. Other Board members receive a basic fee and additional fees for being Vice-Chair, chairing or membership of various committees. The fees are currently split 50/50 between PLC (in sterling) and NV (in euros). The Boards may decide to pay fees in any other currency based on such foreign exchange rates as the Boards shall determine, provided total Non-Executive Director fees stay within the annual limits as approved by shareholders from time to time. The current 2017 fee structure can be found in the Directors’ Remuneration Report on page 73. The fee structure may vary from year to year within the terms of this Remuneration Policy.

 

Fees are normally reviewed annually but may be reviewed less frequently.

 

Additional allowances are made available to Non-Executive Directors where appropriate, to reflect any additional time commitment or duties.

 

 
  OTHER ITEMS   

Non-Executive Directors are encouraged to build up a personal shareholding of at least 100% of their total annual fees over the five years from appointment.

 

Non-Executive Directors are not entitled to participate in any of the Group’s incentive plans.

 

All reasonable travel and other expenses incurred by Non-Executive Directors in the course of performing their duties are considered to be business expenses and are reimbursed together with any tax payable. Non-Executive Directors also receive expenses relating to the attendance of the Director’s spouse or partner, when they are invited by Unilever. Other benefits or additional payments may be provided in the future if, in the view of the Boards, this is considered appropriate. Such benefits and/or payments would be within the total annual limits as approved by shareholders as described above.

 

REMUNERATION POLICY FOR NEW NON-EXECUTIVE DIRECTOR HIRES

In the event of hiring a new Non-Executive Director, the Committee will align the remuneration package with the Remuneration Policy as set out herein above.

NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT

The terms of engagement of Non-Executive Directors are set out in letters of appointment which each Non-Executive Director signed upon appointment. Non-Executive Directors are currently appointed for a one-year term, subject to satisfactory performance, re-nomination at the discretion of the Boards on the recommendation of the Nominating and Corporate Governance Committee and re-election at forthcoming annual shareholder meetings. It is Unilever’s expectation that Non-Executive Directors serve for a minimum of three years. The letters of appointment allow for Unilever to terminate a Non-Executive Director’s appointment in cases of gross misconduct, bankruptcy or where the Non-Executive Director is prevented from occupying such a position by law.

The letters do not contain provision for notice periods or compensation if the Non-Executive Directors’ appointments are terminated by Unilever. Non-Executive Directors may terminate their engagement upon three months’ notice. Except in exceptional circumstances, the Boards will not propose Non-Executive Directors for re-nomination when nine years have elapsed since the date of their appointment. Letters of appointment are available for inspection on request from the Group Secretary.

In considering appointments to the Boards, the Directors and Unilever give due consideration to the time commitment required to fulfil the role appropriately.

 

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ANNUAL REMUNERATION REPORT

The following sets out how Unilever’s existing Remuneration Policy (which is available on our website – see www.unilever.com/ara2015/downloads ) was implemented in 2016, and how our new Remuneration Policy (set out on pages 52 to 64) will be implemented if it receives shareholder approval at the 2017 AGMs.

IMPLEMENTATION OF THE REMUNERATION POLICY IN 2017 FOR EXECUTIVE DIRECTORS

If approved by shareholders, Unilever’s new Remuneration Policy will be implemented with effect from the 2017 AGMs as set out below. If the new Remuneration Policy is not approved, Unilever’s existing Remuneration Policy will continue to apply.

ELEMENTS OF REMUNERATION

 

 

  ELEMENTS OF

  REMUNERATION

 

 

AT A GLANCE

  

 

ADDITIONAL INFORMATION

 

  BASE SALARY

 

 

Salary effective from 1 May 2017:

•    CEO: £1,010,000

(unchanged from 2016)

•    CFO: £656,250

  

 

No salary increase is to be awarded to the CEO during 2017. The Committee notes that the CEO’s salary continues to be below competitive benchmarks compared to similar-sized UK and European companies, but that he has consistently refused a salary increase over recent years.

 

The CFO was recently appointed to the Board and has performed strongly in role since appointment. The Committee has therefore determined, in line with our Remuneration Policy, to award the CFO a salary increase of 5% that reflects his strong performance since appointment and development in role. This is above the average increase awarded to the broader employee population, but after careful consideration is considered appropriate by the Committee.

 

In particular, the Committee notes that the CFO was appointed with a salary significantly below that of his predecessor, and that, even with this increase, the CFO’s salary is still below the lower quartile of the market when assessed against our benchmarking peer group (as disclosed on page 53).

 

The Committee will continue to review the CFO’s salary in view of his performance and development in role, and may make salary increases that exceed that of the wider workforce, although any further salary increases awarded will not exceed 15% on aggregate over the course of this Remuneration Policy.

 

  FIXED

  ALLOWANCE

 

Fixed allowance for 2017:

•    CEO: £250,000

(unchanged from 2016)

•    CFO: £200,000

(unchanged from 2016)

 

   n/a

  OTHER BENEFIT

  ENTITLEMENTS

 

Implemented in line with the 2017 Remuneration Policy.

 

   n/a
  ANNUAL BONUS  

•    Implemented in line with the 2017 Remuneration Policy.

•    Target annual bonus of 120% of base salary for the CEO and 100% of base salary for the CFO.

•    Business Performance Multiplier of between 0% and 150% based on achievement against business targets over the year.

•    Personal Performance Multiplier of between 0% and 150% based on personal performance of the Executive Director.

•    Maximum annual bonus is 200% of base salary for the CEO and 150% for the CFO.

 

  

For 2017, the Business Performance Multiplier will be based on the following metrics:

 

LOGO

 

A 0% multiplier will be applied for threshold performance, and up to 150% multiplier for maximum performance. Performance target ranges are considered to be commercially sensitive and will be disclosed in full with the corresponding performance outcomes retrospectively following the end of the relevant performance year.

 

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

 

 

  ELEMENTS OF

  REMUNERATION

 

 

AT A GLANCE

  

 

ADDITIONAL INFORMATION

  GSIP 2017

  AWARDS

 

•    Implemented in line with the 2014 Remuneration Policy.

•    GSIP award made on 13 February 2017 (vesting 13 February 2020).

•    Target award 200% of base salary for the CEO (salary = £1,010,000) and 150% of base salary for the CFO (salary = £625,000).

•    Maximum vesting of 200% of initial award (so maximum vesting of 400% of base salary for the CEO (£4,040,000), and 300% of base salary for the CFO (£1,875,000)).

•    In addition, a two-year post-vesting holding period will apply to this award (beyond the three-year vesting period) for the CEO and CFO.

 

  

Performance conditions are assessed over a three-year period. The performance conditions and target ranges for 2017 awards will be as follows:

 

LOGO

 

For the three business-focused performance conditions, 25% of target awards vest for achieving threshold performance, 100% for target and 200% for maximum performance (with straight-line vesting between threshold and maximum). For the TSR measure, 50% of the target award vests for threshold performance at 10th place, 100% at 7th place, and 200% vests at 3rd place or above (with straight-line vesting occurring between these points). (a)

  NEW MCIP  

•    Implemented in line with the 2017 Remuneration Policy.

•    It is intended to make initial awards under the MCIP in May 2017.

•    Paul Polman elected to invest the value of 60% (£1,119,888) of his 2016 annual bonus into the MCIP (upon the plan’s approval at the 2017 AGMs).

•    Graeme Pitkethly elected to invest the value of 60% (£453,750) of his 2016 annual bonus in MCIP investment shares (upon the plan’s approval at the 2017 AGMs).

•    Matching shares are awarded based on performance up to a maximum of 1.5 x matching shares.

•    Therefore the maximum value from the matching shares for the CEO would be £1,679,832 and for the CFO would be £680,625.

  

Performance conditions are assessed over a four-year period. The performance conditions and target ranges for 2017 awards under the new MCIP will be as follows:

 

LOGO

 

Threshold results in no matching shares being awarded, target performance results in an award of 1 x matching shares, up to a maximum award of 1.5 x matching shares for Executive Directors, with straight-line vesting between threshold and maximum (although the maximum for other participants is 2 x matching)

 

Participants are required to hold all their own investment shares and remain employed by Unilever for the duration.

 

It is the Committee’s intention that management should be assessed against the progress they make on the USLP as a whole, rather than selected components of it. Unilever already publishes periodic progress reports for the USLP on our website and so our shareholders are able to monitor performance against USLP goals. At the end of the MCIP performance period, the Committee will disclose a full narrative setting out the performance achieved and the corresponding outcome that the Committee determines for the Sustainability Progress Index.

 

 

(a)   For the relative TSR measure, Unilever’s TSR is measured against a comparator group of other consumer goods companies. TSR measures the return received by a shareholder, capturing both the increase in share price and the value of dividend income (assuming dividends are reinvested). The TSR results are measured on a common currency basis to better reflect the shareholder experience. The current TSR peer group consists of 18 companies (19 including Unilever) as follows:

 

Avon    Colgate-Palmolive    Henkel    L’Oréal    Reckitt Benckiser
Beiersdorf    Danone    Kao    Nestlé    Shiseido
Campbell Soup    General Mills    Kellogg’s    PepsiCo   
Coca-Cola    Estée Lauder    Kimberly-Clark    Procter & Gamble   

The Committee may change the TSR vesting levels set out above if the number of companies in the TSR comparator group changes (e.g. via M&A activity etc).

 

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ULTIMATE REMEDY/MALUS AND CLAWBACK

Grants under the GSIP and MCIP are subject to ultimate remedy as explained in the 2017 Remuneration Policy. Malus and clawback apply to all performance-related payments as explained in the 2017 Remuneration Policy.

In 2016, the Committee did not reclaim or claw back any of the value of awards of performance-related payments to Executive Directors.

SINGLE FIGURE OF REMUNERATION AND IMPLEMENTATION OF THE REMUNERATION POLICY IN 2016 FOR EXECUTIVE DIRECTORS (AUDITED)

The table below shows a single figure of remuneration for each of our Executive Directors, for the years 2015 and 2016.

 

                                                                 
   

Paul Polman

CEO (UK)

(€‘000)

   

Graeme Pitkethly

CFO (UK)

(€‘000)

 

Jean-Marc Huët

former CFO (UK)

(€‘000)

      2016       2015       2016 (b)       2015 (b)       2016 (c)       2015 (c)  

(A) Base salary

    1,239       1,392       511       -       -       738  

(B) Fixed allowances and other benefits

    855       901       185       -       -       273  

(C) Annual bonus

    2,289       2,573       928       -       -       812  

(D) MCIP matching shares –                

(required by UK law) (d)                         

    1,240       1,933 (a)       153       -       -       375 (a)  

Long-term incentives

           

(E) GSIP performance shares –           

(required by UK law) (d)                         

    2,603       3,336 (a)       305       -       -       1,783 (a)  

Long-term incentives (sub-total)

    3,843       5,269       458       -       -       2,158  

(F) Conditional supplemental pension

    144       161       -       -       -       -  

Total remuneration paid – (required by UK law) (A+B+C+D+E+F)

    8,370       10,296       2,082       -       -       3,981  

(G) Share awards (required by Dutch law)

    3,170       3,274       674       -       -       573  

Total remuneration paid – (required by Dutch law) (A+B+C+F+G)

    7,697       8,301       2,298       -       -       2,396  

 

(a)   Amount restated using actual share price(s) on relevant dates rather than three-month average share price to 31 December 2015 (which was used for the 2015 report).
(b)   The figures included relate to amounts paid or payable to Graeme Pitkethly for his services from 21 April 2016 for the remainder of the year, being the date on which he was appointed as an Executive Director of the Boards of NV and PLC. Although Graeme Pitkethly assumed the role of CFO and became a member of the ULE on 1 October 2015, he did not serve as an Executive Director during that year, and therefore his 2015 remuneration is not disclosed herein.
(c)   The figures included relate to amounts paid to Jean-Marc Huët for his services between 1 January and 1 October 2015, being the date on which he ceased to be CFO and an Executive Director of Unilever.
(d)   Graeme Pitkethly’s GSIP and MCIP values in the above single figure table for 2016 include GSIP performance shares and MCIP matching shares previously granted to him in 2014, before his appointment as an Executive Director.

Where relevant, amounts for 2016 have been translated into euros using the average exchange rate over 2016 ( 1 = £0.8152), excluding amounts in respect of MCIP and GSIP which have been translated into euros using the exchange rate at vesting date of 14 February 2017 ( 1 = £0.8494). Amounts for 2015 have been translated into euros using the average exchange rate over 2015 ( 1 = £0.7254), excluding amounts in respect of MCIP and GSIP which have been translated into euros using the exchange rate at vesting date of 18 February 2016 ( 1 = £0.7763).

We do not grant our Executive Directors any personal loans or guarantees.

ELEMENTS OF SINGLE FIGURE REMUNERATION 2016

(A) BASE SALARY (AUDITED)

Salary set in sterling and paid in 2016:

 

  CEO – £1,010,000.
  CFO – £416,667 (amount paid to Graeme Pitkethly for his services from 21 April 2016, being the date on which he was appointed as an Executive Director of the Boards of NV and PLC; Graeme Pitkethly’s annual salary is £625,000).

(B) FIXED ALLOWANCE AND OTHER BENEFITS (AUDITED)

For 2016 this comprises:

 

    

Paul Polman

CEO (UK)

(£)

 

 

(a)  

   

Graeme Pitkethly      

CFO (UK)      

(£) (a)(b)

 

 

 

      2016     2016        

Fixed allowance

     250,000       133,333        

Medical insurance cover and actual tax return preparation costs

     29,390       14,087        

Provision of death-in-service benefits and administration

     11,011       3,370        
Payment to protect against difference between employee social security obligations in country of residence versus UK      406,247       -        

Total

     696,648       150,790        

 

(a)   The numbers in this table are quoted in sterling and translated into euros for the single figure of remuneration table above using the average exchange rate over 2016 of 1 = £0.8152.
(b)   The figures included relate to amounts paid or payable to Graeme Pitkethly for his services from 21 April 2016 for the remainder of the year, being the date on which he was elected at the AGMs as an Executive Director of the Boards of NV and PLC.

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

(C) ANNUAL BONUS (AUDITED)

Annual bonus 2016 actual outcomes

  CEO – £1,866,480 (which is 92.5% of maximum, 185% of base salary).
  CFO – £756,250 (which is 80.7% of maximum, 121% of base salary).

This includes cash and the portion of annual bonus that Executive Directors have indicated will be re-invested in shares under the MCIP. See below for details. Performance against targets:

 

LOGO

At the beginning of the year, the Committee set stretching financial performance targets which management delivered against during the course of the year. In 2016 we achieved underlying sales growth of 3.7%, ahead of our markets, driven by a good step-up in price growth with balanced volume. Improvement in core operating margin compared with 2015 was 0.5 percentage points driven by savings, improved product mix and operational leverage. All categories delivered progress against their strategic priorities. For the annual bonus calculations, free cash flow (FCF) is calculated on a constant basis at 4.7 billion (equivalent to the reported 4.8 billion at current rates), driven by the increase in core operating profit and improvement in working capital, in line with the strong delivery in 2015.

The 2016 results represent good all-round performance despite difficult conditions. The consistent delivery of top-line and bottom-line growth has been established over the last eight years. Operating margin performance, despite significant restructuring spend, was well above target with cash flow and underlying sales growth more in line with target. Hence, the Committee has decided to award a performance factor of 110% versus target. Although purely mathematically the bonus would have been 121%, management recommended the adjustment slightly downwards in light of overall quality of results as we ended the year with slower growth. The Committee considered this to be a fair representation of the performance delivery by the executive team during 2016.

 

  Paul Polman

In determining bonus outcomes for Paul Polman, the Committee also considered his very strong personal performance. Again in 2016, Paul demonstrated very firm leadership, both internally and externally. He received significant recognition for his work in leading Unilever and in helping to promote sustainable and responsible business models around the world. He was awarded the Chevalier de la Legion d’Honneur, the highest decoration in France, and the Public Service Star from the Singapore Government. Despite increasingly difficult market conditions in 2016, Unilever maintained its consistent track record of delivering underlying sales growth ahead of its markets and growth in core operating margin together with strong free cash flow. In 2016 Paul also introduced and pushed forward a number of major transformation initiatives for Unilever – notably Connected 4 Growth (C4G) – which are already helping to strengthen the company and will enable it to meet the demands of a fast-changing environment with even greater speed, agility and confidence. In 2016 Paul also oversaw a number of strategic acquisitions that will help to bolster Unilever’s position in some fast-growing areas of the market. As a consequence of the review of his personal performance, Paul Polman was awarded a personal performance multiplier of 140%. This resulted in his receiving a bonus of 185% of his base salary, calculated as follows:

 

LOGO

 

  Graeme Pitkethly

In determining bonus outcomes for Graeme Pitkethly, the Committee considered his personal performance and leadership, including the management of Unilever’s financial risk exposure and the continuing drive for enterprise-wide efficiencies. It also took account of his strong focus as CFO on performance management and the extent to which this was reflected in Unilever’s positive business results in 2016. Graeme also played an important role in the successful launch of the C4G major organisational re-design, as well as driving the implementation of the ambitious Zero-Based Budgeting (ZBB) programme across the Group, which is already generating savings for reinvestment within Unilever and has the potential to restructure Unilever’s cost base over the next two years. Graeme has also pushed to instil enhanced levels of investment discipline and cash delivery. As a consequence of that review, Graeme was awarded a personal performance multiplier of 110%. This resulted in his receiving a bonus of 121% of his base salary, calculated as follows:

 

LOGO

 

68   Governance    Annual Report on Form 20-F 2016


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(D) MCIP – UK LAW REQUIREMENT (AUDITED)

2016 OUTCOMES

This includes MCIP matching shares granted on 14 February 2014 (based on the percentage of 2013 bonus that Paul Polman and Graeme Pitkethly had invested in Unilever shares, as well as performance in the three-year period to 31 December 2016) which vested on 14 February 2017. Further details of the performance measures are disclosed below in note (E).

The values included in the single figure table for 2016 are calculated by multiplying the number of shares granted on 14 February 2014 (including additional shares in respect of accrued dividends through to 31 December 2016) by the level of vesting (70% of target award for the CEO and 84% of target award for the CFO) and the share prices on the date of vesting (NV 38.81 and PLC £32.86). The CFO’s award vested at a different level than the CEO’s award as it relates to an award granted in 2014 before his appointment as an Executive Director. Performance measures and performance against them are as set out in the table below (although the weightings of the measures were different for participants below Board level, so the weightings of each measure in the award that vested for the CFO are Underlying Sales Growth at 30%, Core Operating Margin Improvement at 30%, Cumulative Operating Cash Flow at 30% and TSR at 10%). These have been translated into euros using the exchange rate on the date of vesting ( 1 = £0.8494).

(E) GSIP – UK LAW REQUIREMENT (AUDITED)

2016 OUTCOMES

This includes GSIP performance shares granted on 14 February 2014, based on performance in the three-year period to 31 December 2016, which vested on 14 February 2017.

The values included in the single figure table for 2016 are calculated by multiplying the number of shares granted on 14 February 2014 (including additional shares in respect of accrued dividends through to 31 December 2016) by the level of vesting (70% of target award for the CEO and 84% of target award for the CFO) and the share price on the date of vesting (NV 38.81 and PLC £32.86). The CFO’s award vested at a different level than the CEO’s award as it relates to an award granted in 2014 before his appointment as an Executive Director with the performance measures and weighting as set out under heading (D) above. These have been translated into euros using the exchange rate on the date of vesting ( 1 = £0.8494).

Performance against targets:

 

LOGO

(a)   For details of comparator group please see page 66.

Over the past three years, Unilever has delivered consistent financial performance. Underlying sales growth during this period was 3.6% per year and core operating margin improvement over the period was an average of 0.4 percentage points per year, demonstrating management’s continued drive for consistent top- and bottom-line growth. Unilever also generated strong operating cash in the period, with cumulative operating cash flow of 18.1 billion. Total shareholder return (TSR) over this three-year period was in the middle third of the peer group just below the threshold for minimum vesting and, as such, no part of the GSIP and MCIP awards related to TSR will vest. On the basis of this performance, the Committee determined that the GSIP and MCIP awards to the end of 2016 will vest at 70% of initial award levels (ie 35% of maximum for GSIP and 47% of maximum for MCIP (which is capped at 150% for the Executive Directors)).

(F) CONDITIONAL SUPPLEMENTAL PENSION (AUDITED)

CEO (Paul Polman): Conditional supplemental pension provision agreed with Paul Polman on hiring, which will be paid on his retirement (or his death or total disability prior to retirement). This was £117,123 based on 12% of a capped salary of £976,028 for 2016.

(G) SHARE INCENTIVES – DUTCH LAW REQUIREMENT (AUDITED)

As per the Dutch requirements, these costs are non-cash costs and relate to the expenses recognised for the period following IFRS 2. This is based on share prices on grant dates and a 98% adjustment factor for GSIP shares and MCIP matching shares awarded in 2016, 2015 and 2014.

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

SCHEME INTERESTS AWARDED IN THE YEAR (AUDITED)

 

 

PLAN

 

 

BASIS OF AWARD

 

 

MAXIMUM
FACE VALUE  
OF AWARDS

 

 

THRESHOLD
VESTING
(% OF TARGET  
AWARD)

 

 

PERFORMANCE  
PERIOD

 

 

DETAILS OF PERFORMANCE

MEASURES

   

MCIP

Conditional matching share award made on 11 February 2016

 

Based on the level of   2015 bonus paid in 2016 invested by the CEO and CFO.

 

The following numbers of matching shares were awarded on 11 February

2016 (a) :

 

CEO:

PLC – 0

NV – 39,318

 

CFO:

PLC – 4,912

NV – 4,912

 

Maximum vesting results in 150% of target awards vesting.

 

  CEO:

£1,763,984 (b)

 

CFO:

£434,415 (b)

  Four equally
weighted long-term
performance
measures. For the
three business-
focused metrics,
25% of the target
award vests for
threshold
performance. For the
TSR measure, 50%
of the target award
vests for threshold
performance.
  1 January 2016 –
31 December 2018
 

Subject to four equally weighted performance measures:

 

LOGO

 

Participants are required to hold all their own investment shares and remain employed by Unilever for the duration.

   

GSIP

Conditional share award made on 11 February 2016

 

The CEO received a target award of 200% of base salary.

 

CEO:

PLC – 35,115

NV – 35,115

 

The CFO received a target award of 150% of base salary.

 

CFO:

PLC – 16,297

NV – 16,297

 

Maximum vesting results in 200% of target awards vesting, which translates to a maximum vesting of 400% of base salary for the CEO and 300% of base salary for the CFO.

 

  CEO:

£4,140,739 (b)

 

CFO:

£1,921,732 (b)

  As above   As above  

Subject to four equally weighted performance measures:

 

LOGO

 

(a)   Under MCIP, Executive Directors are able to choose whether they invest in PLC shares or NV shares or an equal number of shares in each. Executive Directors receive a corresponding number of performance-related matching shares. Matching shares will be awarded in the same form as the investment shares (i.e. in PLC shares, NV shares or an equal number of shares in each). On 11 February 2016, the CEO invested 60% (£1,119,888) and the CFO invested 60% (£282,520) of their 2015 bonus in MCIP investment shares. The CEO elected to invest fully in NV shares. The CFO elected to receive an equal number of shares in each of PLC and NV.
(b)   The face values included in this table are calculated by multiplying the number of shares granted on 11 February 2016 by the share price on that day of PLC £29.05 and NV 36.69 respectively, assuming maximum performance and therefore maximum vesting of 200% for GSIP and 150% for MCIP and then translating into sterling using an average exchange rate over 2016 of 1 = £0.8152.

 

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MINIMUM SHAREHOLDING REQUIREMENT AND EXECUTIVE DIRECTOR SHARE INTERESTS (UNAUDITED)

The table below shows the Executive Directors’ share ownership against the minimum shareholding requirements as at 31 December 2016 and the interest in NV and PLC ordinary shares of Executive Directors and their connected persons as at 31 December 2016.

When calculating an Executive Director’s personal shareholding the following methodology is used:

  Base salary at the date of measurement.
  Shares in either Unilever PLC or Unilever N.V. (or a combination of both) will qualify provided they are personally owned by the Executive Director, by a member of his (immediate) family or by certain corporate bodies, trusts or partnerships as required by law from time to time (each a ‘connected person’).
  Shares purchased under the MCIP from the annual bonus will qualify as from the moment of purchase as these are held in the individual’s name and are not subject to further restrictions.
  Shares or entitlements to shares that are subject only to the Director remaining in employment will qualify on a net of tax basis.
  Shares awarded on a conditional basis by way of the GSIP or MCIP will not qualify until the moment of vesting (i.e. once the precise number of shares is fixed after the three-year vesting period, or a four-year vesting period for the MCIP, has elapsed).
  The shares will be valued on the date of measurement or, if that outcome fails the personal shareholding test, on the date of acquisition. The share price for the relevant measurement date will be based on the average closing share prices and the euro/sterling/US dollar exchange rates from the 60 calendar days prior to the measurement date.

Executive Directors are required to hold shares to the value of 100% of their shareholding requirement for 12 months post cessation of employment at Unilever, and 50% of these shares for 24 months post cessation of employment with Unilever. All ULE members are required to build a shareholding of 300% of base salary. This requirement is 150% of base salary for the ‘Top 100’ management layer below ULE.

EXECUTIVE DIRECTORS’ AND THEIR CONNECTED PERSONS’ INTERESTS IN SHARES AND SHARE OWNERSHIP (AUDITED)

 

     Share ownership             Actual share          Shares held as at          Shares held as at  
     guideline as % of      Have guidelines      ownership as a %          1 January 2016 (b)      31 December 2016  
     base salary (as at      been met (as at      of base salary (as at          NV      PLC          NV      PLC  
     31 December 2016)      31 December 2016)?      31 December 2016) (a)              

CEO: Paul Polman

     400        Yes        3,433%            655,307        297,008            824,245        307,239  

CFO: Graeme Pitkethly

     300        Yes        367%            17,468        27,569            32,189        42,908  

 

(a)   Calculated based on the minimum shareholding requirements and methodology set out above and the base salaries as detailed for the CEO and CFO in section (A) on page 67.
(b)   NV shares are ordinary 0.16 shares and PLC shares are ordinary 3  1 9 p shares.

During the period between 31 December 2016 and 21 February 2017, the following changes in interests have occurred:

  Graeme Pitkethly purchased 8 PLC shares under the Unilever PLC ShareBuy Plan: 4 on 10 January 2017 at a share price of £33.50, and a further 4 on 8 February 2017 at a share price of £33.09; and
  as detailed under headings (D) and (E) on page 69, on 14 February 2017:
      Paul Polman acquired 31,964 NV shares following the vesting of his 2014 MCIP award, and 67,186 NV shares following the vesting of his 2014 GSIP award, in accordance with his share choice to receive 100% NV shares on the vesting of these awards; and
      Graeme Pitkethly acquired 1,964 NV shares and 1,983 PLC shares following the vesting of his 2014 MCIP award, and 3,915 NV shares and 3,952 PLC shares following the vesting of his 2014 GSIP award.

The voting rights of the Directors (Executive and Non-Executive) and members of the ULE who hold interests in the share capital of NV and PLC are the same as for other holders of the class of shares indicated. As at 21 February 2017 none of the Directors’ (Executive and Non-Executive) or other ULE members’ shareholdings amounted to more than 1% of the issued shares in that class of share, excluding the holdings of the Leverhulme Trust and the Leverhulme Trade Charities Trust, which amounted to 5.5%. All shareholdings in the table above are beneficial. In addition, 68,531,182 shares are held by the Leverhulme Trust and 2,035,582 shares are held by the Leverhulme Trade Charities Trust, of which Paul Polman is a director.

INFORMATION IN RELATION TO OUTSTANDING SHARE INCENTIVE AWARDS

As at 31 December 2016, Paul Polman held awards over a total of 362,163 shares which are subject to performance conditions, and Graeme Pitkethly held awards over a total of 66,760 shares which are subject to performance conditions. There are no awards of shares without performance conditions and no awards in the form of options.

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

MANAGEMENT CO-INVESTMENT PLAN (AUDITED)

The following conditional shares vested during 2016 or were outstanding at 31 December 2016 under the MCIP:

 

            Balance of                                               Balance of  
            conditional shares     Conditional shares                                         conditional shares  
            at 1 January 2016     awarded in 2016 (a)                                              at 31 December 2016  
                                Dividend                                         
                  Performance             shares                 Additional                       
                  period             accrued                 shares                       
     Share      Original     1 January 2016 to      Price at      during          Vested in          earned in      Price at      Shares      No. of  
     type      award     31 December 2018      award      the year (d)      2016 (e)      2016      vesting      lapsed      shares  

Paul Polman

     NV        99,362 (b)       39,318      36.69        3,327            24,779            0      38.85        505        116,723  
       PLC        25,509 (b)       0      £ 29.05        0            24,999            0      £ 30.25        510        0  

Graeme Pitkethly

     NV        5,401 (c)       4,912      36.69        192            3,700            564      38.85        0        7,369  
       PLC        7,715 (c)       4,912      £ 29.05        301            3,733            569      £ 30.25        0        9,765  

 

(a)   Each award of conditional matching shares vests three years after the date of the award, subject to performance conditions (further details can be found on pages 69-70). Awards are all subject to continued employment and maintenance of the underlying investment shares. Under MCIP, Executive Directors are able to choose whether they invest in PLC or NV shares or an equal number of shares in each. Executive Directors receive a corresponding number of performance-related matching shares.
     Matching shares will be awarded in the same form as the investment shares (i.e. in PLC shares, NV shares or an equal number of shares in each). On 11 February 2016, Paul Polman and Graeme Pitkethly each invested in the MCIP 60% of their annual bonus earned during 2015 and paid in 2016, and received a corresponding award of matching shares (which will vest, subject to performance, on 11 February 2019).
(b)   This includes a grant of 22,999 of each of NV and PLC shares made on 18 February 2013 (98% of which vested on 18 February 2016), a grant of 41,775 NV shares made on 14 February 2014 (70% of which vested on 14 February 2017), a grant of 29,128 NV shares made on 13 February 2015 (vesting 13 February 2018) and 5,460 NV shares and 2,510 PLC shares from reinvested dividends accrued in prior years in respect of awards.
(c)   This includes grants that were made to Graeme Pitkethly before his appointment as Executive Director on 21 April 2016, being a grant of 2,852 of each of NV and PLC shares made on 18 February 2013 (118% of which vested on 18 February 2016), a grant of 2,139 of each of NV and PLC shares made on 14 February 2014 (84% of which vested on 14 February 2017), a grant of 2,215 PLC shares made on 13 February 2015 (vesting 13 February 2018) and 410 NV shares and 509 PLC shares from reinvested dividends accrued in prior years in respect of awards.
(d)   Reflects reinvested dividend equivalents accrued during 2016 and subject to the same performance conditions as the underlying matching shares.
(e)   The 18 February 2013 grant vested on 18 February 2016 at 98% for Paul Polman and 118% for Graeme Pitkethly. In accordance with Unilever’s existing Remuneration Policy ( www.unilever.com/ara2016/downloads ), Executive Directors are able to choose whether they receive any shares due to vest under MCIP in PLC or NV shares or an equal number of shares in each. Paul Polman elected for share choice and chose to receive his shares in the form of 100% NV shares. Therefore, upon vesting, his 18 February 2013 PLC award was cancelled and converted and delivered to him as 24,971 NV shares (resulting in a total vesting for the 18 February grant of 49,750 NV shares). Graeme Pitkethly elected to receive his shares in the form of an equal number of shares in each of PLC and NV.

GLOBAL SHARE INCENTIVE PLAN (AUDITED)

The following conditional shares vested during 2016 or were outstanding at 31 December 2016 under the GSIP:

 

            Balance of                                               Balance of  
            conditional shares     Conditional shares                                         conditional shares  
            at 1 January 2016     awarded in 2016 (a)                                              at 31 December 2016  
                                Dividend                                         
                  Performance             shares                 Additional                       
                  period             accrued                 shares                       
     Share      Original     1 January 2016 to      Price at      during          Vested in          earned in      Price at      Shares      No. of  
     type      award     31 December 2018      award      the year (d)      2016 (e)      2016      vesting      lapsed      shares  

Paul Polman

     NV        127,306 (b)       35,115      36.69        3,532            42,769            0      38.85        873        122,311  
       PLC        128,029 (b)       35,115      £ 29.05        4,014            43,150            0      £ 30.25        879        123,129  

Graeme Pitkethly

     NV        12,281 (c)       16,297      36.69        647            5,278            805      38.85        0        24,752  
       PLC        12,353 (c)       16,297      £ 29.05        737            5,325            812      £ 30.25        0        24,874  

 

(a)   Each award of conditional shares vests three years after the date of the award, subject to performance conditions (further details can be found on pages 69-70). The 2016 award was made on 11 February 2016 (vesting 11 February 2019).
(b)   This includes a grant of 39,698 of each of NV and PLC shares made on 18 February 2013 (98% of which vested on 18 February 2016), a grant of 43,700 of each of NV and PLC shares made on 14 February 2014 (70% of which vested on 14 February 2017), a grant of 36,497 of each of NV and PLC shares made on 13 February 2015 (vesting 13 February 2018) and 7,411 NV shares and 8,134 PLC shares from reinvested dividends accrued in prior years in respect of awards.
(c)   This includes grants that were made to Graeme Pitkethly before his appointment as Executive Director on 21 April 2016, being a grant of 4,068 of each of NV and PLC shares made on 18 February 2013 (118% of which vested on 18 February 2016), a grant of 4,263 of each of NV and PLC shares made on 14 February 2014 (84% of which vested on 14 February 2017), a grant of 3,216 of each of NV and PLC shares made on 13 February 2015 (vesting 13 February 2018) and 734 NV shares and 806 PLC shares from reinvested dividends accrued in prior years in respect of awards.
(d)   Reflects reinvested dividend equivalents accrued during 2016, subject to the same performance conditions as the underlying GSIP shares.
(e)   The 18 February 2013 grant vested on 18 February 2016 at 98% for Paul Polman and 118% for Graeme Pitkethly. In accordance with Unilever’s existing Remuneration Policy ( www.unilever.com/ara2015/downloads ), Executive Directors are able to choose whether they receive any shares due to vest under GSIP in PLC or NV shares or an equal number of shares in each. Paul Polman elected for share choice and chose to receive his shares in the form of 100% NV shares. Therefore, upon vesting, his 18 February 2013 PLC award was cancelled and converted and delivered to him as 43,102 NV shares (resulting in a total vesting for the 18 February grant of 85,871 NV shares). Graeme Pitkethly elected to receive his shares in the form of an equal number of shares in each of PLC and NV.

On 13 February 2017, under the GSIP Paul Polman received an award of 30,532 NV and 30,532 PLC performance-related shares, and Graeme Pitkethly received an award of 14,171 NV and 14,171 PLC performance-related shares.

 

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EXECUTIVE DIRECTORS’ SERVICE CONTRACTS

Starting dates of our Executive Directors’ service contracts:

  Paul Polman: 1 October 2008 (signed on 7 October 2008); and
  Graeme Pitkethly: 1 October 2015 (signed on 16 December 2015).

Service contracts are available to shareholders to view at the AGMs or on request from the Group Secretary, and can be terminated with 12 months’ notice from Unilever or six months’ notice from the Executive Director. A payment in lieu of notice can be made of no more than one year’s base salary, fixed allowance and other benefits unless the Boards, at the proposal of the Committee, find this manifestly unreasonable given the circumstances or unless dictated by applicable law. Other payments that can be made to Executive Directors in the event of loss of office are disclosed in our existing Remuneration Policy which is available on our website (see www.unilever.com/ara2015/downloads ) , and in our new Remuneration Policy detailed above (in the event of its approval by shareholders).

PAYMENTS TO FORMER DIRECTORS (AUDITED)

There have been no payments to former Directors during the year.

PAYMENTS FOR LOSS OF OFFICE (AUDITED)

There were no payments for loss of office.

IMPLEMENTATION OF THE REMUNERATION POLICY IN 2017 FOR NON-EXECUTIVE DIRECTORS

The current Non-Executive Director fee levels will not be changed for 2017 and we will review fee levels for 2018 during the course of the year. The table below outlines the current fee structure (with fees paid 50% by each of Unilever N.V. and Unilever PLC):

 

Role    Reference
sterling
total fees
     NV                              PLC  
Basic Non-Executive Director fee      £75,000        €48,065                 and                 £37,500  
Current Chairman (all-inclusive figure) (a)      £600,000        €384,510                 and                 £300,000  
Vice-Chairman      £30,000        €19,226                 and                 £15,000  
Membership of the Nominating and Corporate Governance, Compensation or Corporate Responsibility Committee      £10,000        €6,409                 and                 £5,000  
Membership of the Audit Committee      £15,000        €9,613                 and                 £7,500  
Chair of the Nominating and Corporate Governance, Compensation or Corporate Responsibility Committee      £20,000        €12,817                 and                 £10,000  
Chair of the Audit Committee      £30,000        €19,226                 and                 £15,000  

 

(a)   During 2016 the Compensation Committee increased the Chairman’s fee from the previous figure of £550,000; the increase took effect upon the appointment of Marijn Dekkers as Chairman on 21 April 2016.

All reasonable travel and other expenses incurred by Non-Executive Directors in the course of performing their duties are considered to be business expenses. Non-Executive Directors also receive expenses relating to the attendance of the Director’s spouse or partner, when they are invited by Unilever.

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

SINGLE FIGURE OF REMUNERATION IN 2016 FOR NON-EXECUTIVE DIRECTORS (AUDITED)

The table below shows a single figure of remuneration for each of our Non-Executive Directors, for the years 2015 and 2016.

 

            2016                    2015         
Non-Executive Director     

Fees

    €’000

(a)  

 

   

Benefits

€’000

(b)  

 

   


Total

remuneration
€’000

 

 
 

    

Fees

’000

(a)  

 

   

Benefits

’000

(b)  

 

   


Total

remuneration
’000

 

 
 

Marijn Dekkers (c)

     502       18       520                     

Michael Treschow (d)(h)

     230       5       235        732       2       734  

Nils Andersen

     111       17       128        75       4       79  

Laura Cha

     119       -       119        122             122  

Vittorio Colao

     107       -       107        57             57  

Louise Fresco (e)

     119       -       119        126             126  

Ann Fudge (f)

     157       -       157        149             149  

Byron Grote (g)

                        47             47  

Judith Hartmann

     113       9       122        80             80  

Mary Ma

     113       -       113        120             120  

Strive Masiyiwa

     71       -       71                     

Youngme Moon

     71       -       71                     

Hixonia Nyasulu (h)

     38       -       38        120             120  

Sir Malcolm Rifkind (g)

                        38             38  

John Rishton (i)

     132       8       140        133             133  

Kees Storm (g)

                        73             73  

Feike Sijbesma (j)

     132             132        126       1       127  

Paul Walsh (g)

                        42             42  

Total

     2,015       57       2,072            2,040       7       2,047  

 

(a)   This includes fees received from NV in euros and PLC in sterling for 2015 and 2016 respectively. Includes basic Non-Executive Director fee and Committee chairmanship and/or membership.
(b)   The only benefit received relates to travel by spouses or partners where they are invited by Unilever.
(c)   Chairman with effect from 21 April 2016.
(d)   Chairman until 21 April 2016.
(e)   Chair, Corporate Responsibility Committee.
(f)   Vice-Chairman and Chair of the Compensation Committee.
(g)   Retired from the Boards at the April 2015 AGMs.
(h)   Retired from the Boards at the April 2016 AGMs.
(i)   Chair, Audit Committee.
(j)   Chair, Nominating and Corporate Governance Committee.

We do not grant our Non-Executive Directors any personal loans or guarantees, nor are they entitled to any severance payments.

NON-EXECUTIVE DIRECTORS’ INTERESTS IN SHARES (AUDITED)

Non-Executive Directors are encouraged to build up a personal shareholding of at least 1 x their annual fees over the five years from 1 January 2012 (or appointment if later). The table shows the interests in NV and PLC ordinary shares of Non-Executive Directors and their connected persons as at 31 December 2016. There has been no change in these interests between 31 December 2016 and 21 February 2017 (other than Judith Hartmann, who bought 1,500 NV shares on 31 January 2017 at a share price of 37.60).

 

      Share type      Shares held at
1 January 2016
     Shares held at
31 December 2016
 

Marijn Dekkers (a)

     NV NY               20,000  
       PLC ADRs                

Michael Treschow

     NV        15,158        15,158 (b)  
       PLC        15,000        15,000 (b)  

Nils Andersen

     NV        5,800        6,014  
       PLC                

Laura Cha

     NV        310        310  
       PLC        208        208  

Vittorio Colao

     NV        2,600        3,600  
       PLC                

Louise Fresco

     NV        1,800        1,800  
       PLC                

Ann Fudge

     NV NY               196  
       PLC ADRs        5,000        5,000  

Judith Hartmann

     NV               1,000  
       PLC                
     Share type     Shares held at
1 January 2016
    Shares held at
31 December 2016
 

Mary Ma

    NV              
      PLC       400       400  

Strive Masiyiwa (a)

    NV              
      PLC              

Youngme Moon (a)

    NV NY             2,000  
      PLC ADRs              

Hixonia Nyasulu

    NV       600       600 (b)  
      PLC       750       750 (b)  

John Rishton

    NV       3,340       3,340  
      PLC              

Feike Sijbesma

    NV       6,000       10,000  
      PLC              

 

(a)   Appointed at April 2016 AGMs.
(b)   Shares held at 21 April 2016 (the date by which Michael Treschow and Hixonia Nyasulu retired from the Boards).
 

 

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NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT

All Non-Executive Directors were re-appointed to the Boards at the 2016 AGMs, with the exception of Marijn Dekkers, Strive Masiyiwa and Youngme Moon (who were appointed for the first time), and Michael Treschow and Hixonia Nyasulu (who retired from the Boards).

 

Non-Executive Director     

Date first appointed

to the Board

 

 

    

Effective date of

current appointment

 

(a)  

Marijn Dekkers

     21 April 2016        21 April 2016  

Michael Treschow

     16 May 2007        n/a  

Nils Andersen

     30 April 2015        21 April 2016  

Laura Cha

     15 May 2013        21 April 2016  

Vittorio Colao

     1 July 2015        21 April 2016  

Louise Fresco

     14 May 2009        21 April 2016  

Ann Fudge

     14 May 2009        21 April 2016  

Judith Hartmann

     30 April 2015        21 April 2016  

Mary Ma

     15 May 2013        21 April 2016  

Strive Masiyiwa

     21 April 2016        21 April 2016  

Youngme Moon

     21 April 2016        21 April 2016  

Hixonia Nyasulu

     16 May 2007        n/a  

John Rishton

     15 May 2013        21 April 2016  

Feike Sijbesma

     1 November 2014        21 April 2016  

 

(a)   The unexpired term for all Non-Executive Directors’ letters of appointment is the period up to the 2017 AGMs, as they all, unless they are retiring, submit themselves for annual re-appointment.

OTHER DISCLOSURES RELATED TO DIRECTORS’ REMUNERATION

SERVING AS A NON-EXECUTIVE ON THE BOARD OF ANOTHER COMPANY

Executive Directors serving as non-executive directors on the boards of other companies are permitted to retain all remuneration and fees earned from outside directorships subject to a maximum of one outside listed directorship (see ‘Independence and Conflicts’ on page 30 for further details).

Paul Polman is a non-executive director of The Dow Chemical Company and received an annual fee of 127,749 (US$115,000) based on the average exchange rate over the year 2016 of 1 = US$1.1109. In addition, he received a restricted award of 2,680 ordinary shares with a nominal value of US$2.50 per share in the capital of The Dow Chemical Company. The shares include the rights to vote and to receive dividends thereon. The shares cannot be sold or transferred until Paul Polman leaves the board of directors of The Dow Chemical Company, and in any case not earlier than 13 May 2018.

EIGHT-YEAR HISTORICAL TOTAL SHAREHOLDER RETURN (TSR) PERFORMANCE

The graph below includes:

  growth in the value of a hypothetical £100 holding over eight years’ FTSE 100 comparison based on 30-trading-day average values; and
  growth in the value of a hypothetical 100 investment over eight years’ AEX comparison based on 30-trading-day average values.

The Committee has decided to show Unilever’s performance against the FTSE 100 Index, London and also the Euronext 100 index (AEX), Amsterdam as these are the most relevant indices in the UK and the Netherlands where we have our principal listings. Unilever is a constituent of both these indices.

 

LOGO

 

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DIRECTORS’ REMUNERATION REPORT CONTINUED

    

 

CEO SINGLE FIGURE EIGHT-YEAR HISTORY

The table below shows the eight-year history of the CEO single figure of total remuneration:

 

      2009      2010      2011      2012      2013      2014      2015      2016  

CEO

                       

Single figure of total remuneration ( ‘000)

     3,859        6,292        6,010        7,852        7,740        9,561        10,296        8,370  

Annual bonus award rates against maximum opportunity

     82%        80%        68%        100%        78%        66%        92%        92%  

GSIP performance shares vesting rates against maximum opportunity

     n/a        47%        44%        55%        64%        61%        49%        35%  

MCIP matching shares vesting rates against maximum opportunity

     n/a        n/a        n/a        n/a        n/a        81%        65%        47%  

Share Matching Plan vesting rates against maximum opportunity (a)

     100%        100%        n/a        n/a        n/a        n/a        n/a        n/a  

 

(a)   Shown in year of award.

PERCENTAGE CHANGE IN REMUNERATION OF DIRECTOR UNDERTAKING THE ROLE OF CHIEF EXECUTIVE OFFICER

The table below shows the percentage change from 2015 to 2016 for base salary, bonus and benefits (excluding pension) for both the CEO and all UK and Dutch management in Unilever. The subset of UK and Dutch management has been used as a fair representation of our dual listing status.

 

% change from 2015 to 2016    Salary      Bonus      Benefits
(not including
pension)
 

CEO (a)(b)

     -11.0%        -11.0%        -5.1%  

UK and Dutch management (c)

     -4.3%        -11.7%        -23.6%  

 

(a)   Calculated using the data from the Executive Directors’ single figure table on page 67.
(b)   It is noted that although the CEO’s salary and annual bonus have decreased by 11.0% in the above table, this is due to currency movements, rather than any change in remuneration amounts (as base salary was £1,010,000 in both 2015 and 2016, and actual annual bonus was £1,866,480 in both years).
(c)   Similarly, figures for UK and Dutch management have also been affected by the sterling:euro exchange rate, and a rebalancing of fixed pay amounts to roll up some local allowances into salary.

RELATIVE IMPORTANCE OF SPEND ON PAY

The chart below shows the relative spend on pay compared with dividends paid to Unilever shareholders and core earnings. Core earnings represent the net profit attributable to Unilever shareholders, adjusted for non-core items. Over time, both core earnings and core earnings growth provide a good reference point to compare spend on pay.

 

LOGO

 

* In calculating core earnings, net profit attributable to shareholders’ equity is adjusted to eliminate the post-tax impact of non-core items. Refer to note 7, and the table entitled ‘Calculation of core earnings’ on page 103 for reconciliation of core earnings to net profit attributable to shareholders’ equity.  

 

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THE COMPENSATION COMMITTEE

The Committee’s membership has been further refreshed in 2016. Ann Fudge (Chair) and Vittorio Colao both served throughout this period. Former Chairman Michael Treschow was a member of the Committee until 21 April 2016, when he retired from the Boards; he was effectively replaced by his successor in that role, Marijn Dekkers, who became a member of the Committee on 21 April 2016 immediately upon his appointment as Chairman. Similarly, Nils Andersen stepped down from the Committee on 21 April 2016, with his place being taken by Strive Masiyiwa, who joined the Committee immediately upon his appointment as a Non-Executive Director becoming effective on 21 April 2016.

The Committee reviewed its terms of reference during the year. The Committee’s revised terms of reference are contained within ‘The Governance of Unilever’, and are also set out on our website ( www.unilever.com/corporategovernance ).

As part of the internal Board evaluation carried out in 2016, the Boards evaluated the performance of the Committee. The Committee also carried out an assessment of its own performance in 2016. Overall the Committee members concluded that the Committee is performing effectively, and has enhanced its effectiveness and that of the Boards by keeping the Boards informed of the progress of its review of the executive remuneration framework (and related shareholder consultation) in a timely manner, so as to enhance Board decision-making concerning these proposals. The Committee intends to further enhance its effectiveness in 2017 by reducing pre-read materials where possible, and building in longer NED-only Committee sessions for members to share views and priorities.

ADVISERS

While it is the Committee’s responsibility to exercise independent judgement, the Committee does request advice from management and professional advisers, as appropriate, to ensure that its decisions are fully informed given the internal and external environment.

The Committee appointed Tom Gosling of PricewaterhouseCoopers (PwC) to provide independent advice on various matters it considered. The wider PwC firm has also provided tax and consultancy services to Unilever including tax compliance, transfer pricing, other tax-related services, contract compliance reviews, internal audit advice and secondees, third party risk and compliance advice, cyber security advice, sustainability assurance and consulting, and financial due diligence on disposals. PwC is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK, which is available at www.remunerationconsultantsgroup.com.

The Committee is satisfied that the PwC engagement partner and team, which provide remuneration advice to the Committee, do not have connections with Unilever N.V. or Unilever PLC that might impair their independence. The Committee reviewed the potential for conflicts of interest and judged that there were appropriate safeguards against such conflicts. The fees paid to PwC in relation to advice provided to the Committee in the year to 31 December 2016 were £107,900. This figure is calculated based on time spent and expenses incurred for the majority of advice provided, but on occasion for specific projects a fixed fee may be agreed.

During the year, the Committee also sought input from the CEO (Paul Polman), the Chief Human Resources Officer (Leena Nair, who succeeded Doug Baillie upon his retirement from this role in March 2016) and the EVP Global Head of Reward (Peter Newhouse) on various subjects including the remuneration of senior management. No individual Executive Director was present when their own remuneration was being discussed to ensure a conflict of interest did not arise. The Committee also received legal and governance advice from the Group Secretary (Tonia Lovell) and General Counsel - Executive Remuneration & Employment (Margot Fransen).

CLARIFICATION STATEMENT (APPLICABLE TO 2014 REMUNERATION POLICY)

After publication of our Directors’ Remuneration Report 2013 the Committee issued a clarification statement at the request of The Investment Association (previously: IMA and ABI). The statement is available on our website. The statement confirms that, under our existing Remuneration Policy, we will not make share awards higher than the maximum awards stated in our existing Remuneration Policy for current and newly hired Executive Directors without prior shareholder approval. It further clarifies that awards to newly hired Executive Directors to buy out remuneration items on leaving the previous employer as provided in the new hires policy will be made under the GSIP. Consequently, under such exceptional circumstances, the aggregated GSIP share awards for a newly hired Executive Director may be higher than the maximum annual award set out in the existing Remuneration Policy. As stated in the existing Remuneration Policy in relation to new hires, we will inform shareholders of any such buyout awards when announcing the appointment. Further details of our existing Remuneration Policy are available at www.unilever.com/ara2016/downloads , and for details of our proposed new Remuneration Policy please see above.

SHAREHOLDER VOTING

Unilever remains committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. In the event of a substantial vote against a resolution in relation to Directors’ remuneration, Unilever would seek to understand the reasons for any such vote and would set out in the following Annual Report and Accounts any actions in response to it. The following table sets out actual voting in respect of our previous report:

 

Voting outcome (% of votes)

 

        

For

 

    

Against

 

 

2015 Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) (2016 AGM) (a)

   PLC      94.49%        5.51%  

2014 Directors’ Remuneration Policy (2014 AGM) (b)

   PLC      97.51%        2.49%  

2014 Directors’ Remuneration Policy (2014 AGM) (c)

   NV      98.37%        1.63%  

 

(a)   1,772,026 votes were withheld (approximately 0.14% of share capital).

 

(b)   7,606,237 votes were withheld (approximately 0.85% of share capital).

 

(c)   4,188,993 votes were withheld (approximately 0.27% of share capital).

The Directors’ Remuneration Report is not subject to a shareholder vote in the Netherlands. It has been approved by the Boards, and signed on their behalf by Tonia Lovell, Group Secretary.

 

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FINANCIAL STATEMENTS

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

    

 

ANNUAL ACCOUNTS

The Directors are required by Part 9 of Book 2 of the Civil Code in the Netherlands and by the UK Companies Act 2006 to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Unilever Group, and the NV and PLC entities, as at the end of the financial year and of the profit or loss and cash flows for that year.

The Directors consider that, in preparing the accounts, the Group and the NV and PLC entities have used the most appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all International Financial Reporting Standards as adopted by the EU and as issued by the International Accounting Standards Board (in the case of the consolidated financial statements), Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101) and Dutch law (in the case of the NV parent company accounts) which they consider to be applicable have been followed.

The Directors have responsibility for ensuring that NV and PLC keep accounting records which disclose with reasonable accuracy their financial position and which enable the Directors to ensure that the accounts comply with the relevant legislation. They also have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group, and to prevent and detect fraud and other irregularities.

This statement, which should be read in conjunction with the Independent Auditors’ reports, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditors in relation to the accounts.

A copy of the financial statements of the Unilever Group is placed on our website at www.unilever.com/investorrelations . The maintenance and integrity of the website are the responsibility of the Directors, and the work carried out by the auditors does not involve consideration of these matters. Accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially placed on the website. Legislation in the UK and the Netherlands governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

UK law sets out additional responsibilities for the Directors of PLC regarding disclosure of information to auditors. Disclosure in respect of these responsibilities is made on page 35.

DIRECTORS’ RESPONSIBILITY STATEMENT

Each of the Directors confirms that, to the best of his or her knowledge:

  The Unilever Annual Report and Accounts 2016, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy;
  The financial statements which have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and as issued by the International Accounting Standards Board (in the case of the consolidated financial statements) and Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101) and UK accounting standards and Part 9 of Book 2 of the Dutch Civil Code (in the case of the NV parent company accounts), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and
  The Strategic Report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The Directors and their roles are listed on pages 3 and 29.

GOING CONCERN

The activities of the Group, together with the factors likely to affect its future development, performance, the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described on pages 1 to 28. In addition, we describe in notes 15 to 18 on pages 110 to 124 the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities and its exposures to credit and liquidity risk. Although not assessed over the same period as going concern, the viability of the Group has been assessed on page 37.

The Group has considerable financial resources together with established business relationships with many customers and suppliers in countries throughout the world. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain outlook.

After making enquiries, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing this Annual Report and Accounts.

INTERNAL AND DISCLOSURE CONTROLS AND PROCEDURES

Please refer to page 37 for a discussion of Unilever’s principal risk factors and to pages 38 to 41 for commentary on the Group’s approach to risk management and control.

 

 

78   Financial Statements    Annual Report on Form 20-F 2016


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

THE BOARD OF DIRECTORS AND SHAREHOLDERS

We have audited the accompanying consolidated balance sheets of the Unilever Group (Unilever N.V. and Unilever PLC, together with their subsidiaries) as at 31 December 2016 and 2015 and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements for each of the years in the three-year period ended 31 December 2016 on pages 84 to 143 of the Unilever Group’s Annual Report and Accounts 2016 (excluding note 25 on page 130) and the Guarantor financial information included in the Guarantor Statements on pages 170 to 174 of this Form 20-F (hereafter referred to as ‘Consolidated Financial Statements’). We also have audited the Unilever Group’s internal control over financial reporting as at 31 December 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Unilever Group’s management is responsible for these Consolidated Financial Statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Report on Internal Control over Financial Reporting included on page 167 of this Form 20-F. Our responsibility is to express an opinion on these Consolidated Financial Statements and an opinion on the Unilever Group’s internal control over financial reporting based on our 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 financial statement 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 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 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.

In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the financial position of the Unilever Group as at 31 December 2016 and 2015, and the results of its operations and its cash flows for each of the years in the three-year period ended 31 December 2016, 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 Unilever Group maintained, in all material respects, effective internal control over financial reporting as of 31 December 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

KPMG LLP   KPMG Accountants N.V.

London, United Kingdom

 

/s/ KPMG LLP

 

Amsterdam, the Netherlands

 

/s/ KPMG Accountants N.V.

24 February 2017  

 

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CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December

                                                                           
      Notes            € million
2016
     million
2015
     million
2014
 

Turnover

   2              52,713       53,272       48,436  

Operating profit

   2              7,801       7,515       7,980  

After (charging)/crediting non-core items

   3              (245     (350     960  

Net finance costs

   5              (563     (493     (477

Finance income

        115       144       117  

Finance costs

        (584     (516     (500

Pensions and similar obligations

        (94     (121     (94

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

   11              127       107       98  

Other income/(loss) from non-current investments and associates

        104       91       45  

Profit before taxation

        7,469       7,220       7,646  

Taxation

   6A              (1,922     (1,961     (2,131

Net profit

        5,547       5,259       5,515  

Attributable to:

         

Non-controlling interests

        363       350       344  

Shareholders’ equity

          5,184       4,909       5,171  

Combined earnings per share

   7               

Basic earnings per share ( )

        1.83       1.73       1.82  

Diluted earnings per share ( )

          1.82       1.72       1.79  

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December

 

                                                                           
      Notes            € million
2016
     million
2015
   

 million     

2014     

 

Net profit

        5,547       5,259       5,515       

Other comprehensive income

   6C               

Items that will not be reclassified to profit or loss:

         

Remeasurement of defined benefit pension plans net of tax

   15B              (980     884       (1,250)      

Items that may be reclassified subsequently to profit or loss:

         

Currency retranslation gains/(losses) net of tax (a)

   15B              217       (481     (25)      

Fair value gains/(losses) on financial instruments net of tax

   15B              (15     100       (85)      

Total comprehensive income

        4,769       5,762       4,155       

Attributable to:

         

Non-controlling interests

        374       357       404       

Shareholders’ equity

          4,395       5,405                3,751       

 

(a)   Includes fair value gains/(losses) on net investment hedges and exchange differences in net investments in foreign operations of (365) million (2015: 617 million; 2014: 412 million).

References in the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet and consolidated cash flow statement relate to notes on pages 90 to 143, which form an integral part of the consolidated financial statements.

 

84   Financial Statements    Annual Report on Form 20-F 2016


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

     € million      € million     € million     € million     € million     € million     € million  
Consolidated statement of changes in equity    Called up
share
capital
     Share
premium
account
    Other
reserves
    Retained
profit
    Total     Non-
controlling
interests
    Total
equity
 

31 December 2013

     484        138       (6,746     20,468       14,344       471       14,815  

Profit or loss for the period

     -        -       -       5,171       5,171       344       5,515  

Other comprehensive income net of tax:

               

Fair value gains/(losses) on financial instruments

     -        -       (85     -       (85     -       (85

Remeasurement of defined benefit pension plans net of tax

     -        -       -       (1,253     (1,253     3       (1,250

Currency retranslation gains/(losses)

     -        -       (290     208       (82     57       (25

Total comprehensive income

     -        -       (375     4,126       3,751       404       4,155  

Dividends on ordinary capital

     -        -       -       (3,196     (3,196     -       (3,196

Movements in treasury stock (a)

     -        -       (235     (217     (452     -       (452

Share-based payment credit (b)

     -        -       -       188       188       -       188  

Dividends paid to non-controlling interests

     -        -       -       -       -       (342     (342

Currency retranslation gains/(losses) net of tax

     -        7       -       -       7       (2     5  

Other movements in equity (c)

     -        -       (182     (809     (991     81       (910

31 December 2014

     484        145       (7,538     20,560       13,651       612       14,263  

Profit or loss for the period

     -        -       -       4,909       4,909       350       5,259  

Other comprehensive income net of tax:

               

Fair value gains/(losses) on financial instruments

     -        -       100       -       100       -       100  

Remeasurement of defined benefit pension plans net of tax

     -        -       -       882       882       2       884  

Currency retranslation gains/(losses)

     -        -       (377     (109     (486     5       (481

Total comprehensive income

     -        -       (277     5,682       5,405       357       5,762  

Dividends on ordinary capital

     -        -       -       (3,404     (3,404     -       (3,404

Movements in treasury stock (a)

     -        -       6       (282     (276     -       (276

Share-based payment credit (b)

     -        -       -       150       150       -       150  

Dividends paid to non-controlling interests

     -        -       -       -       -       (326     (326

Currency retranslation gains/(losses) net of tax

     -        7       -       -       7       -       7  

Other movements in equity

     -        -       (7     (87     (94     -       (94

31 December 2015

     484        152       (7,816     22,619       15,439       643       16,082  

Profit or loss for the period

     -        -       -       5,184       5,184       363       5,547  

Other comprehensive income net of tax:

               

Fair value gains/(losses) on financial instruments

     -        -       (15     -       (15     -       (15

Remeasurement of defined benefit pension plans net of tax

     -        -       -       (980     (980     -       (980

Currency retranslation gains/(losses)

     -        -       189       17       206       11       217  

Total comprehensive income

     -        -       174       4,221       4,395       374       4,769  

Dividends on ordinary capital

     -        -       -       (3,600     (3,600     -       (3,600

Movements in treasury stock (a)

     -        -       (45     (213     (258     -       (258

Share-based payment credit (b)

     -        -       -       198       198       -       198  

Dividends paid to non-controlling interests

     -        -       -       -       -       (364     (364

Currency retranslation gains/(losses) net of tax

     -        (18     -       -       (18     -       (18

Other movements in equity

     -        -       244       (46     198       (27     171  

31 December 2016

     484        134       (7,443     23,179       16,354       626       16,980  

 

(a)   Includes purchases and sales of treasury stock, and transfer from treasury stock to retained profit of share-settled schemes arising from prior years and differences between exercise and grant price of share options.
(b)   The share-based payment credit relates to the non-cash charge recorded against operating profit in respect of the fair value of share options and awards granted to employees.
(c)   2014 includes the impact of the purchase of Estate shares (see note 24).

 

Annual Report on Form 20-F 2016   Financial Statements   85


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CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

 

CONSOLIDATED BALANCE SHEET

as at 31 December

 

      Notes                          € million
2016
                million
2015
 

Assets

          

Non-current assets

          

Goodwill

   9         17,624       16,213  

Intangible assets

   9         9,809       8,846  

Property, plant and equipment

   10         11,673       11,058  

Pension asset for funded schemes in surplus

   4B         694       934  

Deferred tax assets

   6B         1,354       1,185  

Financial assets

   17A         673       605  

Other non-current assets

   11         718       771  
           42,545       39,612  

Current assets

          

Inventories

   12         4,278       4,335  

Trade and other current receivables

   13         5,102       4,804  

Current tax assets

           317       230  

Cash and cash equivalents

   17A         3,382       2,302  

Other financial assets

   17A         599       836  

Non-current assets held for sale

   22         206       179  
           13,884       12,686  

Total assets

               56,429       52,298  

Liabilities

          

Current liabilities

          

Financial liabilities

   15C         5,450       4,789  

Trade payables and other current liabilities

   14         13,871       13,788  

Current tax liabilities

           844       1,127  

Provisions

   19         390       309  

Liabilities associated with assets held for sale

   22         1       6  
           20,556       20,019  

Non-current liabilities

          

Financial liabilities

   15C         11,145       9,854  

Non-current tax liabilities

           120       121  

Pensions and post-retirement healthcare liabilities:

          

Funded schemes in deficit

   4B         2,163       1,569  

Unfunded schemes

   4B         1,704       1,685  

Provisions

   19         1,033       831  

Deferred tax liabilities

   6B         2,061       1,744  

Other non-current liabilities

   14         667       393  
           18,893       16,197  

Total liabilities

           39,449       36,216  

Equity

          

Shareholders’ equity

          

Called up share capital

   15A         484       484  

Share premium account

           134       152  

Other reserves

   15B         (7,443     (7,816

Retained profit

           23,179       22,619  
           16,354       15,439  

Non-controlling interests

           626       643  

Total equity

           16,980       16,082  

Total liabilities and equity

               56,429       52,298  

These financial statements have been approved by the Directors.

The Board of Directors

24 February 2017

 

86   Financial Statements    Annual Report on Form 20-F 2016


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CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December

 

                     € million             million             million  
      Notes          2016     2015     2014  

Net profit

           5,547       5,259       5,515  

Taxation

           1,922       1,961       2,131  

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

           (231     (198     (143

Net finance costs

   5         563       493       477  

Operating profit

           7,801       7,515       7,980  

Depreciation, amortisation and impairment

           1,464       1,370       1,432  

Changes in working capital:

           51       720       8  

Inventories

           190       (129     (47

Trade and other receivables

           142       2       82  

Trade payables and other liabilities

           (281     847       (27

Pensions and similar obligations less payments

           (327     (385     (364

Provisions less payments

           65       (94     32  

Elimination of (profits)/losses on disposals

           127       26       (1,460

Non-cash charge for share-based compensation

           198       150       188  

Other adjustments

           (81     49       38  

Cash flow from operating activities

           9,298       9,351       7,854  

Income tax paid

           (2,251     (2,021     (2,311

Net cash flow from operating activities

           7,047       7,330       5,543  

Interest received

           105       119       123  

Purchase of intangible assets

           (232     (334     (359

Purchase of property, plant and equipment

           (1,804     (1,867     (1,893

Disposal of property, plant and equipment

           158       127       207  

Acquisition of group companies, joint ventures and associates

           (1,731     (1,897     (313

Disposal of group companies, joint ventures and associates

           30       199       1,741  

Acquisition of other non-current investments

           (208     (78     (82

Disposal of other non-current investments

           173       127       69  

Dividends from joint ventures, associates and other non-current investments

           186       176       162  

(Purchase)/sale of financial assets

           135       (111     4  

Net cash flow (used in)/from investing activities

           (3,188     (3,539     (341

Dividends paid on ordinary share capital

           (3,609     (3,331     (3,189

Interest and preference dividends paid

           (472     (579     (521

Purchase of Estate shares

   24         -       -       (880

Net change in short-term borrowings

           258       245       338  

Additional financial liabilities

           6,761       7,566       5,174  

Repayment of financial liabilities

           (5,213     (6,270     (5,305

Capital element of finance lease rental payments

           (35     (14     (16

Other movements on treasury stock

           (257     (276     (467

Other financing activities

           (506     (373     (324

Net cash flow (used in)/from financing activities

           (3,073     (3,032     (5,190

Net increase/(decrease) in cash and cash equivalents

           786       759       12  

Cash and cash equivalents at the beginning of the year

           2,128       1,910       2,044  

Effect of foreign exchange rate changes

           284       (541     (146

Cash and cash equivalents at the end of the year

   17A           3,198       2,128       1,910  

The cash flows of pension funds (other than contributions and other direct payments made by the Group in respect of pensions and similar obligations) are not included in the Group cash flow statement.

 

Annual Report on Form 20-F 2016   Financial Statements   87


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP

 

 

1. ACCOUNTING INFORMATION AND POLICIES

The accounting policies adopted are the same as those which were applied for the previous financial year, except as set out below under the heading ‘Recent accounting developments’.

UNILEVER

The two parent companies, NV and PLC, together with their group companies, operate as a single economic entity (the Unilever Group, also referred to as Unilever or the Group). NV and PLC have the same Directors and are linked by a series of agreements, including an Equalisation Agreement, which are designed so that the positions of the shareholders of both companies are as closely as possible the same as if they held shares in a single company.

The Equalisation Agreement provides that both companies adopt the same accounting principles. It also requires that dividends and other rights and benefits attaching to each ordinary share of NV, be equal in value to those rights and benefits attaching to each ordinary share of PLC, as if each such unit of capital formed part of the ordinary share capital of one and the same company.

BASIS OF CONSOLIDATION

Due to the operational and contractual arrangements referred to above, NV and PLC form a single reporting entity for the purposes of presenting consolidated financial statements. Accordingly, the financial statements of Unilever are presented by both NV and PLC as their respective consolidated financial statements. Group companies included in the consolidation are those companies controlled by NV or PLC. Control exists when the Group has the power to direct the activities of an entity so as to affect the return on investment.

The net assets and results of acquired businesses are included in the consolidated financial statements from their respective dates of acquisition, being the date on which the Group obtains control. The results of disposed businesses are included in the consolidated financial statements up to their date of disposal, being the date control ceases.

Intra-group transactions and balances are eliminated.

COMPANIES LEGISLATION AND ACCOUNTING STANDARDS

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), IFRIC Interpretations and in accordance with Part 9 of Book 2 of the Civil Code of the Netherlands and the UK Companies Act 2006 applicable to companies reporting under IFRS. They are also in compliance with IFRSs as issued by the International Accounting Standards Board (IASB).

These financial statements are prepared under the historical cost convention unless otherwise indicated.

These financial statements have been prepared on a going concern basis. Refer to the going concern statement on page 78.

ACCOUNTING POLICIES

Accounting policies are included in the relevant notes to the consolidated financial statements. These are presented as text highlighted in grey on pages 90 to 143. The accounting policies below are applied throughout the financial statements.

FOREIGN CURRENCIES

The consolidated financial statements are presented in euros. The functional currencies of NV and PLC are euros and UK Pound Sterling respectively. Items included in the financial statements of individual group companies are recorded in their respective functional currency which is the currency of the primary economic environment in which each entity operates.

Foreign currency transactions in individual group companies are translated into functional currency using exchange rates at the date of the transaction. Foreign exchange gains and losses from settlement of these transactions, and from translation of monetary assets and liabilities at year-end exchange rates, are recognised in the income statement except when deferred in equity as qualifying hedges.

In preparing the consolidated financial statements, the balances in individual group companies are translated from their functional currency into euros. The income statement, the cash flow statement and all other movements in assets and liabilities are translated at average rates of exchange as a proxy for the transaction rate, or at the transaction rate itself if more appropriate. Assets and liabilities are translated at year-end exchange rates.

The ordinary share capital of NV and PLC is translated in accordance with the Equalisation Agreement. The difference between the value for PLC and the value by applying the year-end rate of exchange is taken to other reserves (see note 15B on pages 112 to 113).

The effect of exchange rate changes during the year on net assets of foreign operations is recorded in equity. For this purpose net assets include loans between group companies and any related foreign exchange contracts where settlement is neither planned nor likely to occur in the foreseeable future.

The Group applies hedge accounting to certain exchange differences arising between the functional currencies of a foreign operation and NV or PLC as appropriate, regardless of whether the net investment is held directly or through an intermediate parent. Differences arising on retranslation of a financial liability designated as a foreign currency net investment hedge are recorded in equity to the extent that the hedge is effective. These differences are reported within profit or loss to the extent that the hedge is ineffective.

Cumulative exchange differences arising since the date of transition to IFRS of 1 January 2004 are reported as a separate component of other reserves. In the event of disposal or part disposal of an interest in a group company either through sale or as a result of a repayment of capital, the cumulative exchange difference is recognised in the income statement as part of the profit or loss on disposal of group companies.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements requires management to make judgements, estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period affected.

Information about critical judgements in applying accounting policies, as well as estimates and assumptions that have the most significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:

  separate presentation of items in the income statement – note 3;
  measurement of defined benefit obligations – note 4B;
  utilisation of tax losses and recognition of other deferred tax assets – note 6B;
  key assumptions used in discounted cash flow projections for impairment testing of goodwill and intangible assets – note 9;
  likelihood of occurrence of provisions and contingencies, including tax investigations and audits – notes 6A, 19 and 20; and
  measurement of consideration and assets and liabilities acquired as part of business combinations – note 21.
 

 

88   Financial Statements    Annual Report on Form 20-F 2016


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1. ACCOUNTING INFORMATION AND POLICIES CONTINUED

RECENT ACCOUNTING DEVELOPMENTS

ADOPTED BY THE GROUP

The Group applied for the first time amendments to two standards from 1 January 2016. These did not have a material impact on the Group.

 

            
APPLICABLE STANDARD   KEY REQUIREMENTS   IMPACT ON GROUP
            

 

Amendments to IAS 1

‘Presentation of

Financial Statements’

 

 

 

This change provides additional principles to

assist preparers with the presentation and

disclosure of financial statements.

 

 

 

There is no impact as current reporting is consistent with

these principles.

 

Amendments to IAS 41

‘Agriculture: Bearer Plants’

 

 

This changes the reporting for bearer plants to

be consistent with IAS 16 ‘Property, Plant and

Equipment’. This is because these assets are

similar to manufacturing assets.

 

 

 

There is no material impact as Unilever does not have

material bearer plants.

All other standards or amendments to standards that have been issued by the IASB and were effective by 1 January 2016 were not applicable to Unilever.

NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS OF EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN EARLY ADOPTED BY THE GROUP

The following three new standards have been released, but are not yet adopted by the Group. The expected impact and progress is shown below.

 

            
APPLICABLE STANDARD  

KEY REQUIREMENTS

OR CHANGES IN ACCOUNTING POLICY

 

IMPLEMENTATION PROGRESS

AND EXPECTED IMPACT

            

 

IFRS 9

‘Financial Instruments’

 

Effective from the year

ended 31 December 2018

 

The standard has been

endorsed by the EU

 

 

This standard introduces new requirements in three areas:

 

Classification and measurement:

Financial assets will now be classified based on 1) the objective of the Group in holding the asset and 2) the contractual cash flows.

 

Impairment:

A new expected credit loss model will be used for calculating impairment on financial assets. A loss event does not have to occur before credit losses are recognised.

 

Hedge accounting:

New general hedge accounting requirements will allow hedge accounting based on the Group’s risk management policies rather than only prescribed scenarios.

 

 

 

During 2016, the Group continued assessing the impact of the new requirements in IFRS 9, the work on classification and measurement is most advanced.

 

Classification and measurement:

We expect a slight increase in assets classified as fair value through profit or loss driven by the removal of available-for-sale classification, which currently have fair value movements recognised within equity.

 

Impairment:

Based on preliminary work we estimate the impact will be immaterial.

 

Hedge accounting:

Based on preliminary work we estimate the impact will be immaterial.

 

IFRS 15

‘Revenue from

Contracts with Customers’

 

Effective from the year

ended 31 December 2018

 

The standard has been

endorsed by the EU

 

 

The standard clarifies the accounting for bundled services and identifying each ‘performance obligation’ in contractual arrangements. It also provides more guidance on the measurement of revenue contracts which have discounts, rebates, payments to suppliers and consignment stock.

 

 

During 2016, the Group completed a detailed review of the requirements of IFRS 15 against our current accounting policies. This focused on accounting for trade expenditure, consignment stock, bad debts and incentives.

 

As a result of our review we concluded that our current accounting policies are in line with the new standard. As our business model evolves, we will continue to review the Group’s contracts and transactions with customers to ensure compliance with IFRS 15 on adoption.

 

 

IFRS 16

‘Leases’

 

Effective from the year

ended 31 December 2019

 

The standard is not yet

endorsed by the EU

 

 

 

This standard changes the recognition, measurement, presentation and disclosure of leases. In particular it requires lessees to record all leases on the balance sheet with exemptions available for low value and short-term leases.

 

 

Based on preliminary work we estimate that more leases will be recorded on the Group balance sheet. Significant work is required to determine the impact due to a high volume of lease contracts and exemptions available.

In addition to the above, the Group does not currently believe adoption of the following amendments will have a material impact on the consolidated results or financial position of the Group.

 

Annual Report on Form 20-F 2016   Financial Statements   89


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

1. ACCOUNTING INFORMATION AND POLICIES CONTINUED

 

            
APPLICABLE STANDARD  

KEY REQUIREMENTS

OR CHANGES IN ACCOUNTING POLICY

  IMPACT ON GROUP
            

 

Amendments to IAS 7

‘Statement of Cash Flows’

 

Effective from the year

ended 31 December 2017

 

The standard is not yet

endorsed by the EU

 

 

 

This change adds a new requirement to explain changes in liabilities relating to financing activities.

 

 

This will require additional disclosure to be presented by the Group.

All other standards or amendments to standards that have been issued by the IASB and are effective from 1 January 2017 onwards are not applicable to Unilever.

 

 

2. SEGMENT INFORMATION

 

 

SEGMENTAL REPORTING
Personal Care     primarily sales of skin care and hair care products, deodorants and oral care products.
Foods     primarily sales of soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines and spreads.
Home Care     primarily sales of home care products, such as powders, liquids and capsules, soap bars and a wide range of cleaning products.
Refreshment     primarily sales of ice cream and tea-based beverages.

REVENUE

Turnover comprises sales of goods after the deduction of discounts, sales taxes and estimated returns. It does not include sales between group companies. Discounts given by Unilever include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs.

Turnover is recognised when the risks and rewards of the underlying products have been substantially transferred to the customer. Depending on individual customer terms, this can be at the time of dispatch, delivery or upon formal customer acceptance.

CORE OPERATING PROFIT

Core operating profit represents our measure of segment profit or loss as it is the primary measure used for the purpose of making decisions about allocating resources and assessing performance of segments. Core operating margin is calculated as core operating profit divided by turnover.

 

90   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

2. SEGMENT INFORMATION CONTINUED

 

                            € million             € million             € million              € million              € million
      Notes            

Personal

Care

  Foods   Home Care   

Refresh-

ment

   Total

2016

                 

Turnover

          20,172       12,524       10,009        10,008        52,713  

Operating profit

          3,704       2,180       949        968        7,801  

Non-core items

     3          140       60       18        27        245  

Core operating profit

          3,844       2,240       967        995        8,046  

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

          (5     4       1        127        127  

Significant non-cash charges:

                 

Depreciation and amortisation (a)

          437       322       236        469        1,464  

Impairment and other non-cash charges (b)

                      208       151       131        108        598  

2015

                 

Turnover

          20,074       12,919       10,159        10,120        53,272  

Operating profit

          3,637       2,298       740        840        7,515  

Non-core items

     3          151       56       35        108        350  

Core operating profit

          3,788       2,354       775        948        7,865  

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

          (4     4       -        107        107  

Significant non-cash charges:

                 

Depreciation and amortisation (a)

          377       308       235        450        1,370  

Impairment and other non-cash charges (b)

                      267       113       134        153        667  

2014

                 

Turnover

          17,739       12,361       9,164        9,172        48,436  

Operating profit

          3,259       3,607       576        538        7,980  

Non-core items

     3          66       (1,302     3        273        (960

Core operating profit

          3,325       2,305       579        811        7,020  

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

          (1     3       -        96        98  

Significant non-cash charges:

                 

Depreciation and amortisation (a)

          307       257       192        371        1,127  

Impairment and other non-cash charges (b)

                      198       122       100        393        813  

 

(a)   All amounts included within core operating profit.
(b)   These comprise share-based compensation, movements in provisions and foreign exchange losses resulting from remeasurement of the Argentinian business (in 2016 and 2015) and Venezuelan business (in 2015). Certain amounts are included within non-core items.

Transactions between the Unilever Group’s reportable segments are immaterial and are carried out on an arm’s length basis.

The Unilever Group is not reliant on revenues from transactions with any single customer and does not receive 10% or more of its revenues from transactions with any single customer.

Segment assets and liabilities are not provided because they are not reported to or reviewed by our chief operating decision-maker, which is Unilever Leadership Executive (ULE) as explained in the Corporate Governance Section.

The home countries of the Unilever Group are the Netherlands and the United Kingdom. Turnover and non-current assets for these two countries combined, for the United States (being the largest country outside the home countries) and for all other countries are:

 

                                 € million              € million              € million              € million
2016                         Netherlands/
United
Kingdom
  

United

States

   Others    Total

Turnover

             3,819        8,263        40,631        52,713  

Non-current assets (c)

                               4,770        11,696        23,358        39,824  
2015                                             

Turnover

             4,157        7,956        41,159        53,272  

Non-current assets (c)

                               4,878        9,674        22,336        36,888  
2014                                             

Turnover

             3,851        6,684        37,901        48,436  

Non-current assets (c)

                               3,921        7,668        21,714        33,303  

 

(c)   Non-current assets excluding financial assets, deferred tax assets and pension assets for funded schemes in surplus.

No other country had turnover or non-current assets (as shown above) greater than 10% of the Group total.

 

Annual Report on Form 20-F 2016   Financial Statements   91


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

2. SEGMENT INFORMATION CONTINUED

ADDITIONAL INFORMATION BY GEOGRAPHIES

Although the Group’s operations are managed by product area, we provide additional information based on geographies. The analysis of turnover by geographical area is stated on the basis of origin.

 

                                 € million               € million               € million                € million  
                                

Asia/

AMET/RUB

 

(d)  

   

The

Americas

 

 

    Europe        Total  

2016

                 

Turnover

             22,445       17,105       13,163        52,713  

Operating profit

             3,275       2,504       2,022        7,801  

Non-core items

             19       222       4        245  

Core operating profit

             3,294       2,726       2,026        8,046  

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

                               (2     108       21        127  

2015

                 

Turnover

             22,425       17,294       13,553        53,272  

Operating profit

             3,019       2,273       2,223        7,515  

Non-core items

             16       244       90        350  

Core operating profit

             3,035       2,517       2,313        7,865  

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

                               (1     96       12        107  

2014

                 

Turnover

             19,703       15,514       13,219        48,436  

Operating profit

             2,626       3,233       2,121        7,980  

Non-core items

             (15     (959     14        (960

Core operating profit

             2,611       2,274       2,135        7,020  

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

                               -       68       30        98  

 

(d)   Refers to Asia, Africa, Middle East, Turkey, Russia, Ukraine and Belarus.

Transactions between the Unilever Group’s geographical regions are immaterial and are carried out on an arm’s length basis.

 

 

3. GROSS PROFIT AND OPERATING COSTS

 

RESEARCH AND MARKET SUPPORT COSTS

Expenditure on research and market support, such as advertising, is charged to the income statement as incurred.

NON-CORE ITEMS

Disclosed on the face of the income statement are costs and revenues relating to business disposals, acquisition and disposal-related costs, impairments and other one-off items, which we collectively term non-core items due to their nature and/or frequency of occurrence. These items are material in terms of nature and/or amount and are relevant to an understanding of our financial performance.

Business disposals generate both gains and losses which are not reflective of underlying performance. Acquisition and disposal-related costs are charges directly attributable to the acquisition or disposal of group companies.

 

             € million               million               million  
      2016     2015     2014  

Turnover

     52,713       53,272       48,436  

Cost of sales

     (30,229     (30,808     (28,387

of which: Distribution costs

     (3,246     (3,358     (3,079
                        

Gross profit

     22,484       22,464       20,049  

Selling and administrative expenses

     (14,683     (14,949     (12,069

of which: Brand and Marketing Investment

     (7,731     (8,003     (7,166

                   Research and Development

     (978     (1,005     (955
                        

Operating profit

     7,801       7,515       7,980  

 

92   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

3. GROSS PROFIT AND OPERATING COSTS CONTINUED

NON-CORE ITEMS

Non-core items are disclosed on the face of the income statement to provide additional information to users to help them better understand underlying business performance.

 

             € million               million               million  
      2016     2015     2014  

Acquisition and disposal-related costs

     (132     (105     (97

Gain/(loss) on disposal of group companies (a)

     (95     (9     1,392  

Impairments and other one-off items (b)

     (18     (236     (335

Non-core items before tax

     (245     (350     960  

Tax impact of non-core items

     60       49       (423

Non-core items after tax

     (185     (301     537  

Attributable to:

      

Non-controlling interests

     1       -        

Shareholders’ equity

     (186     (301     537  

 

(a)   2014 includes a gain of 1,316 million from the sale of the Ragú & Bertolli brands and related assets. The total cash consideration for this transaction was approximately US$2.15 billion.
(b)   2016 includes 18 million in foreign exchange losses resulting from remeasurement of the Argentinian business (2015: 52 million). 2015 includes an 86 million charge for legal cases pertaining to a number of investigations by local competition regulators (2014: 30 million), a 14 million charge relating to other one-off legal cases (2014: nil), and 84 million in foreign exchange losses resulting from remeasurement of the Venezuelan business. 2014 includes an impairment charge of 305 million on assets related to the Slim.Fast business.

OTHER

Other significant cost items by nature within operating costs include:

 

                           € million             million             million  
      Notes              2016     2015     2014  

Staff costs

     4A           (6,523     (6,555     (6,054

Raw and packaging materials and goods purchased for resale

           (21,122     (21,543     (19,816

Amortisation of finite-life intangible assets and software

     9           (310     (273     (180

Depreciation of property, plant and equipment

     10           (1,154     (1,097     (947

Exchange gains/(losses):

           (209     (87     12  

On underlying transactions

           (28     (118     15  

On covering forward contracts

           (181     31       (3

Lease rentals:

           (531     (534     (535

Minimum operating lease payments

           (536     (546     (544

Less: Sub-lease income relating to operating lease agreements

           5       12       9  
                                            

 

Annual Report on Form 20-F 2016   Financial Statements   93


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

 

4. EMPLOYEES

4A. STAFF AND MANAGEMENT COSTS

 

             € million               million               million  
Staff costs    2016     2015     2014  

Wages and salaries

     (5,347     (5,474     (4,992

Social security costs

     (606     (606     (586

Other pension costs

     (372     (325     (288

Share-based compensation costs

     (198     (150     (188
       (6,523     (6,555     (6,054
     ‘000     ‘000     ‘000  
Average number of employees during the year    2016     2015     2014  

Asia/AMET/RUB

     95       97       99  

The Americas

     42       42       42  

Europe

     32       32       32  
       169       171       173  
     € million      million     million  
Key management compensation (a)    2016     2015     2014  

Salaries and short-term employee benefits

     (31     (34     (28

Non-Executive Directors’ fees

     (2     (2     (2

Post-employment benefits

     (1     (1     (1

Share-based benefits (b)

     (17     (30     (19
     (51     (67     (50

Of which:

      

Executive Directors

     (13     (18     (15

Non-Executive Directors

     (2     (2     (2

Other (c)

     (36     (47     (33
       (51     (67     (50

 

(a)   Includes full year compensation for Unilever Leadership Executive members joining part way through the year.
(b)   Share-based benefits are shown on a vesting basis.
(c)   Other includes all members of the Unilever Leadership Executive, other than Executive Directors.

Key management are defined as the members of Unilever Leadership Executive and the Non-Executive Directors.

Details of the remuneration of Directors are given in the parts noted as audited in the Directors’ Remuneration Report on pages 48 to 77.

4B. PENSIONS AND SIMILAR OBLIGATIONS

 

For defined benefit plans, operating and finance costs are recognised separately in the income statement. The amount charged to operating cost in the income statement is the cost of accruing pension benefits promised to employees over the year, plus the costs of individual events such as past service benefit changes, settlements and curtailments (such events are recognised immediately in the income statement). The amount charged or credited to finance costs is a net interest expense calculated by applying the liability discount rate to the net defined benefit liability or asset. Any differences between the expected interest on assets and the return actually achieved, and any changes in the liabilities over the year due to changes in assumptions or experience within the plans, are recognised immediately in the statement of comprehensive income.

The defined benefit plan surplus or deficit on the balance sheet comprises the total for each plan of the fair value of plan assets less the present value of the defined benefit liabilities (using a discount rate based on high-quality corporate bonds, or a suitable alternative where there is no active corporate bond market).

All defined benefit plans are subject to regular actuarial review using the projected unit method, either by external consultants or by actuaries employed by Unilever. The Group policy is that the most important plans, representing approximately 84% of the defined benefit liabilities, are formally valued every year. Other major plans, accounting for a further 13% of the liabilities, have their liabilities updated each year. Group policy for the remaining plans requires a full actuarial valuation at least every three years. Asset values for all plans are updated every year.

For defined contribution plans, the charges to the income statement are the company contributions payable, as the company’s obligation is limited to the contributions paid into the plans. The assets and liabilities of such plans are not included in the balance sheet of the Group.

 

94   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

4B. PENSIONS AND SIMILAR OBLIGATIONS CONTINUED

DESCRIPTION OF PLANS

The Group increasingly operates a number of defined contribution plans, the assets of which are held in external funds. In certain countries the Group operates defined benefit pension plans based on employee pensionable remuneration and length of service. The majority of defined benefit plans are either career average, final salary or hybrid plans and operate on a funded basis. Benefits are determined by the plan rules and are linked to inflation in some countries. The Group also provides other post-employment benefits, mainly post-employment healthcare plans in the United States. These plans are predominantly unfunded.

GOVERNANCE

The majority of the Group’s externally funded plans are established as trusts, foundations or similar entities. The operation of these entities is governed by local regulations and practice in each country, as is the nature of the relationship between the Group and the Trustees (or equivalent) and their composition. Where Trustees (or equivalent) are in place to operate plans, they are generally required to act on behalf of the plan’s stakeholders. They are tasked with periodic reviews of the solvency of the fund in accordance with local legislation and play a role in the long-term investment and funding strategy. The Group also has an internal body, the Pensions and Equity Committee, that is responsible for setting the company’s policies and decision-making on plan matters, including but not limited to design, funding, investments, risk management and governance.

INVESTMENT STRATEGY

The Group’s investment strategy in respect of its funded plans is implemented within the framework of the various statutory requirements of the territories where the plans are based. The Group has developed policy guidelines for the allocation of assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Group of the benefits provided. To achieve this, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. The plans continue to invest a good proportion of the assets in equities, which the Group believes offer the best returns over the long-term, commensurate with an acceptable level of risk. The plans expose the Group to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and, in certain markets, inflation risk. There are no unusual entity or plan-specific risks to the Group. For risk control, the pension funds also have significant investments in liability matching assets (bonds) as well as in property and other alternative assets; additionally, the Group uses derivatives to further mitigate the impact of the risks outlined above. The majority of assets are managed by a number of external fund managers with a small proportion managed in-house. Unilever has a pooled investment vehicle (Univest) which it believes offers its pension plans around the world a simplified externally managed investment vehicle to implement their strategic asset allocation models, currently for bonds, equities and alternative assets. The aim is to provide high-quality, well diversified, cost-effective, risk-controlled vehicles. The pension plans’ investments are overseen by Unilever’s internal investment company, the Univest Company.

ASSUMPTIONS

With the objective of presenting the assets and liabilities of the pensions and other post-employment benefit plans at their fair value on the balance sheet, assumptions under IAS 19 are set by reference to market conditions at the valuation date. The actuarial assumptions used to calculate the benefit liabilities vary according to the country in which the plan is situated. The following table shows the assumptions, weighted by liabilities, used to value the principal defined benefit plans (which cover approximately 96% of total pension liabilities) and the plans providing other post-employment benefits.

 

     31 December 2016      31 December 2015  
     

Principal

      defined benefit

pension plans

    

Other

post-employment

benefit plans

    

Principal

      defined benefit

pension plans

    

Other

post-employment

benefit plans

 

Discount rate

     2.6%        4.8%        3.4%        5.0%  

Inflation

     2.5%        n/a        2.4%        n/a  

Rate of increase in salaries

     2.9%        3.0%        2.7%        3.1%  

Rate of increase for pensions in payment (where provided)

     2.4%        n/a        2.3%        n/a  

Rate of increase for pensions in deferment (where provided)

     2.7%        n/a        2.5%        n/a  

Long-term medical cost inflation

     n/a        5.3%        n/a        5.2%  

The valuations of other post-employment benefit plans generally assume a higher initial level of medical cost inflation, which falls from 6% to the long-term rate within the next five years. Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans.

 

Annual Report on Form 20-F 2016   Financial Statements   95


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

4B. PENSIONS AND SIMILAR OBLIGATIONS CONTINUED

For the most important pension plans, representing approximately 84% of all defined benefit plans liabilities, the assumptions used at 31 December 2016 and 2015 were:

 

    United Kingdom   Netherlands   United States   Germany
           2016               2015               2016               2015               2016               2015               2016               2015      

Discount rate

  2.7%   3.7%   1.8%   2.5%   4.3%   4.5%   1.8%   2.5%

Inflation

  3.2%   3.0%   1.7%   1.7%   2.1%   2.3%   1.7%   1.7%

Rate of increase in salaries

  3.1%   2.9%   2.2%   2.2%   3.0%   3.0%   3.0%   2.8%

Rate of increase for pensions in payment
(where provided)

  3.1%   2.8%   1.7%   1.7%   -   -   1.7%   1.7%

Rate of increase for pensions in deferment
(where provided)

  3.1%   2.9%   1.7%   1.7%   -   -   -   -

Number of years a current pensioner is expected to live beyond age 65:

               

Men

  22.5   22.4   21.8   21.7   20.8   21.2   21.7   19.4

Women

  24.6   24.6   24.0   23.8   22.8   23.2   24.0   23.0

Number of years a future pensioner currently aged 45 is expected to live beyond age 65:

               

Men

  23.8   23.7   24.1   23.9   23.1   22.9   21.7   19.4

Women

  26.5   26.4   26.3   25.9   26.2   24.9   24.0   23.0

Demographic assumptions, such as mortality rates, are set with having regard to the latest trends in life expectancy (including expectations of future improvements), plan experience and other relevant data. These assumptions are reviewed and updated as necessary as part of the periodic actuarial valuation of the pension plans. The years of life expectancy for 2016 above have been translated from the following tables:

  UK: the year of use S1 series all pensioners (‘S1PA’) tables have been adopted, which are based on the experience of UK pension schemes over the period 2000-2006. Scaling factors are applied reflecting the experience of our pension funds appropriate to the member’s gender and status. Future improvements in longevity have been allowed for in line with the 2012 CMI core projections and a 1% pa long-term improvement rate.
  The Netherlands: the Dutch Actuarial Society’s AG Prognosetafel 2016 table is used with correction factors to allow for the typically longer life expectancy for fund members relative to the general population. This table has an in-built allowance for future improvements in longevity.
  United States: the table RP-2016 with MP-2016 generational mortality improvement. This table has an in-built allowance for future improvements in longevity.
  Germany: fund specific tables are used which broadly equate to the Heubeck 2005 base table projected to 2045.

Assumptions for the remaining defined benefit plans vary considerably, depending on the economic conditions of the countries where they are situated.

INCOME STATEMENT

The charge to the income statement comprises:

 

                             € million                 million                 million  
      Notes              2016     2015     2014  

Charged to operating profit:

            

Defined benefit pension and other benefit plans:

            

Current service cost

           (226     (271     (259

Employee contributions

           17       17       16  

Special termination benefits

           (6     (9     (27

Past service cost including (losses)/gains on curtailments

           32       129       87  

Settlements

           (2     6       10  

Defined contribution plans

           (187     (197     (115

Total operating cost

     4A           (372     (325     (288

Finance income/(cost)

     5           (94     (121     (94

Net impact on the income statement (before tax)

                       (466     (446     (382

 

96   Financial Statements    Annual Report on Form 20-F 2016


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4B. PENSIONS AND SIMILAR OBLIGATIONS CONTINUED

STATEMENT OF COMPREHENSIVE INCOME

Amounts recognised in the statement of comprehensive income on the remeasurement of the net defined benefit liability.

 

             € million               million                 million  
      2016     2015     2014  

Return on plan assets excluding amounts included in net finance income/(cost)

     1,877       (254     1,316  

Actuarial gains/(losses) arising from changes in demographic assumptions

     (217     (22     (28

Actuarial gains/(losses) arising from changes in financial assumptions

     (2,963     1,167       (3,076

Experience gains/(losses) arising on pension plan and other benefit plan liabilities

     82       233       78  

Total of defined benefit costs recognised in other comprehensive income

     (1,221     1,124       (1,710

BALANCE SHEET

The assets, liabilities and surplus/(deficit) position of the pension and other post-employment benefit plans at the balance sheet date were:

 

    

€ million

2016

   

 million

2015

 
     

          Pension

plans

   

Other post-

employment

  benefit plans

   

          Pension

plans

   

Other post-

employment

  benefit plans

 

Fair value of assets

     21,162       21       20,723       19  

Present value of liabilities

     (23,751     (605     (22,466     (596

Net liabilities

     (2,589     (584     (1,743     (577

Pension liability net of assets

     (2,589     (584     (1,743     (577

Of which in respect of:

        

Funded plans in surplus:

        

Liabilities

     (5,833     -       (5,936     -  

Assets

     6,524       3       6,867       3  

Aggregate surplus

     691       3       931       3  

Pension asset net of liabilities

     691       3       931       3  

Funded plans in deficit:

        

Liabilities

     (16,783     (36     (15,411     (30

Assets

     14,638       18       13,856       16  

Pension liability net of assets

     (2,145     (18     (1,555     (14

Unfunded plans:

        

Pension liability

     (1,135     (569     (1,119     (566

RECONCILIATION OF CHANGE IN ASSETS AND LIABILITIES

Movements in assets and liabilities during the year:

 

     

€ million

Assets

2016

   

 million

Assets

2015

   

€ million

Liabilities

2016

   

 million

Liabilities

2015

   

€ million

Total

2016

   

 million

Total

2015

 

1 January

         20,742           20,484           (23,062         (24,055         (2,320         (3,571

Current service cost

     -       -       (226     (271     (226     (271

Employee contributions

     17       17       -       -       17       17  

Special termination benefits

     -       -       (6     (9     (6     (9

Past service costs including losses/(gains) on curtailments

     -       -       32       129       32       129  

Settlements

     -       (16     (2     22       (2     6  

Actual return on plan assets (excluding amounts in net finance
income/charge)

     1,877       (254     -       -       1,877       (254

Interest cost

     -       -       (758     (773     (758     (773

Interest income

     664       652       -       -       664       652  

Actuarial gain/(loss) arising from changes in demographic assumptions

     -       -       (217     (22     (217     (22

Actuarial gain/(loss) arising from changes in financial assumptions

     -       -       (2,963     1,167       (2,963     1,167  

Actuarial gain/(loss) arising from experience adjustments

     -       -       82       233       82       233  

Employer contributions

     512       513       -       -       512       513  

Benefit payments

     (1,326     (1,345     1,326       1,345       -       -  

Reclassification of benefits (a)

     (2     -       2       (8     -       (8

Currency retranslation

     (1,301     691       1,436       (820     135       (129

31 December

     21,183       20,742       (24,356     (23,062     (3,173     (2,320

 

(a)   Certain liabilities have been reclassified as employee benefit liabilities.

 

Annual Report on Form 20-F 2016   Financial Statements   97


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

4B. PENSIONS AND SIMILAR OBLIGATIONS CONTINUED

The actual return on plan assets during 2016 was 2,541 million, being the sum of 1,877 million and 664 million from the table above (2015: 398 million).

The duration of the principal defined benefit liabilities at 31 December 2016 is between 8 and 20 years (2015: 9 and 18 years). The liabilities are split between different categories of plan participants as follows:

  active members 19.9% (2015: 18.7%);
  deferred members 26.0% (2015: 23.4%); and
  retired members 54.1% (2015: 57.9%).

ASSETS

The fair value of plan assets at the end of the reporting period for our major and principal plans for each category are as follows:

 

    

€ million

31 December 2016

    

 million

31 December 2015

 
     

            Pension

plans

   

Other post-

    employment

benefit

plans

    

            Pension

plans

   

Other post-

    employment

benefit

plans

 

Total assets

     21,162       21        20,723       19  

Equities total

     8,133       -        7,993       -  

– Europe

     2,197       -        2,526       -  

– North America

     3,829       -        3,313       -  

– Other

     2,107       -        2,154       -  

Fixed income total

     10,282       20        9,741       18  

– Government bonds

     5,326       8        4,870       18  

– Investment grade corporate bonds

     2,927       12        2,970       -  

– Other fixed income

     2,029       -        1,901       -  

Derivatives

     (1,446     -        (1,647     -  

Private equity

     634       -        721       -  

Property and real estate

     1,461       -        1,689       -  

Hedge funds

     1,171       -        1,123       -  

Other

     591       1        810       1  

Other plans

     336       -        293       -  

The fair values of the above equity and fixed income instruments are determined based on quoted market prices in active markets. The fair value of private equity, properties, derivatives and hedge funds are not based on quoted market prices in active markets. The Group uses swaps to hedge some of its exposure to inflation and interest rate risk. Foreign currency exposures in part are also hedged by the use of forward foreign exchange contracts. Assets included in the Other category are commodities, cash and insurance contracts which are also unquoted assets.

Equity securities include Unilever securities amounting to 12 million (0.1% of total plan assets) and 14 million (0.1% of total plan assets) at 31 December 2016 and 2015 respectively. Property includes property occupied by Unilever amounting to 34 million at 31 December 2016 (2015: 17 million).

The pension assets above exclude the assets in a Special Benefits Trust amounting to 79 million (2015: 86 million) to fund pension and similar liabilities in the United States (see also note 17A on pages 121 to 122) and 68 million (2015: nil) in an escrow account that would otherwise have been payable to the main UK pension fund (see also note 11 on pages 107 to 108).

SENSITIVITIES

The sensitivity of the overall pension liabilities to changes in the weighted key assumptions are:

 

                Change in assumption                                   Change in liabilities  

Discount rate

           Increase by 0.5%      -8%  

Inflation rate

           Increase by 0.5%      +6%  

Life expectancy

           Increase by 1 year      +4%  

Long-term medical cost inflation (b)

           Increase by 1.0%      +1%  

An equivalent decrease in each assumption would have an equal and opposite impact on liabilities.

 

(b)   Long-term medical cost inflation only relates to post retirement medical plans.

The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.

 

98   Financial Statements    Annual Report on Form 20-F 2016


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4B. PENSIONS AND SIMILAR OBLIGATIONS CONTINUED

CASH FLOW

Group cash flow in respect of pensions and similar post-employment benefits comprises company contributions paid to funded plans and benefits paid by the company in respect of unfunded plans. The table below sets out these amounts:

 

               € million                  million                  million  
      2016      2015      2014  

Company contributions to funded plans:

        

Defined benefit

     355        356        386  

Defined contributions

     187        197        115  

Benefits paid by the company in respect of unfunded plans:

        

Defined benefit

     157        157        151  

Group cash flow in respect of pensions and similar benefits

     699        710        652  

The triennial valuation of the UK pension fund is currently underway. The outcome will determine our funding requirements for 2017 and beyond. Excluding the UK pension fund deficit contributions, the current estimated Group employer contributions to be paid in 2017 are 480 million for our defined benefit plans and 210 million for our defined contribution plans.

The Group’s funding policy is to periodically review the contributions made to the plans while taking account of local legislations.

4C. SHARE-BASED COMPENSATION PLANS

 

The fair value of awards at grant date is calculated using appropriate pricing models. This value is expensed over their vesting period, with a corresponding credit to equity. The expense is reviewed and adjusted to reflect changes to the level of awards expected to vest, except where this arises from a failure to meet a market condition. Any cancellations are recognised immediately in the income statement.

As at 31 December 2016, the Group had share-based compensation plans in the form of performance shares, share options and other share awards.

The numbers in this note include those for Executive Directors shown in the Directors’ Remuneration Report on pages 48 to 77 and those for key management shown in note 4A on page 94. Non-Executive Directors do not participate in any of the share-based compensation plans.

The charge in each of the last three years is shown below, and relates to equity-settled plans:

 

                   € million                     million                       million  
Income statement charge    2016     2015     2014  

Performance share plans

     (185     (143     (186

Other plans

     (13     (7     (2
       (198     (150     (188

PERFORMANCE SHARE PLANS

Performance share awards are made under the Management Co-Investment Plan (MCIP) and the Global Share Incentive Plan (GSIP). The MCIP allows Unilever’s managers to invest up to 60% of their annual bonus in shares in Unilever and to receive a corresponding award of performance-related shares. Under GSIP, Unilever’s managers receive annual awards of NV and PLC shares. The awards of both plans will vest after three years between 0% and 200% of grant level, depending on the satisfaction of performance metrics.

The performance metrics of both MCIP and GSIP are underlying sales growth, operating cash flow and core operating margin improvement for the Group, except for GSIP awards granted to the managers of certain business units (below the Unilever Leadership Executive) which are subject to similar performance metrics but specific to the relevant business unit. There is an additional target based on relative total shareholder return (TSR) for senior executives.

A summary of the status of the Performance Share Plans as at 31 December 2016, 2015 and 2014 and changes during the years ended on these dates is presented below:

 

     

2016

Number of

shares

   

2015

Number of

shares

   

2014

Number of

shares

 

Outstanding at 1 January

               15,979,140           17,468,291           18,909,204  

Awarded

     7,016,274       8,890,394       9,724,186  

Vested

     (6,983,053     (8,448,454     (9,347,225

Forfeited

     (1,194,301     (1,931,091     (1,817,874

Outstanding at 31 December

     14,818,060       15,979,140       17,468,291  

 

Annual Report on Form 20-F 2016   Financial Statements   99


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

4C. SHARE-BASED COMPENSATION PLANS CONTINUED

 

Share award value information                            2016                              2015                              2014  

Fair value per share award during the year

     €35.43        33.17        27.80  

ADDITIONAL INFORMATION

At 31 December 2016, shares and options in NV or PLC totalling 16,085,024 (2015: 17,363,014) were held in respect of share-based compensation plans of NV, PLC and its subsidiaries, including North American plans.

To satisfy the options granted, certain NV group companies hold 16,936,797 (2015: 17,772,147) ordinary shares of NV or PLC. Shares acquired during 2016 represent 0.20% of the Group’s called up share capital. The balance of shares held in connection with share plans at 31 December 2016 represented 0.6% (2015: 0.6%) of the Group’s called up share capital.

The book value of 727 million (2015: 639 million) of all shares held in respect of share-based compensation plans for both NV and PLC is eliminated on consolidation by deduction from other reserves. Their market value at 31 December 2016 was 658 million (2015: 710 million).

At 31 December 2016, the exercise price of nil PLC options (2015: nil) were above the market price of the shares.

Shares held to satisfy options are accounted for in accordance with IAS 32 ‘Financial Instruments: Presentation’. All differences between the purchase price of the shares held to satisfy options granted and the proceeds received for the shares, whether on exercise or lapse, are charged to reserves. The basis of the charge to operating profit for the economic value of options granted is discussed on page 99.

Between 31 December 2016 and 21 February 2017 (the latest practicable date for inclusion in this report), 2,862,195 shares were granted, 4,803,965 shares were vested and 13,036 shares were forfeited related to the Performance Share Plans.

 

 

5. NET FINANCE COSTS

 

Net finance costs are comprised of finance costs and finance income, including net finance costs in relation to pensions and similar obligations.

Finance income includes income on cash and cash equivalents and income on other financial assets. Finance costs include interest costs in relation to financial liabilities.

Borrowing costs are recognised based on the effective interest method.

 

Net finance costs    Notes                          2016                 2015                 2014  

Finance costs

           (584     (516     (500

Bank loans and overdrafts

           (67     (56     (57

Interest on bonds and other loans (a)

           (501     (492     (425

Dividends paid on preference shares

           (4     (4     (4

Net gain/(loss) on transactions for which hedge accounting is not applied (b)

           (12     36       (14

On foreign exchange derivatives

           (215     (218     (655

Exchange difference on underlying items

           203       254       641  

Finance income

           115       144       117  

Pensions and similar obligations

     4B           (94     (121     (94
                         (563     (493     (477

 

(a)   ‘Interest on bonds and other loans’ includes the impact of interest rate derivatives that are part of a fair value hedge accounting relationship and the recycling of results from the cash flow hedge accounting reserve relating to derivatives that were part of a cash flow hedge accounting relation.
(b)   For further details of derivatives for which hedge accounting is not applied, please refer to note 16C.

 

100   Financial Statements    Annual Report on Form 20-F 2016


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6. TAXATION

6A. INCOME TAX

 

Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.

Current tax in the consolidated income statement will differ from the income tax paid in the consolidated cash flow statement primarily because of deferred tax arising on temporary differences and payment dates for income tax occurring after the balance sheet date.

Unilever is subject to taxation in the many countries in which it operates. The tax legislation of these countries differs, is often complex and is subject to interpretation by management and the government authorities. These matters of judgement give rise to the need to create provisions for tax payments that may arise in future years. Provisions are made against individual exposures and take into account the specific circumstances of each case, including the strength of technical arguments, recent case law decisions or rulings on similar issues and relevant external advice. The provision is estimated based on the individual most likely outcome approach.

 

     € million      million      million  
Tax charge in income statement                     2016                      2015                      2014  

Current tax

      

Current year

     (2,026     (1,992     (2,111

Over/(under) provided in prior years

     158       (57     68  
     (1,868     (2,049     (2,043

Deferred tax

      

Origination and reversal of temporary differences

     (65     82       (112

Changes in tax rates

     (7     (13     4  

Recognition of previously unrecognised losses brought forward

     18       19       20  
     (54     88       (88
       (1,922     (1,961     (2,131

The reconciliation between the computed weighted average rate of income tax expense, which is generally applicable to Unilever companies, and the actual rate of taxation charged is as follows:

 

Reconciliation of effective tax rate   

%

                 2016

   

%

                 2015

   

%

                 2014

 

Computed rate of tax (a)

     26       24       27  

Differences due to:

      

Incentive tax credits

     (4     (5     (5

Withholding tax on dividends

     3       2       2  

Expenses not deductible for tax purposes

     1       2       1  

Irrecoverable witholding tax

     1       2       1  

Income tax reserve adjustments – current and prior year

     (1     2       1  

Transfer to/(from) unrecognised deferred tax assets

     -       1       1  

Effective tax rate

     26       28       28  

 

(a)   The computed tax rate used is the average of the standard rate of tax applicable in the countries in which Unilever operates, weighted by the amount of profit before taxation generated in each of those countries. For this reason the rate may vary from year to year according to the mix of profit and related tax rates.

Our tax rate is reduced by incentive tax credits, the benefit from preferential tax regimes that have been legislated by the countries and provinces concerned in order to promote economic development and investment. The tax rate is increased by business expenses which are not deductible for tax, such as entertainment costs and some interest expense and by irrecoverable withholding taxes on dividends paid by subsidiary companies and on other cross-border payments such as royalties and service fees, which cannot be offset against other taxes due. In 2016 there has been a net decrease in the amount provided for uncertain tax provisions, principally as the result of favourable audit settlements (versus a net increase in 2015).

The Group’s future tax charge and effective tax rate could be affected by several factors, including changes in tax laws and their interpretation and still to be determined tax reform proposals in the EU, Switzerland and the United States, as well as the impact of acquisitions, disposals and any restructuring of our businesses.

 

Annual Report on Form 20-F 2016   Financial Statements   101


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

6B. DEFERRED TAX

 

Deferred tax is recognised using the liability method on taxable temporary differences between the tax base and the accounting base of items included in the balance sheet of the Group. Certain temporary differences are not provided for as follows:

    goodwill not deductible for tax purposes;  
    the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and  
    differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.  

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantively enacted, at the year end.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

     € million     € million     € million     € million      million      million      million      million  
Movements in 2016 and 2015   

As at

1 January

2016

   

Income

statement

    Other    

As at

31 December

2016

   

As at

1 January

2015

   

Income

statement

    Other    

As at

31 December

2015

 

Pensions and similar obligations

     557       7       202       766       874       (23     (294     557  

Provisions

     708       68       146       922       657       144       (93     708  

Goodwill and intangible assets

     (1,301     (104     (523     (1,928     (1,292     8       (17     (1,301

Accelerated tax depreciation

     (752     (85     (33     (870     (753     7       (6     (752

Tax losses

     123       (6     14       131       123       14       (14     123  

Fair value gains

     (25     14       4       (7     (10     (2     (13     (25

Fair value losses

     16       8       5       29       10       (62     68       16  

Share-based payments

     190       (14     (7     169       172       (2     20       190  

Other

     (75     58       98       81       (29     4       (50     (75
       (559     (54     (94     (707     (248     88       (399     (559

At the balance sheet date, the Group had unused tax losses of 4,138 million (2015: 3,338 million) and tax credits amounting to 644 million (2015: 629 million) available for offset against future taxable profits. Deferred tax assets have not been recognised in respect of unused tax losses of 3,622 million (2015: 2,941 million) and tax credits of 629 million (2015: 629 million), as it is not probable that there will be future taxable profits within the entities against which the losses can be utilised. The majority of these tax losses and credits arise in tax jurisdictions where they do not expire with the exception of 2,363 million (2015: 1,790 million) comprising corporate income tax losses in the Netherlands which expire between now and 2025 and state and federal tax losses in the US which expire between now and 2036.

Other deductible temporary differences of 52 million (2015: 67 million) have not been recognised as a deferred tax asset. There is no expiry date for these differences.

At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised was 1,557 million (2015: 1,505 million). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences, and it is probable that such differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated balance sheet:

 

         € million               million     € million      million             € million               million  
Deferred tax assets and liabilities   

Assets

2016

   

Assets

2015

   

     Liabilities

2016

   

     Liabilities

2015

   

Total

2016

   

Total

2015

 

Pensions and similar obligations

     568       434       198       123       766       557  

Provisions

     579       516       343       192       922       708  

Goodwill and intangible assets

     2       126       (1,930     (1,427     (1,928     (1,301

Accelerated tax depreciation

     (60     (66     (810     (686     (870     (752

Tax losses

     128       96       3       27       131       123  

Fair value gains

     28       12       (35     (37     (7     (25

Fair value losses

     9       (5     20       21       29       16  

Share-based payments

     44       59       125       131       169       190  

Other

     56       13       25       (88     81       (75
     1,354       1,185       (2,061     (1,744     (707     (559

Of which deferred tax to be recovered/(settled) after more than 12 months

     1,157       856       (2,206     (1,811     (1,049     (955

 

102   Financial Statements    Annual Report on Form 20-F 2016


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6C. TAX ON OTHER COMPREHENSIVE INCOME

 

Income tax is recognised in other comprehensive income for items recognised directly in equity.

Tax effects of the components of other comprehensive income were as follows:

 

             € million             € million              € million               million               million               million  
     

Before

tax

2016

   

Tax

(charge)/

credit

2016

    

After

tax

2016

   

Before

tax

2015

   

Tax

(charge)/

credit

2015

   

After

tax

2015

 

Fair value gains/(losses) on financial instruments

     (15     -        (15     82       18       100  

Remeasurements of defined benefit pension plans

     (1,221     241        (980     1,124       (240     884  

Currency retranslation gains/(losses)

     217       -        217       (510     29       (481
       (1,019     241        (778     696       (193     503  

 

 

7. COMBINED EARNINGS PER SHARE

 

The combined earnings per share calculations are based on the average number of share units representing the combined ordinary shares of NV and PLC in issue during the period, less the average number of shares held as treasury stock.

In calculating diluted earnings per share and core earnings per share, a number of adjustments are made to the number of shares, principally: (i) conversion into PLC ordinary shares in the year 2038 of shares in a group company (refer below) and (ii) the exercise of share options by employees.

On 19 May 2014 Unilever PLC purchased the shares convertible to PLC ordinary shares in 2038. Due to the repurchase the average number of combined share units is not adjusted for these shares from 20 May 2014 to 31 December 2016. For 2014 the adjusted average number of share units is calculated based on the number of days the shares were dilutive during the year ended 31 December 2014.

Earnings per share for total operations for the 12 months were calculated as follows:

 

                            
Combined earnings per share                                2016                 2015                     2014  

Basic earnings per share

           1.83       1.73       1.82  

Diluted earnings per share

           1.82       1.72       1.79  

Core EPS

                       1.88       1.82       1.61  
                   Millions of share units  
Calculation of average number of share units                    2016     2015     2014  

Average number of shares: NV

           1,714.7       1,714.7       1,714.7  

                                             PLC

           1,310.2       1,310.2       1,310.2  

Less shares held by employee share trusts and companies

           (184.7     (184.8     (184.4

Combined average number of share units

           2,840.2       2,840.1       2,840.5  

Add shares issuable in 2038

           -       -       26.8  

Add dilutive effect of share-based compensation plans

           13.7       15.3       15.3  

Diluted combined average number of share units

                       2,853.9       2,855.4       2,882.6  
Calculation of earnings                   

€ million

2016

   

 million

2015

   

 million

2014

 

Net profit

           5,547       5,259       5,515  

Non-controlling interests

           (363     (350     (344

Net profit attributable to shareholders’ equity

                       5,184       4,909       5,171  
Calculation of core earnings    Notes             

€ million

2016

   

 million

2015

   

 million

2014

 

Net profit attributable to shareholders’ equity

           5,184       4,909       5,171  

Post-tax impact of non-core items

     3           186       301       (537

Core profit attributable to shareholders’ equity

                       5,370       5,210       4,634  

 

Annual Report and Accounts 2016   Financial Statements   103


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

 

8. DIVIDENDS ON ORDINARY CAPITAL

 

Dividends are recognised on the date that the shareholder’s right to receive payment is established. This is generally the date when the dividend is declared.

 

                 € million                   million                   million  
Dividends on ordinary capital during the year    2016     2015     2014  

NV dividends

     (1,974     (1,862     (1,757

PLC dividends

     (1,626     (1,542     (1,439
       (3,600     (3,404     (3,196

Four quarterly interim dividends were declared and paid during 2016 totalling 1.26 (2015: 1.19) per NV ordinary share and £1.04 (2015: £0.87) per PLC ordinary share.

Quarterly dividends of 0.32 per NV ordinary share and £0.28 per PLC ordinary share were declared on 26 January 2017, to be paid in March 2017. See note 26 ‘Events after the balance sheet date’ on page 130. Total dividends declared in relation to 2016 were 1.28 (2015: 1.21) per NV ordinary share and £1.09 (2015: £0.88) per PLC ordinary share.

 

 

9. GOODWILL AND INTANGIBLE ASSETS

 

GOODWILL

Goodwill is initially recognised based on the accounting policy for business combinations (see note 21). Goodwill is subsequently measured at cost less amounts provided for impairment. The Group’s cash generating units (CGUs) are based on the four product categories and the three geographical areas.

Goodwill acquired in a business combination is allocated to the Group’s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination. These might not always be the same as the CGUs that include the assets and liabilities of the acquired business. Each unit or group of units to which the goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes, and is not larger than an operating segment.

INTANGIBLE ASSETS

Separately purchased intangible assets are initially measured at cost, being the purchase price as at the date of acquisition. On acquisition of new interests in group companies, Unilever recognises any specifically identifiable intangible assets separately from goodwill. These intangible assets are initially measured at fair value as at the date of acquisition.

Development expenditure for internally-produced intangible assets is capitalised only if the costs can be reliably measured, future economic benefits are probable, the product is technically feasible and the Group has the intent and the resources to complete the project. Research expenditure to support development of internally-produced intangible assets is recognised in profit or loss as incurred.

Indefinite-life intangibles mainly comprise trademarks and brands. These assets are not amortised but are subject to a review for impairment annually, or more frequently if events or circumstances indicate this is necessary. Any impairment is charged to the income statement as it arises.

Finite-life intangible assets mainly comprise software, patented and non-patented technology, know-how and customer lists. These assets are amortised on a straight-line basis in the income statement over the period of their expected useful lives, or the period of legal rights if shorter. None of the amortisation periods exceeds ten years.

 

104   Financial Statements    Annual Report on Form 20-F 2016


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9. GOODWILL AND INTANGIBLE ASSETS CONTINUED

 

             € million     € million             € million             € million             € million  
Movements during 2016    Goodwill    

  Indefinite-life

intangible

assets

   

Finite-life

intangible

assets

    Software     Total  

Cost

          

1 January 2016

     17,378       7,444       819       2,538       28,179  

Acquisitions of group companies

     1,140       911       236       -       2,287  

Disposals of group companies

     (2     (83     -       -       (85

Reclassification to held for disposal

     (55     -       -       -       (55

Additions

     -       2       6       225       233  

Disposals

     -       -       (1     (42     (43

Currency retranslation

     328       84       8       (143     277  

31 December 2016

     18,789       8,358       1,068       2,578       30,793  

Accumulated amortisation and impairment

          

1 January 2016

     (1,165     (13     (673     (1,269     (3,120

Amortisation/impairment for the year

     -       -       (19     (291     (310

Disposals

     -       -       1       42       43  

Currency retranslation

     -       -       (7     34       27  

31 December 2016

     (1,165     (13     (698     (1,484     (3,360

Net book value 31 December 2016

     17,624       8,345       370       1,094       27,433  
Movements during 2015                                    

Cost

          

1 January 2015

     15,725       6,364       685       2,136       24,910  

Acquisitions of group companies

     1,012       842       112       -       1,966  

Disposals of group companies

     (5     (42     -       -       (47

Reclassification to held for disposal

     (34     (9     -       -       (43

Additions

     -       3       3       329       335  

Disposals

     -       -       (3     (7     (10

Currency retranslation

     680       286       22       80       1,068  

31 December 2015

     17,378       7,444       819       2,538       28,179  

Accumulated amortisation and impairment

          

1 January 2015

     (1,083     (12     (644     (997     (2,736

Amortisation/impairment for the year

     -       -       (8     (265     (273

Disposals

     -       -       3       7       10  

Currency retranslation

     (82     (1     (24     (14     (121

31 December 2015

     (1,165     (13     (673     (1,269     (3,120

Net book value 31 December 2015

     16,213       7,431       146       1,269       25,059  

There are no significant carrying amounts of goodwill and intangible assets that are allocated across multiple cash generating units.

IMPAIRMENT CHARGES

We have tested all material goodwill and indefinite-life intangible assets for impairment. No impairments were identified.

SIGNIFICANT CGUs

The goodwill and indefinite-life intangible assets held in the three CGUs relating to Foods across the geographical areas and Personal Care The Americas are considered significant within the total carrying amounts of goodwill and indefinite-life intangible assets at 31 December 2016 in terms of size, headroom and sensitivity to assumptions used. No other CGUs are considered significant in this respect.

The goodwill and indefinite-life intangible assets held in the significant CGUs are:

 

     € billion      € billion       billion       billion  
     2016      2016      2015      2015  
                Goodwill     

Indefinite-

life

    intangibles

             Goodwill     

Indefinite-

life

    intangibles

 

Foods Europe

     5.8        1.6        6.0        1.6  

Foods The Americas

     3.9        1.6        3.7        1.6  

Foods Asia/AMET/RUB

     1.8        0.5        1.6        0.5  

Personal Care The Americas

     2.8        1.7        2.1        1.6  

Value in use has been calculated as the present value of projected cash flows. A pre-tax discount rate of 7.4% (2015: 7.4%) was used.

 

Annual Report on Form 20-F 2016   Financial Statements   105


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

9. GOODWILL AND INTANGIBLE ASSETS CONTINUED

For the significant CGUs, the following key assumptions were used in the discounted cash flow projections:

 

     Foods      Foods      Foods        Personal Care  
                Europe     

The

          Americas

    

Asia/

        AMET/RUB

    

The

Americas

 

Longer-term sustainable growth rates

     0.4%        1.2%        4.3%        1.2%  

Average near-term nominal growth rates

     -1.3%        3.0%        5.6%        6.3%  

Average operating margins

     16%        15%        9%        17%  

The projections cover a period of five years, as we believe this to be the most appropriate timescale over which to review and consider annual performances before applying a fixed terminal value multiple to the final year cash flows.

The growth rates and margins used to estimate future performance are based on the conservative end of the range of estimates from past performance, our annual forecast and three year strategic plan extended to year 4 and 5.

We have performed sensitivity analyses around the base assumptions. There are no reasonably possible changes in a key assumption that would cause the carrying amount to exceed recoverable amount.

 

 

10. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment is measured at cost including eligible borrowing costs less depreciation and accumulated impairment losses.

Depreciation is provided on a straight-line basis over the expected average useful lives of the assets. Residual values are reviewed at least annually. Estimated useful lives by major class of assets are as follows:

 

•    Freehold buildings (no depreciation on freehold land)    40 years
•    Leasehold land and buildings    40 years (or life of lease if less)
•    Plant and equipment    2–20 years

Property, plant and equipment is subject to review for impairment if triggering events or circumstances indicate that this is necessary. If an indication of impairment exists, the asset’s or cash generating unit’s recoverable amount is estimated and any impairment loss is charged to the income statement as it arises.

 

     € million     € million               € million  
     Land and     Plant and        
Movements during 2016              buildings               equipment     Total  

Cost

      

1 January 2016

     4,551       15,366       19,917  

Acquisitions of group companies

     -       13       13  

Disposals of group companies

     (1     (11     (12

Additions

     358       1,553       1,911  

Disposals

     (84     (521     (605

Currency retranslation

     23       64       87  

Reclassification as held for sale

     (102     (2     (104

31 December 2016

     4,745       16,462       21,207  

Accumulated amortisation and impairment

      

1 January 2016

     (1,443     (7,416     (8,859

Disposals of group companies

     1       7       8  

Depreciation charge for the year

     (149     (1,005     (1,154

Disposals

     56       332       388  

Currency retranslation

     5       (15     (10

Reclassification as held for sale

     47       46       93  

31 December 2016

     (1,483     (8,051     (9,534

Net book value 31 December 2016 (a)

     3,262       8,411       11,673  

Includes payments on account and assets in course of construction

     189       1,236       1,425  

 

(a)   Includes 249 million (2015: 270 million) of freehold land.

The Group has commitments to purchase property, plant and equipment of 478 million (2015: 535 million).

 

106   Financial Statements    Annual Report on Form 20-F 2016


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10. PROPERTY, PLANT AND EQUIPMENT CONTINUED

 

     € million     € million               € million  
     Land and     Plant and        
Movements during 2015              buildings               equipment     Total  

Cost

      

1 January 2015

     4,200       14,714       18,914  

Acquisitions of group companies

     40       13       53  

Disposals of group companies

     -       (5     (5

Additions

     369       1,513       1,882  

Disposals

     (64     (723     (787

Currency retranslation

     37       (5     32  

Reclassification as held for sale

     (31     (141     (172

31 December 2015

     4,551       15,366       19,917  

Accumulated depreciation

      

1 January 2015

     (1,346     (7,096     (8,442

Disposals of group companies

     -       2       2  

Depreciation charge for the year

     (120     (977     (1,097

Disposals

     31       620       651  

Currency retranslation

     (29     (29     (58

Reclassification as held for sale

     21       64       85  

31 December 2015

     (1,443     (7,416     (8,859

Net book value 31 December 2015

     3,108       7,950       11,058  

Includes payments on account and assets in course of construction

     217       1,334       1,551  

 

 

11. OTHER NON-CURRENT ASSETS

 

Joint ventures are undertakings in which the Group has an interest and which are jointly controlled by the Group and one or more other parties. Associates are undertakings where the Group has an investment in which it does not have control or joint control but can exercise significant influence.

Interests in joint ventures and associates are accounted for using the equity method and are stated in the consolidated balance sheet at cost, adjusted for the movement in the Group’s share of their net assets and liabilities. The Group’s share of the profit or loss after tax of joint ventures and associates is included in the Group’s consolidated profit before taxation.

Where the Group’s share of losses exceeds its interest in the equity accounted investee, the carrying amount of the investment is reduced to zero and the recognition of further losses is discontinued, except to the extent that the Group has an obligation to make payments on behalf of the investee.

Biological assets are measured at fair value less costs to sell with any changes recognised in the income statement.

 

               € million                  million  
      2016      2015  

Interest in net assets of joint ventures

     36        48  

Interest in net assets of associates

     51        59  

Long-term trade and other receivables

     421        413  

Fair value of biological assets

     51        48  

Other non-current assets (a)

     159        203  
       718        771  

 

(a)   Mainly relate to assets held in escrow for the UK pension fund and tax assets.

 

Annual Report on Form 20-F 2016   Financial Statements   107


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

11. OTHER NON-CURRENT ASSETS CONTINUED

 

               € million                 million  
Movements during 2016 and 2015    2016     2015  

Joint ventures (a)

    

1 January

     48       52  

Additions

     24       4  

Dividends received/reductions

     (151     (137

Share of net profit/(loss)

     130       117  

Currency retranslation

     (15     12  

31 December

     36       48  

Associates (b)

    

1 January

     59       42  

Additions

     7       24  

Dividend received/reductions

     (8     -  

Share of net profit/(loss)

     (3     (10

Currency retranslation

     (4     3  

31 December

     51       59  

 

(a)   Our principal joint ventures are Unilever Jerónimo Martins for Portugal, the Pepsi/Lipton Partnership for the US and Pepsi Lipton International for the rest of the world.
(b)   Associates as at 31 December 2016 primarily comprise our investments in Langholm Capital Partners. Other Unilever Ventures assets are included under ‘Other non-current non-financial assets’. In 2015 we sold shares in an associate (carrying value zero) for consideration of 110 million.

The joint ventures and associates have no significant contingent liabilities to which the Group is exposed, and the Group has no significant contingent liabilities in relation to its interests in the joint ventures and associates.

The Group has no outstanding capital commitments to joint ventures.

Outstanding balances with joint ventures and associates are shown in note 23 on page 129.

 

 

12. INVENTORIES

 

Inventories are valued at the lower of weighted average cost and net realisable value. Cost comprises direct costs and, where appropriate, a proportion of attributable production overheads. Net realisable value is the estimated selling price less the estimated costs necessary to make the sale.

 

               € million                  million  
Inventories    2016      2015  

Raw materials and consumables

     1,385        1,381  

Finished goods and goods for resale

     2,893        2,954  
       4,278        4,335  

Inventories with a value of 110 million (2015: 100 million) are carried at net realisable value, this being lower than cost. During 2016, 113 million (2015: 119 million) was charged to the income statement for damaged, obsolete and lost inventories. In 2016, 113 million (2015: 123 million) was utilised or released to the income statement from inventory provisions taken in earlier years.

 

 

13. TRADE AND OTHER CURRENT RECEIVABLES

 

Trade and other receivables are initially recognised at fair value plus any directly attributable transaction costs. Subsequently these assets are held at amortised cost, using the effective interest method and net of any impairment losses.

We do not consider the fair values of trade and other receivables to be significantly different from their carrying values. Concentrations of credit risk with respect to trade receivables are limited, due to the Group’s customer base being large and diverse. Our historical experience of collecting receivables, supported by the level of default, is that credit risk is low across territories and so trade receivables are considered to be a single class of financial assets. Balances are considered for impairment on an individual basis rather than by reference to the extent that they become overdue.

 

108   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

13. TRADE AND OTHER CURRENT RECEIVABLES CONTINUED

 

               € million                  million  
Trade and other current receivables    2016      2015  

Due within one year

     

Trade receivables

     3,329        2,917  

Prepayments and accrued income

     504        561  

Other receivables

     1,269        1,326  
       5,102        4,804  

Other receivables comprise financial assets of 396 million (2015: 379 million), and non-financial assets of 873 million (2015: 947 million). Financial assets include supplier and customer deposits, employee advances and certain derivatives. Non-financial assets mainly consist of reclaimable sales tax.

 

               € million                 million  
Ageing of trade receivables    2016     2015  

Total trade receivables

     3,472       3,047  

Less impairment provision for trade receivables

     (143     (130
     3,329       2,917  

Of which:

    

Not overdue

     2,537       2,200  

Past due less than three months

     666       634  

Past due more than three months but less than six months

     102       73  

Past due more than six months but less than one year

     69       52  

Past due more than one year

     98       88  

Impairment provision for trade receivables

     (143     (130
       3,329       2,917  
     € million      million  
Impairment provision for trade and other receivables – current and non-current impairments    2016     2015  

1 January

     155       145  

Charged to income statement

     42       38  

Reductions/releases

     (35     (25

Currency retranslation

     4       (3

31 December

     166       155  

 

 

14. TRADE PAYABLES AND OTHER LIABILITIES

 

Trade payables and other liabilities are initially recognised at fair value less any directly attributable transaction costs. Trade payables and accruals are subsequently measured at amortised cost, using the effective interest method. Other liabilities are subsequently measured either at amortised cost, using the effective interest method or at fair value, with changes being recognised in the income statement.

We do not consider the fair values of trade payables and other liabilities to be significantly different from their carrying values.

 

               € million                  million  
Trade payables and other liabilities    2016      2015  

Due within one year

     

Trade payables

     8,591        8,296  

Accruals

     3,655        3,616  

Social security and sundry taxes

     468        559  

Others

     1,157        1,317  
     13,871        13,788  

Due after more than one year

     

Accruals

     159        120  

Others

     508        273  
     667        393  

Total trade payables and other liabilities

     14,538        14,181  

Included in others is deferred consideration on acquisitions, third party royalties, certain derivatives and dividends to non-controlling interests.

 

Annual Report on Form 20-F 2016   Financial Statements   109


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

 

15. CAPITAL AND FUNDING

 

ORDINARY SHARES

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

INTERNAL HOLDINGS

The ordinary shares numbered 1 to 2,400 (inclusive) in NV (‘Special Shares’) and deferred stock of PLC are held as to one half of each class by N.V. Elma – a subsidiary of NV – and one half by United Holdings Limited – a subsidiary of PLC. This capital is eliminated on consolidation.

SHARE-BASED COMPENSATION

The Group operates a number of share-based compensation plans involving options and awards of ordinary shares of NV and PLC. Full details of these plans are given in note 4C on pages 99 to 100.

OTHER RESERVES

Other reserves include the fair value reserve, the foreign currency translation reserve, the capital redemption reserve and treasury stock.

SHARES HELD BY EMPLOYEE SHARE TRUSTS AND GROUP COMPANIES

Certain PLC trusts, NV and group companies purchase and hold NV and PLC shares to satisfy performance shares granted, share options granted and other share awards (see note 4C). The assets and liabilities of these trusts and shares held by group companies are included in the consolidated financial statements. The book value of shares held is deducted from other reserves, and trusts’ borrowings are included in the Group’s liabilities. The costs of the trusts are included in the results of the Group. These shares are excluded from the calculation of earnings per share.

FINANCIAL LIABILITIES

Financial liabilities are initially recognised at fair value, less any directly related transaction costs. Certain bonds are designated as being part of a fair value hedge relationship. In these cases, the bonds are carried at amortised cost, adjusted for the fair value of the risk being hedged, with changes in value shown in profit and loss. Other financial liabilities, excluding derivatives, are subsequently carried at amortised cost.

DERIVATIVE FINANCIAL INSTRUMENTS

The Group’s use of, and accounting for, derivative instruments is explained in note 16 on page 115 and on pages 119 to 120.

The Group’s Treasury activities are designed to:

  maintain a competitive balance sheet in line with A+/A1 rating (see below);
  secure funding at lowest costs for the Group’s operations, M&A activity and external dividend payments (see below);
  protect the Group’s financial results and position from financial risks (see note 16);
  maintain market risks within acceptable parameters, while optimising returns (see note 16); and
  protect the Group’s financial investments, while maximising returns (see note 17).

The Treasury department provides central deposit taking, funding and foreign exchange management services for the Group’s operations. The department is governed by standards and processes which are approved by Unilever Leadership Executive (ULE). In addition to guidelines and exposure limits, a system of authorities and extensive independent reporting covers all major areas of activity. Performance is monitored closely by senior management. Reviews are undertaken periodically by corporate audit.

Key instruments used by the department are:

 

  short-term and long-term borrowings;
  cash and cash equivalents; and
  plain vanilla derivatives, including interest rate swaps and foreign exchange contracts.

The Treasury department maintains a list of approved financial instruments. The use of any new instrument must be approved by the Chief Financial Officer. The use of leveraged instruments is not permitted.

 

110   Financial Statements    Annual Report on Form 20-F 2016


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15. CAPITAL AND FUNDING CONTINUED

Unilever considers the following components of its balance sheet to be managed capital:

  total equity – retained profit, other reserves, share capital, share premium, non-controlling interests (notes 15A and 15B);
  short-term debt – current financial liabilities (note 15C); and
  long-term debt – non-current bank loans, bonds and other loans (note 15C).

The Group manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to our shareholders through an appropriate balance of debt and equity. The capital structure of the Group is based on management’s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. We consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets.

Our current long-term credit rating is A+/A1 and our short-term credit rating is A1/P1. We aim to maintain a competitive balance sheet which we consider to be the equivalent of a credit rating of A+/A1 in the long-term. This provides us with:

 

  appropriate access to the debt and equity markets;
  sufficient flexibility for acquisitions;
  sufficient resilience against economic and financial uncertainty while ensuring ample liquidity; and
  optimal weighted average cost of capital, given the above constraints.

Unilever monitors the qualitative and quantitative factors utilised by the rating agencies. This information is publicly available and is updated by the credit rating agencies on a regular basis.

Unilever will take appropriate steps in order to maintain, or if necessary adjust, its capital structure. Unilever is not subject to financial covenants in any of its significant financing agreements.

15A. SHARE CAPITAL

 

           Issued,           Issued,  
           called up           called up  
           and           and  
           Authorised (a)               fully paid (b)             Authorised (a)               fully paid (b)  
      2016     2016     2015     2015  
Unilever N.V.    € million     € million      million      million  

NV ordinary shares of 0.16 each

     480       274       480       274  

NV ordinary shares of 428.57 each (shares numbered 1 to 2,400 – ‘Special Shares’)

     1       1       1       1  

Internal holdings eliminated on consolidation ( 428.57 shares)

     -       (1     -       (1
       481       274       481       274  
Unilever PLC          £ million           £ million  

PLC ordinary shares of 3 1 / 9 p each

       40.8         40.8  

PLC deferred stock of £1 each

       0.1         0.1  

Internal holding eliminated on consolidation (£1 stock)

       (0.1       (0.1
       40.8         40.8  
           € million            million  

Euro equivalent in millions (at £1.00 = 5.143) (c)

             210               210  
Unilever Group          € million            million  

Ordinary share capital of NV

       274         274  

Ordinary share capital of PLC

       210         210  
               484               484  

 

(a)   At 31 December 2016, Unilever N.V. had 3,000,000,000 (2015: 3,000,000,000) authorised ordinary shares. The requirement for a UK company to have an authorised share capital was abolished by the UK Companies Act 2006. In May 2010 Unilever PLC shareholders approved new Articles of Association to reflect this.
(b)   At 31 December 2016, the following quantities of shares were in issue: 1,714,727,700 of NV ordinary shares; 2,400 of NV Special Shares; 1,310,156,361 of PLC ordinary shares and 100,000 of PLC deferred stock. The same quantities were in issue at 31 December 2015.
(c)   Conversion rate for PLC ordinary shares nominal value to euros is £1 = 5.143 (which is calculated by dividing the nominal value of NV ordinary shares by the nominal value of PLC ordinary shares).

For information on the rights of shareholders of NV and PLC and the operation of the Equalisation Agreement, see the Corporate Governance report on pages 29 to 35.

A nominal dividend of 6% per annum is paid on the deferred stock of PLC.

 

Annual Report on Form 20-F 2016   Financial Statements   111


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

15B. EQUITY

BASIS OF CONSOLIDATION

Unilever is the majority shareholder of all material subsidiaries and has control in all cases. Information in relation to group companies is provided on pages 131 to 143.

SUBSIDIARIES WITH SIGNIFICANT NON-CONTROLLING INTERESTS

Unilever has one subsidiary company which has a material non-controlling interest, Hindustan Unilever Limited (HUL). Summary financial information in relation to HUL is shown below.

 

               € million                 million  
HUL Balance sheet as at 31 December    2016     2015  

Non-current assets

     791       649  

Current assets

     1,160       1,265  

Current liabilities

     (980     (968

Non-current liabilities

     (110     (125
HUL Comprehensive income for the year ended 31 December               

Turnover

     4,084       4,212  

Profit after tax

     475       438  

Total comprehensive income

     484       484  
HUL Cash flow for the year ended 31 December               

Net increase/(decrease) in cash and cash-equivalents

     14       (107
HUL Non-controlling interest               

1 January

     (271     (258

Share of (profit)/loss for the year ended 31 December

     (157     (143

Other comprehensive income

     (8     (10

Dividend paid to the non-controlling interest

     157       152  

Other changes in equity

     -       -  

Currency translation

     (3     (12

31 December

     (282     (271

ANALYSIS OF RESERVES FOR THE GROUP

 

             € million               million             million  
     Total     Total     Total  
      2016     2015     2014  

Fair value reserves

     (113     (98     (198

Cash flow hedges

     (168     (174     (234

Available-for-sale financial assets

     55       76       36  

Currency retranslation of group companies

     (3,034     (3,285     (2,901

Adjustment on translation of PLC’s ordinary capital at 3 1 / 9 p = 0.16

     (164     (164     (164

Capital redemption reserve

     32       32       32  

Book value of treasury stock

     (4,164     (4,119     (4,125

Other (a)

     -       (182     (182
       (7,443     (7,816     (7,538

 

(a)   Relates to option on purchase of subsidiary for non-controlling interest.

Unilever acquired 3,902,584 (2015: 3,342,212) NV ordinary shares and 2,268,600 (2015: 2,102,300) PLC shares through purchases on the stock exchanges during the year. These shares are held as treasury stock as a separate component of other reserves. The total number held at 31 December 2016 was 151,953,411 (2015: 152,638,561) NV shares and 33,241,009 (2015: 33,391,209) PLC shares. Of these, 10,392,782 NV shares and 6,544,015 PLC shares were held in connection with share-based compensation plans (see note 4C on pages 99 to 100).

 

112   Financial Statements    Annual Report on Form 20-F 2016


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15B. EQUITY CONTINUED

 

               € million                 million  
Treasury stock – movements during the year    2016     2015  

1 January

     (4,119     (4,125

Purchases and other utilisations

     (45     6  

31 December

     (4,164     (4,119
     € million      million  
Currency retranslation reserve – movements during the year    2016     2015  

1 January

     (3,285     (2,901

Currency retranslation during the year

     599       (1,001

Movement in net investment hedges and exchange differences in net investments in foreign operations

     (365     617  

Recycled to income statement

     17       -  

31 December

     (3,034     (3,285
OTHER COMPREHENSIVE INCOME RECONCILIATION     
     € million      million  
Fair value gains/(losses) on financial instruments – movement during the year    2016     2015  

1 January

     (98     (198

Cash flow hedges

     6       60  

Available for sale financial assets

     (21     40  

31 December

     (113     (98

Refer to the consolidated statement of comprehensive income on page 84, the consolidated statement of changes in equity on page 85, and note 6C on page 103.

 

               € million                 million  
Remeasurement of defined benefit pension plans net of tax    2016     2015  

1 January

     (1,473     (2,357

Movement during the year

     (980     884  

31 December

     (2,453     (1,473

Refer to the consolidated statement of comprehensive income on page 84, the consolidated statement of changes in equity on page 85, note 4B from page 94 to 99 and note 6C on page 103.

 

               € million                 million  
Currency retranslation gains/(losses) – movement during the year    2016     2015  

1 January

     (3,512     (3,031

Currency retranslation during the year:

    

Other reserves

     189       (377

Retained profit

     17       (109

Non-controlling interest

     11       5  

31 December

     (3,295     (3,512

 

Annual Report on Form 20-F 2016   Financial Statements   113


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

15C. FINANCIAL LIABILITIES

 

                           € million      € million              € million                million       million                million  
                   Current        Non-current      Total      Current        Non-current      Total  
Financial liabilities 2016 (a)(b)    Notes              2016      2016      2016      2015      2015      2015  

Preference shares

           -        68        68        -        68        68  

Bank loans and overdrafts

           899        247        1,146        762        302        1,064  

Bonds and other loans

           4,367        10,686        15,053        3,583        9,120        12,703  

Finance lease creditors

     20           9        134        143        37        158        195  

Derivatives

           175        10        185        118        6        124  

Other financial liabilities

           -        -        -        289        200        489  
                         5,450        11,145        16,595        4,789        9,854        14,643  

 

(a)   For the purposes of notes 15C and 17A, financial assets and liabilities exclude trade and other current receivables and trade payables and other liabilities which are covered in notes 13 and 14 respectively.
(b)   Financial liabilities include 2 million (2015: 4 million) of secured liabilities.

ANALYSIS OF BONDS AND OTHER LOANS

 

               € million           million  
     Total     Total  
      2016     2015  

Unilever N.V.

    

Floating Rate Notes 2018 ( )

     749       749  

1.750% Bonds 2020 ( )

     748       747  

0.500% Notes 2022 ( )

     743       742  

1.125% Bonds 2028 ( )

     692       -  

1.000% Notes 2023 ( )

     496       495  

0.500% Notes 2024 ( )

     492       -  

0.000% Notes 2020 ( )

     299       -  

2.950% Notes 2017 (Renminbi)

     41       42  

Commercial paper

     819       1,551  

Total NV

     5,079       4,326  

Unilever PLC

    

4.750% Bonds 2017 (£)

     466       542  

2.000% Notes 2018 (£)

     294 (c)       339 (c)  

Commercial paper

     373       -  

Total PLC

     1,133       881  

Other group companies

    

Switzerland

    

Other

     -       29  

United States

    

4.250% Notes 2021 (US$)

     950       912  

5.900% Bonds 2032 (US$)

     942       904  

4.800% Bonds 2019 (US$)

     714       686  

2.200% Notes 2019 (US$)

     711       681  

2.000% Notes 2026 (US$)

     655       -  

0.850% Notes 2017 (US$)

     524       502  

1.375% Notes 2021 (US$)

     519       -  

2.100% Notes 2020 (US$)

     474       454  

3.100% Notes 2025 (US$)

     470       451  

7.250% Bonds 2026 (US$)

     276       265  

6.625% Bonds 2028 (US$)

     216       206  

5.150% Notes 2020 (US$)

     149       145  

7.000% Bonds 2017 (US$)

     142       136  

5.600% Bonds 2097 (US$)

     87       84  

2.750% Notes 2016 (US$)

     -       458  

Commercial paper (US$)

     1,892       1,532  

Other countries

     120       51  

Total other group companies

     8,841       7,496  

Total bonds and other loans

     15,053       12,703  

 

(c)   Of which 3 million (2015: 1 million) relates to a fair value adjustment following the fair value hedge accounting of a fix-to-float interest rate swap.

Information in relation to the derivatives used to hedge bonds and other loans within a fair value hedge relationship is shown in note 16.

 

114   Financial Statements    Annual Report on Form 20-F 2016


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16. TREASURY RISK MANAGEMENT

 

DERIVATIVES AND HEDGE ACCOUNTING

Derivatives are measured at fair value with any related transaction costs expensed as incurred. The treatment of changes in the value of derivatives depends on their use as explained below.

(I) FAIR VALUE HEDGES (a)

Certain derivatives are held to hedge the risk of changes in value of a specific bond or other loan. In these situations, the Group designates the liability and related derivative to be part of a fair value hedge relationship. The carrying value of the bond is adjusted by the fair value of the risk being hedged, with changes going to the income statement. Gains and losses on the corresponding derivative are also recognised in the income statement. The amounts recognised are offset in the income statement to the extent that the hedge is effective. When the relationship no longer meets the criteria for hedge accounting, the fair value hedge adjustment made to the bond is amortised to the income statement using the effective interest method.

(II) CASH FLOW HEDGES (a)

Derivatives are also held to hedge the uncertainty in timing or amount of future forecast cash flows. Such derivatives are classified as being part of cash flow hedge relationships. For an effective hedge, gains and losses from changes in the fair value of derivatives are recognised in equity. Any ineffective elements of the hedge are recognised in the income statement. If the hedged cash flow relates to a non-financial asset, the amount accumulated in equity is subsequently included within the carrying value of that asset. For other cash flow hedges, amounts deferred in equity are taken to the income statement at the same time as the related cash flow.

When a derivative no longer qualifies for hedge accounting, any cumulative gain or loss remains in equity until the related cash flow occurs. When the cash flow takes place, the cumulative gain or loss is taken to the income statement. If the hedged cash flow is no longer expected to occur, the cumulative gain or loss is taken to the income statement immediately.

(III) NET INVESTMENT HEDGES (a)

Certain derivatives are designated as hedges of the currency risk on the Group’s investment in foreign subsidiaries. The accounting policy for these arrangements is set out in note 1.

(IV) DERIVATIVES FOR WHICH HEDGE ACCOUNTING IS NOT APPLIED

Derivatives not classified as hedges are held in order to hedge certain balance sheet items and commodity exposures. No hedge accounting is applied to these derivatives, which are carried at fair value with changes being recognised in the income statement.

 

(a)   Applying hedge accounting has not led to material ineffectiveness being recognised in the income statement for both 2016 and 2015.

The Group is exposed to the following risks that arise from its use of financial instruments, the management of which is described in the following sections:

  liquidity risk (see note 16A);
  market risk (see note 16B); and
  credit risk (see note 17B).

16A. MANAGEMENT OF LIQUIDITY RISK

Liquidity risk is the risk that the Group will face in meeting its obligations associated with its financial liabilities. The Group’s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the Group’s credit rating, impair investor confidence and also restrict the Group’s ability to raise funds.

The Group maintained a cautious funding strategy, with a positive cash balance throughout 2015. This was the result of cash delivery from the business, coupled with the proceeds from bond issuances. This cash has been invested conservatively with low risk counter-parties at maturities of less than six months.

Cash flow from operating activities provides the funds to service the financing of financial liabilities on a day-to-day basis. The Group seeks to manage its liquidity requirements by maintaining access to global debt markets through short-term and long-term debt programmes. In addition, Unilever has committed credit facilities for general corporate use.

On 31 December 2016 Unilever had undrawn revolving 364-day bilateral credit facilities in aggregate of US$6,550 million (2015: US$6,550 million) with a 364-day term out. As part of the regular annual process, the intention is that these facilities will again be renewed in 2017.

 

Annual Report on Form 20-F 2016   Financial Statements   115


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

16A. MANAGEMENT OF LIQUIDITY RISK CONTINUED

The following table shows Unilever’s contractually agreed undiscounted cash flows, including expected interest payments, which are payable under financial liabilities at the balance sheet date:

 

          € million     € million     € million     € million     € million     € million     € million     € million  
                                                    Net  
                                                    carrying  
                Due     Due     Due     Due                 amount as  
          Due     between     between     between     between     Due           shown in  
          within     1 and     2 and     3 and     4 and     after           balance  
Undiscounted cash flows    Notes        1 year     2 years     3 years     4 years     5 years     5 years     Total     sheet  

2016

                   

Non-derivative financial liabilities:

                   

Preference shares

        (4     (4     (4     (4     (4     (72     (92     (68

Bank loans and overdrafts

        (909     (4     (243     -       -       -       (1,156     (1,146

Bonds and other loans

        (4,700     (1,335     (1,669     (1,882     (1,634     (6,733     (17,953     (15,053

Finance lease creditors

   20          (24     (18     (18     (17     (16     (127     (220     (143

Other financial liabilities

        -       -       -       -       -       -       -       -  

Trade payables excluding social
security and sundry taxes

   14          (13,156     (125     -       -       -       -       (13,281     (13,476

Deferred consideration

        (247     (18     (24     -       (490     (10     (789     (594

Issued financial guarantees

        -       -       -       -       -       -       -       -  
        (19,040     (1,504     (1,958     (1,903     (2,144     (6,942     (33,491     (30,480

Derivative financial liabilities:

                   

Interest rate derivatives:

                   

Derivative contracts – receipts

        56       420       -       -       -       -       476    

Derivative contracts – payments

        (70     (429     -       -       -       -       (499  

Foreign exchange derivatives:

                   

Derivative contracts – receipts

        9,263       -       -       -       -       -       9,263    

Derivative contracts – payments

        (9,580     -       -       -       -       -       (9,580  

Commodity derivatives:

                   

Derivative contracts – receipts

        -       -       -       -       -       -       -    

Derivative contracts – payments

        (3     -       -       -       -       -       (3        
        (334     (9     -       -       -       -       (343     (331

Total

          (19,374     (1,513     (1,958     (1,903     (2,144     (6,942     (33,834     (30,811

2015

                   

Non-derivative financial liabilities:

                   

Preference shares

        (4     (4     (4     (4     (4     (72     (92     (68

Bank loans and overdrafts

        (741     (337     -       -       -       -       (1,078     (1,064

Bonds and other loans

        (3,912     (1,493     (1,331     (1,567     (1,519     (5,509     (15,331     (12,703

Finance lease creditors

   20          (51     (25     (22     (20     (18     (166     (302     (195

Other financial liabilities

        (289     -       -       -       -       (200     (489     (489

Trade payables excluding social

   14          (13,205     (235     -       -       -       -       (13,440     (13,442

security and sundry taxes

                   

Deferred consideration

        (23     (158     -       -       -       -       (181     (179

Issued financial guarantees

        (15     -       -       -       -       -       (15     -  
        (18,240     (2,252     (1,357     (1,591     (1,541     (5,947     (30,928     (28,141

Derivative financial liabilities:

                   

Interest rate derivatives:

                   

Derivative contracts – receipts

        (255     (65     (125     -       -       -       (445  

Derivative contracts – payments

        198       60       124       -       -       -       382    

Foreign exchange derivatives:

                   

Derivative contracts – receipts

        5,686       -       -       -       -       -       5,686    

Derivative contracts – payments

        (5,817     -       -       -       -       -       (5,817  

Commodity derivatives:

                   

Derivative contracts – receipts

        -       -       -       -       -       -       -    

Derivative contracts – payments

        (11     -       -       -       -       -       (11        
        (199     (5     (1     -       -       -       (205     (194

Total

          (18,439     (2,257     (1,358     (1,591     (1,541     (5,947     (31,133     (28,334

 

116   Financial Statements    Annual Report on Form 20-F 2016


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16A. MANAGEMENT OF LIQUIDITY RISK CONTINUED

The following table shows cash flows for which cash flow hedge accounting is applied. The derivatives in the cash flow hedge relationships are expected to have an impact on profit and loss in the same periods as the cash flows occur.

 

     € million     € million     € million     € million      € million      € million      € million     € million  
                                                  Net  
           Due     Due     Due      Due                   carrying  
     Due     between     between     between      between      Due            amount of  
     within     1 and 2     2 and 3     3 and 4      4 and 5      after            related  
       1 year       years       years       years        years        5 years        Total       derivatives (a)  

2016

                   

Foreign exchange cash inflows

     2,863       -       -       -        -        -        2,863    

Foreign exchange cash outflows

     (2,905     -       -       -        -        -        (2,905     (40

Interest rate cash flows

     4       (6     -       -        -        -        (2     -  

Commodity contracts cash flows

     (3     -       -       -        -        -        (3     18  

2015

                   

Foreign exchange cash inflows

     2,884       6       348       -        -        -        3,238    

Foreign exchange cash outflows

     (2,883     -       (300     -        -        -        (3,183     41  

Interest rate cash flows

     (2     (1     -       -        -        -        (3     (1

Commodity contracts cash flows

     (11     -       -       -        -        -        (11     (5

 

(a)   See note 16C.

16B. MANAGEMENT OF MARKET RISK

Unilever’s size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:

  commodity price risk;
  currency risk; and
  interest rate risk.

The above risks may affect the Group’s income and expenses, or the value of its financial instruments. The objective of the Group’s management of market risk is to maintain this risk within acceptable parameters, while optimising returns. Generally, the Group applies hedge accounting to manage the volatility in profit and loss arising from market risk.

The Group’s exposure to, and management of, these risks is explained below. It often includes derivative financial instruments, the uses of which are described in note 16C.

 

     
POTENTIAL IMPACT OF RISK  

MANAGEMENT POLICY AND

HEDGING STRATEGY

 

   SENSITIVITY TO THE RISK
     

(I) COMMODITY PRICE RISK

The Group is exposed to the risk of changes in commodity prices in relation to its purchase of certain raw materials.

 

At 31 December 2016, the Group had hedged its exposure to future commodity purchases with commodity derivatives valued at 441 million (2015: 221 million).

 

    

The Group uses commodity forward contracts to hedge against this risk. All commodity forward contracts hedge future purchases of raw materials and the contracts are settled either in cash or by physical delivery.

 

Commodity derivatives are generally designated as hedging instruments in cash flow hedge accounting relations. All commodity forward contracts are done in line with approvals from the Global Commodity Executive which is chaired by the Unilever Chief Supply Chain Officer (CSCO).

 

  

    

A 10% increase in commodity prices as at 31 December 2016 would have led to a 46 million gain on the commodity derivatives in the cash flow hedge reserve (2015: 22 million gain in the cash flow hedge reserve). A decrease of 10% in commodity prices on a full-year basis would have the equal but opposite effect.

     

(II) CURRENCY RISK

Currency risk on sales, purchases and borrowings

Because of Unilever’s global reach, it is subject to the risk that changes in foreign currency values impact the Group’s sales, purchases and borrowings.

 

At 31 December 2016, the exposure to the Group from companies holding financial assets and liabilities other than in their functional currency amounted to 76 million (2015: 60 million).

 

    

The Group manages currency exposures within prescribed limits, mainly through the use of forward foreign currency exchange contracts.

 

Operating companies manage foreign exchange exposures within prescribed limits. Local compliance is monitored centrally.

 

Exchange risks related to the principal amounts of the US$ and Swiss franc denominated debt either form part of hedging relationships themselves, or are hedged through forward contracts.

 

The aim of the Group’s approach to management of currency risk is to leave the Group with no material residual risk. This aim has been achieved in all years presented.

 

  

    

As an estimation of the approximate impact of the residual risk, with respect to financial instruments, the Group has calculated the impact of a 10% change in exchange rates.

 

Impact on income statement

A 10% strengthening of the euro against key currencies to which the Group is exposed would have led to approximately an additional 7 million gain in the income statement (2015: 6 million gain). A 10% weakening of the euro against these currencies would have led to an equal but opposite effect.

 

Annual Report on Form 20-F 2016   Financial Statements   117


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

16B. MANAGEMENT OF MARKET RISK CONTINUED

 

     
POTENTIAL IMPACT OF RISK  

MANAGEMENT POLICY AND

HEDGING STRATEGY

 

  SENSITIVITY TO THE RISK
     

Currency risk on the Group’s net investments

The Group is also subject to exchange risk in relation to the translation of the net investments of its foreign operations into euros for inclusion in its consolidated financial statements.

 

These net investments include Group financial loans, which are monetary items that form part of our net investment in foreign operations, of 7.9 billion (2015: 8.2 billion), of which 3.5 billion (2015: 4.1 billion) is denominated in GBP. In accordance with IAS 21, the exchange differences on these financial loans are booked through reserves.

 

Part of the currency exposure on the Group’s investments is also managed using US$ and Swiss franc net investment hedges with a nominal value of 3.5 billion (2015: 3.9 billion) for US$ and (0.9) billion (2015: nil) for Swiss francs.

 

At 31 December 2016, the net exposure of the net investments in foreign currencies amounts to 11.1 billion (2015: 11.3 billion).

 

Unilever aims to minimise this foreign investment exchange exposure by borrowing in local currency in the operating companies themselves. In some locations, however, the Group’s ability to do this is inhibited by local regulations, lack of local liquidity or by local market conditions.

 

Where the residual risk from these countries exceeds prescribed limits, Treasury may decide on a case-by-case basis to actively hedge the exposure. This is done either through additional borrowings in the related currency, or through the use of forward foreign exchange contracts.

 

Where local currency borrowings, or forward contracts, are used to hedge the currency risk in relation to the Group’s net investment in foreign subsidiaries, these relationships are designated as net investment hedges for accounting purposes.

 

Impact on equity – trade-related cash flow hedges

A 10% strengthening of the euro against other currencies would have led to a 17 million (2015: 22 million) loss (of which 51 million (2015: 40 million) loss would relate to strengthening against sterling) on hedges used to cover future trade cash flows to which cash flow hedge accounting is applied. A 10% weakening of the euro against other currencies would have led to a 19 million (2015: 24 million) gain (out of which 56 million (2015: 44 million) gain would relate to strengthening against sterling) on hedges used to cover future trade cash flows to which cash flow hedge accounting is applied.

 

Impact on equity – net investment hedges

A 10% strengthening of the euro against other currencies would have led to a 242 million (2015: 352 million) loss on the net investment hedges used to manage the currency exposure on the Group’s investments. A 10% weakening of the euro against other currencies would have led to a 295 million (2015: 430 million) gain on the net investment hedges used to manage the currency exposure on the Group’s investments.

 

Impact on equity – net investments in group companies

A 10% strengthening of the euro against all other currencies would have led to a 1,008 million negative retranslation effect (2015: 675 million negative retranslation effect). A 10% weakening of the euro against those currencies would have led to a 1,232 million positive retranslation effect (2015: 825 million positive retranslation effect). In line with accepted hedge accounting treatment and our accounting policy for financial loans, the retranslation differences would be recognised in equity.

 

     

(III) INTEREST RATE RISK (a)

The Group is exposed to market interest rate fluctuations on its 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. The Group’s ability to manage interest costs also has an impact on reported results.

 

Taking into account the impact of interest rate swaps, at 31 December 2016, interest rates were fixed on approximately 81% of the expected net debt for 2017, and 71% for 2018 (70% for 2016 and 61% for 2017 at 31 December 2015).

 

For interest management purposes, transactions with a maturity shorter than six months from inception date are not included as fixed interest transactions.

 

The average interest rate on short-term borrowings in 2016 was 0.9% (2015: 0.9%).

 

 

    

Unilever’s interest rate management approach aims for an optimal balance between fixed and floating-rate interest rate exposures on expected net debt. The objective of this approach is to minimise annual interest costs after tax and to reduce volatility.

 

This is achieved either by issuing fixed or floating-rate long-term debt, or by modifying interest rate exposure through the use of interest rate swaps.

 

Furthermore, Unilever has interest rate swaps for which cash flow hedge accounting is applied.

 

    

Assuming that all other variables remain constant, a 1.0 percentage point increase in floating interest rates on a full-year basis as at 31 December 2016 would have led to an additional 11 million of finance costs (2015: 21 million additional finance costs). A 1.0 percentage point decrease in floating interest rates on a full-year basis would have an equal but opposite effect.

 

Assuming that all other variables remain constant, a 1.0 percentage point increase in floating interest rates on a full-year basis as at 31 December 2016 would have led to an additional 1 million debit in equity from derivatives in cash flow hedge relationships (2015: 1 million credit). A 1.0 percentage point decrease in floating interest rates on a full-year basis would have led to an additional 1 million credit in equity from derivatives in cash flow hedge relationships (2015: 1 million debit).

 

(a)   See the weighted average amount of net debt with fixed rate interest shown in the following table.

 

118   Financial Statements    Annual Report on Form 20-F 2016


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16B. MANAGEMENT OF MARKET RISK CONTINUED

The following table shows the split in fixed and floating-rate interest exposures, taking into account the impact of interest rate swaps and cross-currency swaps:

 

     

        € million

2016

   

          million

2015

 

Cash and cash equivalents

     3,382       2,302  

Current other financial assets

     599       836  

Current financial liabilities

     (5,450     (4,789

Non-current financial liabilities

     (11,145     (9,854

Net debt

     (12,614     (11,505

Of which:

    

Fixed rate (weighted average amount of fixing for the following year)

     (11,539     (9,429

16C. DERIVATIVES AND HEDGING

The Group does not use derivative financial instruments for speculative purposes. The uses of derivatives and the related values of derivatives are summarised in the following table. Derivatives used to hedge:

 

     € million      € million            € million      € million     € million            € million  
                         Trade            Non-               
     Trade                   payables      Current     current               
     and other      Financial            and other      financial     financial               
      receivables      assets             liabilities      liabilities     liabilities             Total  
                    

31 December 2016

                                                        

Foreign exchange derivatives including cross currency swaps

                          

Fair value hedges

     -              -          -              -       -          -  

Cash flow hedges

     36              -          (76)             -       -          (40

Hedges of net investments in foreign operations

     -              174 (a)          -              (27     -          147  

Hedge accounting not applied

     79              (133 ) (a)          (67)             (134     -          (255

Interest rate swaps

                          

Fair value hedges

     -              3          -              -       -          3  

Cash flow hedges

     -              4          -              -       (4        -  

Hedge accounting not applied

     -              43          -              (14     (6        23  

Commodity contracts

                          

Cash flow hedges

     21              -          (3)             -       -          18  

Hedge accounting not applied

     (1)             -                -              -       -                (1
     135              91                (146)             (175     (10              (105
     Total assets        226          Total liabilities       (331        (105
                                                                      
                    

31 December 2015

                                                        

Foreign exchange derivatives including cross currency swaps

                          

Fair value hedges

     -              1          -              -       -          1  

Cash flow hedges

     29              45          (34)             -       -          40  

Hedges of net investments in foreign operations

     -              155 (a)          -              -       -          155  

Hedge accounting not applied

     39              25 (a)          (26)             (118     (5        (85

Interest rate swaps

                          

Fair value hedges

     -              -          -              -       -          -  

Cash flow hedges

     -              -          -              -       (1        (1

Hedge accounting not applied

     -              4          -              -       -          4  

Commodity contracts

                          

Cash flow hedges

     5              -          (10)             -       -          (5

Hedge accounting not applied

     -              -                -              -       -                -  
     73              230                (70)             (118     (6              109  
     Total assets        303          Total liabilities                (194        109  
                                                                      

 

(a)   Swaps that hedge the currency risk on intra-group loans and offset 174 million (2015: 155 million) within ‘Hedges of net investments in foreign operations’ are included within ‘Hedge accounting not applied’.

 

Annual Report on Form 20-F 2016   Financial Statements   119


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

16C. DERIVATIVES AND HEDGING CONTINUED

MASTER NETTING OR SIMILAR AGREEMENTS

A number of legal entities within our Group enter into derivative transactions under International Swap and Derivatives Association (ISDA) master netting agreements. In general, under such agreements the amounts owed by each counter-party on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances, such as when a credit event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.

The ISDA agreements do not meet the criteria for offsetting the positive and negative values in the consolidated balance sheet. This is because the Group does not have any currently legally enforceable right to offset recognised amounts, between various Group and bank affiliates, because the right to offset is enforceable only on the occurrence of future credit events such as a default.

The column ‘Related amounts not set off in the balance sheet – Financial instruments’ shows the netting impact of our ISDA agreements, assuming the agreements are respected in the relevant jurisdiction.

(A) FINANCIAL ASSETS

The following financial assets are subject to offsetting, enforceable master netting arrangements and similar agreements.

 

                      Related amounts not set        
                      off in the balance sheet        
    € million     € million     € million     € million     € million     € million  
          Gross amounts of                          
          recognised     Net amounts of                    
    Gross amounts     financial liabilities     financial assets           Cash        
    of recognised     set off in the     presented in the     Financial     collateral        
As at 31 December 2016   financial assets     balance sheet     balance sheet     instruments     received     Net amount  

Derivative financial assets

    400       (174     226       (147     -       79  

As at 31 December 2015

                                               

Derivative financial assets

    458       (155     303       (153     (30     120  

 

(B) FINANCIAL LIABILITIES

The following financial liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements.

 

 
                      Related amounts not set        
                      off in the balance sheet        
    € million     € million     € million     € million     € million     € million  
          Gross amounts of                          
          recognised     Net amounts of                    
    Gross amounts     financial liabilities     financial liabilities           Cash        
    of recognised     set off in the     presented in the     Financial     collateral        
As at 31 December 2016     financial liabilities     balance sheet     balance sheet     instruments     pledged     Net amount  

Derivative financial liabilities

    505       (174     331       (147     -       184  

As at 31 December 2015

                                               

Derivative financial liabilities

    349       (155     194       (153     -       41  

 

 

17. INVESTMENT AND RETURN

 

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the balance sheet include deposits, investments in money market funds and highly liquid investments. To be classified as cash and cash equivalents, an asset must:

    be readily convertible into cash;  
    have an insignificant risk of changes in value; and  
    have a maturity period of three months or less at acquisition.  

Cash and cash equivalents in the cash flow statement also include bank overdrafts and are recorded at amortised cost.

OTHER FINANCIAL ASSETS

Other financial assets are first recognised on the trade date. At that point, they are classified as:

    held-to-maturity investments;  
    loans and receivables;  
    available-for-sale financial assets; or  
    financial assets at fair value through profit or loss.  

 

120   Financial Statements    Annual Report on Form 20-F 2016


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17. INVESTMENT AND RETURN CONTINUED

 

(I) HELD-TO-MATURITY INVESTMENTS

These are assets with set cash flows and fixed maturities which Unilever intends to hold to maturity. They are held at cost plus interest using the effective interest method, less any impairment.

(II) LOANS AND RECEIVABLES

These are assets with an established payment profile and which are not listed on a recognised stock exchange. They are initially recognised at fair value, which is usually the original invoice amount plus any directly related transaction costs. Afterwards, loans and receivables are carried at amortised cost, less any impairment.

(III) AVAILABLE-FOR-SALE FINANCIAL ASSETS

Any financial assets not classified as either loans and receivables or financial assets at fair value through profit or loss or held-to-maturity investments are designated as available-for-sale. They are initially recognised at fair value, usually the original invoice amount plus any directly related transaction costs. Afterwards, they are measured at fair value with changes being recognised in equity. When the investment is sold or impaired, the accumulated gains and losses are moved from equity to the income statement. Interest and dividends from these assets are recognised in the income statement.

(IV) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

These are derivatives and assets that are held for trading. Related transaction costs are expensed as incurred. Unless they form part of a hedging relationship, these assets are held at fair value, with changes being recognised in the income statement.

IMPAIRMENT OF FINANCIAL ASSETS

Each year, the Group assesses whether there is evidence that financial assets are impaired. A significant or prolonged fall in value below the cost of an asset generally indicates that an asset may be impaired. If impaired, financial assets are written down to their estimated recoverable amount. Impairment losses on assets classified as loans and receivables are recognised in profit and loss. When a later event causes the impairment losses to decrease, the reduction in impairment loss is also recognised in profit and loss. Impairment losses on assets classified as available-for-sale are recognised by moving the loss accumulated in equity to the income statement. Any subsequent recovery in value of an available-for-sale debt security is recognised within profit and loss. However, any subsequent recovery in value of an equity security is recognised within equity, and is recorded at amortised cost.

17A. FINANCIAL ASSETS

The Group’s Treasury function aims to protect the Group’s financial investments, while maximising returns. The fair value of financial assets is the same as the carrying amount for 2016 and 2015. The Group’s cash resources and other financial assets are shown below.

 

             € million          € million          € million            million            million            million  
            Non-                    Non-         
     Current      current      Total      Current      current      Total  
Financial assets (a)    2016      2016      2016      2015      2015      2015  

Cash and cash equivalents

                 

Cash at bank and in hand

     1,779               1,779        1,547               1,547  

Short-term deposits with maturity of less than three months

     1,513               1,513        655               655  

Other cash equivalents

     90               90        100               100  
     3,382               3,382        2,302               2,302  

Other financial assets

                 

Held-to-maturity investments

     43        99        142        38        106        144  

Loans and receivables (b)

     208        190        398        269        34        303  

Available-for-sale financial assets (c)

     126        383        509        179        462        641  

Financial assets at fair value through profit or loss:

                 

Derivatives

     91               91        230               230  

Other

     131        1        132        120        3        123  
     599        673        1,272        836        605        1,441  
                                                     

Total

         3,981            673            4,654            3,138            605            3,743  

 

(a)   For the purposes of notes 15C and 17A, financial assets and liabilities exclude trade and other current receivables and trade payables and other liabilities which are covered in notes 13 and 14 respectively.
(b)   Current loans and receivables include short-term deposits with banks with maturities of longer than three months.
(c)   Current available-for-sale financial assets include government securities and A- or higher rated money and capital market instruments. Non-current available-for-sale financial assets predominantly consist of investments in a number of companies and financial institutions in Europe, India and the US, including 79 million (2015: 86 million) of assets in a trust to fund benefit obligations in the US (see also note 4B).

 

Annual Report on Form 20-F 2016   Financial Statements   121


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

17A. FINANCIAL ASSETS CONTINUED

 

Cash and cash equivalents reconciliation to the cash flow statement            € million
2016
              million
2015
 

Cash and cash equivalents per balance sheet

     3,382       2,302  

Less: bank overdrafts

     (184     (174

Cash and cash equivalents per cash flow statement

         3,198           2,128  

Approximately 1.5 billion (or 43%) of the Group’s cash and cash equivalents are held in the parent and central finance companies, for maximum flexibility. These companies provide loans to our subsidiaries that are also funded through retained earnings and third party borrowings. We maintain access to global debt markets through an infrastructure of short and long-term debt programmes. We make use of plain vanilla derivatives, such as interest rate swaps and foreign exchange contracts, to help mitigate risks. More detail is provided in notes 16, 16A, 16B and 16C on pages 115 to 120.

The remaining 1.9 billion (57%) of the Group’s cash and cash equivalents are held in foreign subsidiaries which repatriate distributable reserves on a regular basis. For most countries, this is done through dividends which are in some cases subject to withholding or distribution tax. This balance includes 240 million (2015: 284 million, 2014: 452 million) of cash that is held in a few countries where we face cross-border foreign exchange controls and/or other legal restrictions that inhibit our ability to make these balances available for general use by the wider business. The cash will generally be invested or held in the relevant country and, given the other capital resources available to the Group, does not significantly affect the ability of the Group to meet its cash obligations.

17B. CREDIT RISK

Credit risk is the risk of financial loss to the Group if a customer or counter-party fails to meet its contractual obligations. Additional information in relation to credit risk on trade receivables is given in note 13. These risks are generally managed by local controllers. Credit risk related to the use of treasury instruments is managed on a Group basis. This risk arises from transactions with financial institutions involving cash and cash equivalents, deposits and derivative financial instruments. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. To reduce this risk, Unilever has concentrated its main activities with a limited number of counter-parties which have secure credit ratings. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Group’s treasury department. Netting agreements are also put in place with Unilever’s principal counter-parties. In the case of a default, these arrangements would allow Unilever to net assets and liabilities across transactions with that counter-party. To further reduce the Group’s credit exposures on derivative financial instruments, Unilever has collateral agreements with Unilever’s principal counter-parties in relation to derivative financial instruments. Under these arrangements, counter-parties are required to deposit securities and/or cash as a collateral for their obligations in respect of derivative financial instruments. At 31 December 2016 the collateral held by Unilever under such arrangements amounted to 3 million (2015: 30 million), of which nil (2015: 30 million) was in cash, and 3 million (2015: nil) was in the form of bond securities. The non-cash collateral has not been recognised as an asset in the Group’s balance sheet.

Further details in relation to the Group’s exposure to credit risk are shown in note 13 and note 16A.

 

 

18. FINANCIAL INSTRUMENTS FAIR VALUE RISK

The Group is exposed to the risks of changes in fair value of its financial assets and liabilities. The following table summarises the fair values and carrying amounts of financial instruments.

 

     € million     million     € million     million  
                         Carrying             Carrying  
             Fair value             Fair value     amount     amount  
Fair values of financial assets and financial liabilities    2016     2015     2016     2015  

Financial assets

        

Cash and cash equivalents

     3,382       2,302       3,382       2,302  

Held-to-maturity investments

     142       144       142       144  

Loans and receivables

     398       303       398       303  

Available-for-sale financial assets

     509       641       509       641  

Financial assets at fair value through profit or loss:

        

Derivatives

     91       230       91       230  

Other

     132       123       132       123  
         4,654           3,743           4,654           3,743  

Financial liabilities

        

Preference shares

     (125     (132     (68     (68

Bank loans and overdrafts

     (1,147     (1,067     (1,146     (1,064

Bonds and other loans

     (15,844     (13,509     (15,053     (12,703

Finance lease creditors

     (165     (217     (143     (195

Derivatives

     (185     (124     (185     (124

Other financial liabilities

     -       (489     -       (489
       (17,466     (15,538     (16,595     (14,643

 

122   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

18. FINANCIAL INSTRUMENTS FAIR VALUE RISK CONTINUED

The fair value of trade receivables and payables is considered to be equal to the carrying amount of these items due to their short-term nature. The instruments that have a fair value that is different from the carrying amount are classified as Level 2 for both 2015 and 2016 with exception of preference shares which are classified as Level 1 for both years.

FAIR VALUE HIERARCHY

The fair values shown in notes 15C and 17A have been classified into three categories depending on the inputs used in the valuation technique. The categories used are as follows:

  Level 1: quoted prices for identical instruments;
  Level 2: directly or indirectly observable market inputs, other than Level 1 inputs; and
  Level 3: inputs which are not based on observable market data.

For assets and liabilities which are carried at fair value, the classification of fair value calculations by category is summarised below:

 

            € million       million      € million      million     € million      million     € million      million  
                                                  Total fair     Total fair  
            Level 1      Level 1      Level 2     Level 2     Level 3     Level 3     value     value  
      Notes      2016      2015      2016     2015     2016     2015     2016     2015  

Assets at fair value

                     

Other cash equivalents

     17A        -        -        90       100       -       -       90       100  

Available-for-sale financial assets

     17A        138        14        98       180       273       447       509       641  

Financial assets at fair value through profit or loss:

                     

Derivatives (a)

     16C        -        -        226       303       -       -       226       303  

Other

     17A        -        120        131       -       1       3       132       123  

Liabilities at fair value

                     

Derivatives (b)

     16C        -        -        (331     (194     -       -       (331     (194

Contingent consideration

     21        -        -        -       -       (380     (104     (594     (179

 

(a)   Includes 135 million (2015: 73 million) derivatives, reported within trade receivables, that hedge trading activities.
(b)   Includes (146) million (2015: (71) million) derivatives, reported within trade payables, that hedge trading activities.

There were no significant changes in classification of fair value of financial assets and financial liabilities since 31 December 2015. There were also no significant movements between the fair value hierarchy classifications since 31 December 2015.

The impact in the 2016 income statement due to Level 3 instruments is a gain of 94 million (2015: loss of 45 million).

Reconciliation of Level 3 fair value measurements of financial assets is given below:

 

Reconciliation of movements in Level 3 valuations    € million
2016
     million
2015
 

1 January

     346       475  

Gains and losses recognised in profit and loss

     94       (45

Gains and losses recognised in other comprehensive income

     (12     120  

Purchases and new issues

     (247     (91

Sales and settlements

     (187     (113

Transfers into Level 3

     -       -  

Transfers out of Level 3

     (100     -  

31 December

     (106     346  

SIGNIFICANT UNOBSERVABLE INPUTS USED IN LEVEL 3 FAIR VALUES

The largest asset valued using Level 3 techniques is a Split-Dollar Life Insurance of 43 million (2015: 41 million).

A change in one or more of the inputs to reasonably possible alternative assumptions would not change the value significantly.

During the year, an asset with a carrying value of 62 million as at 31 December 2015 (2014: 189 million, 2013: 190 million) was de-recognised. The asset was previously valued using Level 3 techniques and related to an unlisted investment recognised as an available for sale financial asset. The asset was impaired in 2015 but due to unforeseen circumstances, in 2016, this impairment was reversed and the asset disposed for a total consideration of 130 million. The 2016 profit or loss impact of the reversal of the previous impairment was a gain of 63 million recognised within ‘other income/(loss) from non-current investments’. Interest income of 5m was also recognised from this asset in 2016.

CALCULATION OF FAIR VALUES

The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used in the year ended 31 December 2015.

 

Annual Report on Form 20-F 2016   Financial Statements   123


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

18. FINANCIAL INSTRUMENTS FAIR VALUE RISK CONTINUED

ASSETS AND LIABILITIES CARRIED AT FAIR VALUE

  The fair values of quoted investments falling into Level 1 are based on current bid prices.
  The fair values of unquoted available-for-sale financial assets are based on recent trades in liquid markets, observable market rates, discounted cash flow analysis and statistical modelling techniques such as the Monte Carlo simulation. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
  Derivatives are valued using valuation techniques with market observable inputs. The models incorporate various inputs including the credit quality of counter-parties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodities.
  For listed securities where the market is not liquid, and for unlisted securities, valuation techniques are used. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow calculations.

OTHER FINANCIAL ASSETS AND LIABILITIES (FAIR VALUES FOR DISCLOSURE PURPOSES ONLY)

  Cash and cash equivalents, trade and other current receivables, bank loans and overdrafts, trade payables and other current liabilities have fair values that approximate to their carrying amounts due to their short-term nature.
  The fair values of preference shares and listed bonds are based on their market value.
  Non-listed bonds, other loans, bank loans and non-current receivables and payables are based on the net present value of the anticipated future cash flows associated with these instruments using rates currently available for debt on similar terms, credit risk and remaining maturities.
  Fair values for finance lease creditors have been assessed by reference to current market rates for comparable leasing arrangements.

POLICIES AND PROCESSES USED IN RELATION TO THE CALCULATION OF LEVEL 3 FAIR VALUES

Assets valued using Level 3 valuation techniques are primarily made up of long-term cash receivables and unlisted investments. Valuation techniques used are specific to the circumstances involved. Unlisted investments include 172 million (2015: 192 million) of investments within Unilever Ventures companies.

 

 

19. PROVISIONS

 

Provisions are recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable.

 

                               € million               million  
Provisions                         2016     2015  

Due within one year

           390       309  

Due after one year

           1,033       831  

Total provisions

                             1,423       1,140  
     € million         € million     € million             € million             € million  
Movements during 2016    Restructuring     Legal     Disputed
indirect taxes
    Other     Total  

1 January 2016

     188       161       570       221       1,140  

Income Statement:

          

Charges

     258       72       154       69       553  

Releases

     (33     (51     (46     (41     (171

Utilisation

     (116     (55     (38     (38     (247

Currency translation

     (6     (2     154       2       148  

31 December 2016

     291       125       794       213       1,423  

Restructuring provisions primarily include people costs such as redundancy costs and cost of compensation where manufacturing, distribution or selling agreements are to be terminated.

The Group is involved from time to time in legal and arbitration proceedings arising in the ordinary course of business. As previously disclosed, along with other consumer products companies and retail customers, Unilever is involved in a number of ongoing investigations by national competition authorities. These proceedings and investigations are at various stages and concern a variety of product markets. Where specific issues arise, provisions are made to the extent appropriate.

Unilever expects the issues relating to these restructuring, legal and other provisions to be substantively resolved within five years.

The provision for disputed indirect taxes is primarily comprised of disputes with Brazilian authorities, in particular relating to tax credits that can be taken for the PIS and COFINS indirect taxes in Brazil. Due to the nature of these disputes, the timing of any utilisation in relation to these provisions is uncertain.

 

124   Financial Statements    Annual Report on Form 20-F 2016


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20. COMMITMENTS AND CONTINGENT LIABILITIES

 

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised at the lower of fair value at the date of commencement of the lease and the present value of the minimum lease payments. Subsequent to initial recognition, these assets are accounted for in accordance with the accounting policy relating to that specific asset. The corresponding liability is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance costs in the income statement and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Lease payments under operating leases are charged to the income statement on a straight-line basis over the term of the lease.

Contingent liabilities are either possible obligations that will probably not require a transfer of economic benefits, or present obligations that may, but probably will not, require a transfer of economic benefits. It is not appropriate to make provisions for contingent liabilities, but there is a chance that they will result in an obligation in the future. Contingent liabilities are disclosed at the risk adjusted best estimate of the amount that would be required to settle the liability as at the balance sheet date. Where a risk weighting is not available, the maximum exposure is reported.

 

             € million              € million              € million                million               million               million  
Long-term finance lease commitments    Future
minimum
lease
payments
2016
    

Finance

Cost

2016

    

Present

value

2016

     Future
minimum
lease
payments
2015
   

Finance

cost

2015

   

Present

value

2015

 

Buildings (a)

     202        75        127        284       105       179  

Plant and machinery

     18        2        16        18       2       16  
     220        77        143        302       107       195  

The commitments fall due as follows:

               

Within 1 year

     24        15        9        51       14       37  

Later than 1 year but not later than 5 years

     69        28        41        85       37       48  

Later than 5 years

     127        34        93        166       56       110  
       220        77        143        302       107       195  

 

(a)   All leased land is classified as operating leases.

 

The table below shows the net book value of property, plant and equipment under a number of finance lease agreements.

 

 
                                  € million             € million             € million  
Net book value                            Buildings     Plant and
equipment
    Total  

Cost

              211       134       345  

Accumulated depreciation

 

     (79     (115     (194

31 December 2016

                                132       19       151  

Cost

              239       154       393  

Accumulated depreciation

 

     (82     (133     (215

31 December 2015

                                157       21       178  

 

The Group has sublet part of the leased properties under finance leases. Future minimum sublease payments of 31 million (2015: 41 million) are
expected to be received.

 

 
                                € million     million  
Long-term operating lease commitments             2016     2015  

Land and buildings

                2,149       2,024  

Plant and machinery

                692       430  
                                          2,841       2,454  
                   € million      million     € million     million  
Operating lease and other commitments fall due as follows:     

Operating

leases

2016

    

Operating

leases

2015

    Other
commitments
2016
    Other
commitments
2015
 

Within 1 year

           457        410       1,204       919  

Later than 1 year but not later than 5 years

 

     1,393        1,187       1,231       830  

Later than 5 years

           991        857       30       35  
                         2,841        2,454       2,465       1,784  

The Group has sublet part of the leased properties under operating leases. Future minimum sublease payments of 17 million (2015: 5 million) are expected to be received.

Other commitments principally comprise commitments under contracts to purchase materials and services. They do not include commitments to purchase property, plant and equipment, which are reported in note 10 on page 106.

 

Annual Report on Form 20-F 2016   Financial Statements   125


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

20. COMMITMENTS AND CONTINGENT LIABILITIES CONTINUED

CONTINGENT LIABILITIES

Contingent liabilities are possible obligations that are not probable. They arise in respect of litigation against Group companies, investigations by competition, regulatory and fiscal authorities and obligations arising under environmental legislation. In many markets, there is a high degree of complexity involved in the local tax regimes. The majority of contingent liabilities are in respect of fiscal matters.

Assessing the amount of liabilities that are not probable is highly judgemental. Our best estimate of contingent liabilities at 31 December 2016 was 2,360 million (2015: 1,310 million), the largest of which relates to the local corporate reorganisation in 2001 explained further below. There has been no material change in our total contingent liability exposure since 2015. However, in prior years the contingent liabilities in respect of fiscal matters were disclosed on a tax assessment basis whereas in 2016 the basis has been extended to include unassessed years.

During 2004, and in common with many other businesses operating in Brazil, one of our Brazilian subsidiaries received a notice of infringement from the Federal Revenue Service in respect of indirect taxes. The notice alleges that a 2001 reorganisation of our local corporate structure was undertaken without valid business purpose. The 2001 reorganisation was comparable with restructurings done by many companies in Brazil. The original dispute was resolved in the courts in the Group’s favour. However, in 2013 a new assessment was raised in respect of a similar matter. Additionally, during the course of 2014 another notice of infringement was issued based on the same grounds argued in the previous assessments. The total amount of the tax assessments in respect of this matter is 1,464 million. The judicial process in Brazil is likely to take a number of years to conclude.

During 2006, Unilever filed a judicial measure to obtain the right to exclude the Brazilian ICMS indirect tax from the taxable base for the Brazilian PIS and COFINS indirect taxes, and obtained a favourable decision in 2007. In November 2016, this favourable decision was reversed on appeal to a higher court. The Group intends to appeal this decision. The total amount of the tax assessments in respect of this matter is 655 million.

The Group believes that the likelihood that the tax authorities will ultimately prevail is low, however there can be no guarantee of success in court. In each case we believe our position is strong so they have not been provided for and are considered to be contingent liabilities.

 

 

21. ACQUISITIONS AND DISPOSALS

 

Business combinations are accounted for using the acquisition accounting method as at the acquisition date, which is the date at which control is transferred to the Group.

Goodwill is measured at the acquisition date as the fair value of consideration transferred, plus non-controlling interests and the fair value of any previously-held equity interests less the net recognised amount (which is generally fair value) of the identifiable assets and liabilities assumed. Goodwill is subject to an annual review for impairment (or more frequently if necessary) in accordance with our accounting policies. Any impairment is charged to the income statement as it arises.

Contingent consideration is measured at fair value with changes being recognised in the income statement. All other deferred consideration is held at amortised cost. Consideration transferred does not include amounts related to settlement of pre-existing relationships. Such amounts are generally recognised in net profit.

Transaction costs are expensed as incurred, other than those incurred in relation to the issue of debt or equity securities.

Changes in ownership that do not result in a change of control are accounted for as equity transactions and therefore do not have any impact on goodwill. The difference between consideration and the non-controlling share of net assets acquired is recognised within equity.

 

126   Financial Statements    Annual Report on Form 20-F 2016


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21. ACQUISITIONS AND DISPOSALS CONTINUED

2016

In 2016, the Group completed the following business acquisitions and disposals as listed below. Total consideration for 2016 acquisitions is 2,069 million (2015: 2,011 million for acquisitions completed during that year). More information related to the 2016 acquisitions is given on page 22.

 

 

DEAL COMPLETION DATE

 

  

 

ACQUIRED/DISPOSED BUSINESS

   

31 March 2016

 

  

Sold the bread and bakery business under the brand ‘Modern’ in India to Nimman Foods Private Limited, part of the Everstone Group.

 

   

7 April 2016

 

  

Acquired Indulekha and Vayodha brands from Mosons Group.

 

   

6 May 2016

 

  

Sold local Alberto Culver brands Antiall, Farmaco, Veritas, the rights for VO5 in Argentina and a manufacturing plant to Santiago Saenz.

 

   

31 July 2016

 

  

Sold the Rice Exports business in India to LT Foods Middle East DMCC, a Group company of LT Foods Limited.

 

   

10 August 2016

 

  

Acquired Dollar Shave Club, a subscription-based direct-to-consumer male grooming business.

 

   

20 October 2016

 

  

Acquired Seventh Generation, a North American home and personal care eco-friendly naturals business.

 

   

1 December 2016

 

  

Acquired Blueair, a supplier of innovative mobile indoor air purification technologies and solutions.

 

On 1 June 2016 the Group announced that it had signed an agreement with Coca-Cola FEMSA and The Coca-Cola Company to sell the AdeS soy beverage business in Latin America for an aggregate amount of US$575 million. Subject to regulatory approval, the transaction is expected to complete during the first quarter of 2017.

On 16 December 2016 the Group announced that it had signed an agreement to purchase Living Proof Inc., an innovative premium hair care business. The transaction completed on 1 February 2017 after receiving regulatory approval. Due to the proximity of deal completion to the issuance of the financial statements, no valuation work has commenced and no provisional numbers have been disclosed in the notes to the consolidated financial statements.

EFFECT ON CONSOLIDATED INCOME STATEMENT

Since the acquisition dates the 2016 acquisitions above have contributed 149 million to Group revenue and 21 million loss to Group operating profit.

If all the above acquisitions had taken place at the beginning of the year, Group revenue would have been 53,127 million and Group operating profit would have been 7,807 million.

2015

In 2015, the Group completed the following business acquisitions listed below. The acquisition accounting has been finalised and subsequent changes to the provisional numbers published last year were immaterial.

 

 

DEAL COMPLETION DATE

 

  

 

ACQUIRED BUSINESS

   

1 May 2015

 

  

Acquired REN Skincare, a prestige Personal Care business with an iconic British skin care brand.

 

   

1 May 2015

 

  

Camay and Zest brands acquired from The Procter & Gamble Company. In addition a manufacturing site was acquired.

 

   

6 May 2015

 

  

Acquired Kate Somerville Skincare, a prestige Personal Care business with a leading independent skin care brand.

 

   

1 August 2015

 

  

Acquired Dermalogica, a prestige Personal Care business with the leading skin care brand in professional salons and spas. The assets acquired were principally the Dermalogica brand.

 

   

1 September 2015

 

  

Murad, the leading clinical skin care brand, part of our prestige Personal Care business.

 

   

30 September 2015

 

  

Acquired Grom, a premium Italian gelato business.

 

 

Annual Report on Form 20-F 2016   Financial Statements   127


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

21. ACQUISITIONS AND DISPOSALS CONTINUED

EFFECT ON CONSOLIDATED BALANCE SHEET

The following table sets out the effect of the acquisitions in 2016, 2015 and 2014 on the consolidated balance sheet. The fair values currently established for all acquisitions made in 2016 are provisional. Detailed information relating to goodwill is given in note 9 on pages 104 to 106.

 

             € million                million                million  
Acquisitions    2016      2015      2014  

Net assets acquired

     929        999        240  

Goodwill arising in subsidiaries

     1,140        1,012        184  

Total consideration

     2,069        2,011        424  

In 2016 the net assets acquired and total consideration consist of:

 

             € million  
      2016  

Intangible assets

     1,147  

Other non-current assets

     115  

Trade and other receivables

     44  

Other current assets

     122  

Non-current liabilities

     (398

Current liabilities

     (101

Net assets acquired

     929  

Cash consideration

     1,640  

Deferred consideration

     429  

Total consideration

     2,069  

Goodwill

     1,140  

No contingent liabilities were acquired in the acquisitions described above.

Deferred consideration includes future payments which are contingent on acquired businesses achieving or exceeding contractually agreed financial targets within a predetermined timescale. These payments fall due up until 2021 with the maximum possible total payment of 1,950 million. A financial liability representing the best estimate of the Group’s future cash outflows is recognised in other current liabilities and other non-current liabilities on the balance sheet. This is initially recorded at fair-value and revalued at each reporting date with movements in fair value taken to the income statement.

At 31 December 2016, the balance held in deferred consideration for acquisitions is 594 million (2015: 179 million), of which contingent consideration is 380 million (2015: 104 million).

Goodwill represents the future value which the Group believes it will obtain through operational synergies and the application of acquired company ideas to existing Unilever channels and businesses.

The table below shows the impact of all disposals during the year on the Group. The results of disposed businesses are included in the consolidated financial statements up to their date of disposal:

 

             € million               million               million  
Disposals    2016     2015     2014  

Goodwill and intangible assets

     85       47       229  

Other non-current assets

     29       2       106  

Current assets

     5       23       50  

Trade creditors and other payables

     -       (2     (5

Net assets sold

     119       70       380  

(Gain)/loss on recycling of currency retranslation on disposal

     -       -       (76

Profit/(loss) on sale attributable to Unilever

     (95     (9     1,392  

Consideration

     24       61       1,696  

Cash

     16       62       1,727  

Cash balances of businesses sold

     8       (1     (4

Non-cash items and deferred consideration

     -       -       (27
       24       61       1,696  

 

128   Financial Statements    Annual Report on Form 20-F 2016


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22. ASSETS AND LIABILITIES HELD FOR SALE

 

Non-current assets and groups of assets and liabilities which comprise disposal groups are classified as ‘held for sale’ when all of the following criteria are met: a decision has been made to sell; the assets are available for sale immediately; the assets are being actively marketed; and a sale has been agreed or is expected to be concluded within 12 months of the balance sheet date.

Immediately prior to classification as held for sale, the assets or groups of assets are remeasured in accordance with the Group’s accounting policies. Subsequently, assets and disposal groups classified as held for sale are valued at the lower of book value or fair value less disposal costs. Assets held for sale are not depreciated.

 

              € million
2016
               million
2015
 

Groups of assets held for sale (a)

     

Goodwill and intangibles

     98        43  

Property, plant and equipment

     46        73  

Inventories

     34        35  

Trade and other receivables

     1        3  

Other

     5        5  
     184        159  

Non-current assets held for sale

                 

Property, plant and equipment

     22        20  

Liabilities held for sale

                 

Liabilities associated with assets held for sale

     1        6  

 

(a)  Groups of assets held for sale are primarily assets of the AdeS soy beverage business in Latin America. Refer to note 21 on pages 126 to 128.

 

 

23. RELATED PARTY TRANSACTIONS

 

A related party is a person or entity that is related to the Group. These include both people and entities that have, or are subject to, the influence or control of the Group.

The following related party balances existed with associate or joint venture businesses at 31 December:

 

Related party balances            € million
2016
               million
2015
 

Trading and other balances due from joint ventures

     115        116  

Trading and other balances due from/(to) associates

     -        -  

JOINT VENTURES

Sales by Unilever group companies to Unilever Jerónimo Martins and Pepsi Lipton joint ventures were 118 million and 69 million in 2016 (2015: 121 million and 69 million) respectively. Sales from Unilever Jerónimo Martins and from Pepsi Lipton joint ventures to Unilever group companies were 66 million and 51 million in 2016 (2015: 46 million and 51 million) respectively. Balances owed by/(to) Unilever Jerónimo Martins and Pepsi Lipton joint ventures at 31 December 2016 were 119 million and (4) million (2015: 121 million and (5) million) respectively.

ASSOCIATES

Langholm Capital Partners invests in private European companies with above-average longer-term growth prospects.

Langholm Capital II was launched in 2009. Unilever has invested 57 million in Langholm Capital II, with an outstanding commitment at the end of 2016 of 18 million (2015: 20 million).

 

Annual Report on Form 20-F 2016   Financial Statements   129


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

 

24. 2014 PURCHASE OF ESTATE SHARES CONVERTIBLE TO UNILEVER PLC SHARES IN 2038

The first Viscount Leverhulme was the founder of the company which became Unilever PLC. When he died in 1925, he left in his will a large number of PLC shares in various trusts. When the will trusts were varied in 1983, the interests of the beneficiaries of his will were also preserved. Four classes of special shares were created in Margarine Union (1930) Limited, a subsidiary of PLC.

One of these classes of shares (‘Estate shares’) has rights that enable it to be converted at the end of the year 2038 to 70,875,000 Unilever PLC ordinary shares. Before this date, these shares have no rights to dividends nor do they allow early conversion. There are 20,000 Estate shares with a nominal value of £0.01 each.

On 19 May 2014, Unilever PLC purchased all of the Estate shares for a cash consideration of £715 million plus transaction costs. The resulting loss of 880 million, being the difference between the nominal value and the amount paid, was recorded in retained earnings. Unilever does not intend to re-sell these shares.

 

 

25. REMUNERATION OF AUDITORS

 

This note includes all amounts paid to the Group’s auditors, whether in relation to their audit of the Group or otherwise.

During the year the Group (including its subsidiaries) obtained the following services from the Group auditors and its associates:

 

              € million
2016
              million
2015
              million
2014
 

Fees payable to the Group’s auditors for the audit of the consolidated and parent company accounts of Unilever N.V. and Unilever PLC (a)

     4       5       5  

Fees payable to the Group’s auditors for the audit of accounts of subsidiaries of Unilever N.V. and Unilever PLC pursuant to legislation (b)

     10       9       9  

Total statutory audit fees (c)

     14       14       14  

Audit-related assurance services

     (d)       (d)       (d)  

Other taxation advisory services

     (d)       (d)       (d)  

Services relating to corporate finance transactions

                  

Other assurance services

     (d)       (d)       (d)  

All other non-audit services

     (d)       (d)       (d)  

 

(a)   Of which 1 million was payable to KPMG Accountants N.V. (2015: 1 million; 2014: 1 million) and 3 million was payable to KPMG LLP (2015: 4 million; 2014: 4 million).
(b)   Comprises fees payable to the KPMG network of independent member firms affiliated with KPMG International Cooperative for audit work on statutory financial statements and Group reporting returns of subsidiary companies.
(c)   Amount payable to KPMG in respect of services supplied to associated pension schemes was less than 1 million individually and in aggregate (2015: less than 1 million individually and in aggregate; 2014: less than 1 million individually and in aggregate).
(d)  Amounts paid in relation to each type of service are individually less than 1 million. In aggregate the fees paid were 1 million (2015: 1 million; 2014: less than 1 million).

 

 

26. EVENTS AFTER THE BALANCE SHEET DATE

 

Where events occurring after the balance sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of these events is adjusted within the financial statements. Otherwise, events after the balance sheet date of a material size or nature are disclosed below.

On 26 January 2017 Unilever announced a quarterly dividend with the 2016 fourth quarter results of 0.3201 per NV ordinary share and £0.2768 per PLC ordinary share.

On 1 February 2017 the Group completed the acquisition of Living Proof Inc.

 

130   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

 

 

27. GROUP COMPANIES

AS AT 31 DECEMBER 2016

In accordance with section 409 of the Companies Act 2006 a list of subsidiaries, partnerships, associates, and joint ventures as at 31 December 2016 is set out below. All subsidiary undertakings are subsidiary undertakings of their immediate parent undertaking(s) pursuant to section 1162 (2) (a) of the Companies Act 2006 unless otherwise indicated – see the notes on page 143. All subsidiary undertakings not included in the consolidation are not included because they are not material for such purposes. All associated undertakings are included in the Unilever Group’s financial statements using the equity method of accounting unless otherwise indicated – see the notes on page 143.

Principal group companies are identified in bold . These companies are incorporated and principally operate in the countries under which they are shown.

The aggregate percentage of capital held by the Group is shown in the first column, except where it is 100%.

SUBSIDIARY UNDERTAKINGS INCLUDED IN THE CONSOLIDATION

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

72.50   Algeria   Unilever Algérie SPA   NV 72.50   DZD1,000.00 Ordinary   Zone Industrielle Hassi Ameur Oran 31000
    Argentina   Alimentos de Soja S.A.U.   NV 64.55 PLC 35.45   ARA1.00 Ordinary   Tucumán 1, Piso 4°, Cdad. de Buenos Aires
    Argentina   Arisco S.A.   NV 64.55 PLC 35.45   ARA1.00 Ordinary   Tucumán 1, Piso 4°, Cdad. de Buenos Aires
    Argentina   Helket S.A.   NV 64.55 PLC 35.45   ARA1.00 Ordinary   Mendoza km 7/8 – Pocitos, San Juan
98   Argentina   S.A.G.R.A. S.A.   NV 63.26 PLC 34.74   ARA1.00 Ordinary   Tucumán 1, Piso 4°, Cdad. de Buenos Aires
    Argentina   Unilever de Argentina S.A.   NV 64.55 PLC 35.45   ARA1.00 Ordinary   Tucumán 1, Piso 4°, Cdad. de Buenos Aires
    Australia   Ben & Jerry’s Franchising Australia Limited   PLC 100   AUD1.00 Ordinary   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Australia   Dermalogica Holdings Pty Limited   PLC 100   AUD1.00 Ordinary   111 Chandos Street, Crows Nest, NSW 2065
    Australia   Dermalogica Pty Limited   PLC 100   AUD2.00 Ordinary   111 Chandos Street, Crows Nest, NSW 2065
    Australia   DSC Australia Pty Limited   NV 55.40 PLC 44.60   AUD1.00 Ordinary   DLA Piper Australia, Level 38, 201 Elizabeth Street, Sydney, NSW 2000
    Australia   Tea Too Pty Limited   PLC 100   AUD1.00 Ordinary   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Australia   TIGI Australia Pty Limited   PLC 100   AUD1.00 Ordinary-A   Level 17, 2-26 Park Street, Sydney, NSW 2000
            PLC 100   AUD1.00 Ordinary-B    
    Australia   Unilever Australia (Holdings) Pty Limited   PLC 100   AUD1.00 Ordinary   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Australia   Unilever Australia Group Partnership   PLC 100   Partnership Interest   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Australia   Unilever Australia Group Pty Limited   PLC 100   AUD2.00 Ordinary   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Australia   Unilever Australia Limited   PLC 100   AUD1.00 Ordinary   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Australia   Unilever Australia Supply Services Limited   PLC 100   AUD1.00 Ordinary   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Australia   Unilever Australia Trading Limited   PLC 100   AUD1.00 Ordinary   Level 17, 2-26 Park Street, Sydney, NSW 2000
    Austria   Delico Handels GmbH   NV 100   EUR36,337.00 Ordinary   Stella-Klein-Löw Weg 13, 1023 Wien
    Austria   Kuner Nahrungsmittel GmbH   NV 100   EUR36,336.00 Ordinary   Stella-Klein-Löw Weg 13, 1023 Wien
    Austria   Intuiskin GmbH   NV 100   EUR35,000.00 Ordinary   Seilerstätte 13, 1010, Wien
    Austria   TIGI Handels GmbH   NV 100   EUR36,336.00 Ordinary   Stella-Klein-Löw Weg 13, 1023 Wien
    Austria   ULPC Handels GmbH   NV 100   EUR218,019.00 Ordinary   Stella-Klein-Löw Weg 13, 1023 Wien
    Austria   Unilever Austria GmbH   NV 100   EUR10,000,000.00 Ordinary   Stella-Klein-Löw Weg 13, 1023 Wien
    Austria   Unilever BCS Austria GmbH   NV 55.40 PLC 44.60   EUR35,000.00 Ordinary   Stella-Klein-Löw Weg 13, 1023 Wien
60.75   Bangladesh   Unilever Bangladesh Limited   NV 0 PLC 60.75   BDT100.00 Ordinary   51 Kalurghat Heavy Industrial Area, Kalurghat, Chittagong
    Belgium   Intuiskin SPRL   NV 100   EUR185.50 Ordinary   Rond-Point Schuman, 6 Box 5, 1040 Ettebeek
    Belgium   Unilever BCS Belgium NV/SA   NV 55.40 PLC 44.60   No Par Value Ordinary   Humaniteitslaan 292, 1190 Brussels
    Belgium   Unilever Belgium NV/SA   NV 100   No Par Value Ordinary   Humaniteitslaan 292, 1190 Brussels
    Belgium   Unilever Belgium Services SA/NV   NV 100   No Par Value Ordinary   Humaniteitslaan 292, 1190 Brussels
    Belgium   Unilever Lipton Tea NV/SA   NV 100   EUR1.00 Ordinary   Humaniteitslaan 292, 1190 Brussels
    Bolivia   Unilever Andina Bolivia S.A.   NV 100   BOB10.00 Ordinary   Av. Blanco Galindo Km. 10.4 Cochabamba
    Brazil   Alberto Culver Participacoes Limitada   NV 55.40 PLC 44.60   BRL1.00 Quotas  

Rua Líbero Badaró, 293 – 27° Floor – Suite 27D, Room 18

– São Paulo/SP

    Brazil  

Alberto-Culver do Brasil Cosmeticos

Limitada

  NV 55.40 PLC 44.60   BRL1.00 Quotas   Rua Caio Prado, 267 – Room 13, São Paulo/SP
    Brazil   Euphoria Ice Cream Comercio de Alimentos Limitada   NV 64.55 PLC 35.45   BRL1.00 Quotas  

São Paulo, Estado de São Paulo, na Rua Pedroso Alvarenga,

1046, sala 147, Itaim Bibi, CEP 04531-004

    Brazil  

Cicanorte Industria de Conservas

Alimenticas S.A.

  NV 64.55 PLC 35.45   BRL2.80 Ordinary   Rod. BR 101-Norte, s/n, km. 43,6 – Room 4, Igarassu /PE
    Brazil  

RGG – Comércio E Representações

De Produtos De Higiene Pessoal Limitada

  NV 64.55 PLC 35.45   BRL1.00 Quotas  

Av. Presidente Juscelino Kubitschek, 1.309 –13° floor – Room 19 –

São Paulo/SP

    Brazil  

Sorvete Escola Comercio de Alimentos

Limitada

  NV 64.55 PLC 35.45   BRL1.00 Quotas   Rua Pedroso Alvarenga, 1046, Suit 146, Itaim Bibi, Sao Paulo
    Brazil  

UB 4 – Comércio de Produtos de Limpeza

Limitada

  NV 64.55 PLC 35.45   BRL1.00 Quotas  

Av. Presidente Juscelino Kubitschek, 1.309 –13° floor – Room 29 –

São Paulo/SP

    Brazil  

UBA 2 – Comércio e Representação de

Alimentos Limitada

  NV 64.55 PLC 35.45   BRL1.00 Quotas  

Av. Presidente Juscelino Kubitschek, 1.309 –13° floor – Room 21 –

São Paulo/SP

    Brazil   UBI 2 – Comercio de Alimentos Limitada   NV 64.55 PLC 35.45   BRL1.00 Quotas  

Av. Presidente Juscelino Kubitschek, 1.309 –13° floor – Room 24 –

São Paulo/SP

    Brazil   UBI 4 – Comércio de Alimentos Limitada   NV 64.55 PLC 35.45   BRL1.00 Quotas  

Av. Presidente Juscelino Kubitschek, 1.309 –13° floor – Room 28 –

São Paulo/SP

    Brazil   Unilever Brasil Gelados do Nordeste S.A.   NV 64.55 PLC 35.45   No Par Value Ordinary – A   Rod. BR 232, s/n, km. 13 – Jaboatão dos Guararapes/PE
            NV 64.55 PLC 35.45   No Par Value Ordinary – B    
    Brazil   Unilever Brasil Gelados Limitada   NV 64.55 PLC 35.45   BRL1.00 Quotas   Av. Presidente Juscelino Kubitschek, 1.309 –13° floor – Room 23
    Brazil   Unilever Brasil Industrial Limitada   NV 64.55 PLC 35.45   BRL1.00 Quotas   Av. Presidente Juscelino Kubitschek, 1.309 –13° floor – Room 4
    Brazil   Unilever Brasil Limitada   NV 64.55 PLC 35.45   BRL1.00 Quotas  

Av. Presidente Juscelino Kubitschek, 1.309 –12° floor – Room 23,

part of 13° floor and 14° floor – São Paulo/SP

50   Brazil   UP! Alimentos Limitada   NV 32.28 PLC 17.72   BRL1.00 Quotas   Av. Escola Politécnica, 760, 2° Floor – Room 6 – São Paulo/SP
99   Brazil   Veritas do Brazil Limitada   NV 63.90 PLC 35.10   BRL1.00 Quotas   Av. Marechal Floriano, 19 – Room 1001 Part – Rio de Janeiro/RJ
    Bulgaria   Unilever BCS Bulgaria EOOD   NV 55.40 PLC 44.60   BGN1,000.00 Ordinary   City of Sofia, Borough Mladost, 1, Business Park, Building 3, Floor 1

 

Annual Report on Form 20-F 2016   Financial Statements   131


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    Bulgaria   Unilever Bulgaria EOOD   NV 100   BGN1,000.00 Ordinary   City of Sofia, Borough Mladost, 1, Business Park, Building 3, Floor 1
    Cambodia   Unilever (Cambodia) Limited   NV 100   KHR20,000.00 Ordinary   No. 443A Street 105, Sangkat Boeung Pralit, Khan 7 Makara Phnom Penh Capital
    Canada   Dermalogica Canada Limited   PLC 100   No Par Value Class A   3081, 3rd Avenue, Whitehorse, Yukon Territory, Y1A 4Z7
                Common    
    Canada   DSC Canada, Inc   NV 55.40 PLC 44.60   CAD0.01 Common   P.O. Box 49130, 2900 – 595 Burrard Street, Vancouver BC V7X 1J5
    Canada   Rexdale Property Inc.   NV 55.40 PLC 44.60   No Par Value Common   195 Belfield Road, Rexdale, Toronto, Ontario M9W 1G9
    Canada   Seventh Generation Family & Home ULC   NV 55.40 PLC 44.60   No Par Value Common   800-885 West Georgia Street, Vancouver BC V6C 3H1
    Canada   Unilever BCS Canada Inc.   NV 55.40 PLC 44.60   No Par Value Common   195 Belfield Road, Rexdale, Toronto, Ontario M9W 1G9
    Canada   4012208 Canada Inc.   NV 64.54 PLC 35.46   No Par Value Common   1000 rue de la Gauchetière Ouest, Bureau 2500, Montreal H3B 0A2
    Canada   Unilever Canada Inc.   NV 64.54 PLC 35.46   No Par Value Class A   160 Bloor Street East, Suite 1400, Toronto ON M4W 3R2
            NV 64.54 PLC 35.46   No Par Value Class B    
            PLC 100   No Par Value Class C    
            NV 64.54 PLC 35.46   No Par Value Class II    
                Common    
            NV 64.54 PLC 35.46   No Par Value Class III    
                Common    
    Chile   Unilever Chile Limitada   NV 64.55 PLC 35.45   Membership Interest   Av. Carrascal N°3351, Quinta Normal, Santiago
    Chile   Unilever Chile SCC Limitada   NV 64.55 PLC 35.45   Membership Interest   Av. Carrascal N°3351, Quinta Normal, Santiago
    China   Blueair Shanghai Sales Co. Limited   NV 100   RMB1,000,000   Noreste de la Terminal de Contenedores Mariel, aproximadamente 1.6 km, en el Municipio Mariel, Provincia Artemisa
67.71   China   Ningbo Qinyuan Marketing Services Co.   NV 67.71 PLC 0   CNY1.00 Ordinary   298, Seaside Avenue, Hangzhou Bay New Zone
        Limited            
67.71   China   Ningbo Qinyuan Water Equipment Co.   NV 67.71 PLC 0   CNY1.00 Ordinary   358, Ci Yi Road, Hangzhou Bay New Zone
        Limited            
67.71   China   Qinyuan Group Co. Limited   NV 67.71 PLC 0   CNY1.00 Ordinary   Seaside Avenue, Cixi Econimce and Technical Development Zone (Hangzhou Bay New Zone)
67.71   China   Shanghai Qinyuan Environment Protection   NV 67.71 PLC 0   CNY1.00 Ordinary   Room 23, Hall 5, No. 38, Lane 168, Xing Fu Li Road, Fenjing Town,
        Technology Co. Limited           Jinsham District, Shanghai 201100
    China   Unilever (China) Investing Company Limited   NV 100   USD1.00 Ordinary   No.33 North Fuquan Road, Shanghai, 200335,
    China   Unilever (China) Limited   NV 100   USD1.00 Ordinary   88 Jinxiu Avenue, Hefei Economic and Technology Development
                    Zone, Hefei, 230601
    China   Unilever (Tianjin) Company Limited   NV 100   USD1.00 Ordinary   Jingyi Road and Weiliu Road, Tianjin Airport Economic Area, Tianjin
    China   Unilever Foods (China) Co. Limited   NV 100   USD1.00 Ordinary   1068 Ting Wei Road, Jinshanzui Industrial Region, Jinshan District, Shanghai
    China   Unilever Services (Hefei) Co. Limited   NV 100   CNY1.00 Ordinary   88 Jinxiu Avenue, Hefei Economic and Technology Development Zone, Hefei, 230601
    China   Unilever (Sichuan) Company Limited   NV 100   USD1.00 Ordinary   No. 1 Unilever Avenue, Pengshan Country, Sichuan Province 610016
    China   Walls (China) Co. Limited   NV 100   USD1.00 Ordinary   No.16 Wanyuan Road, Beijing E&T Development, Beijing 100076
67.71   China   Zhejiang Qinyuan Water Treatment   NV 67.71 PLC 0   CNY1.00 Ordinary   358, Ci Yi Road, Hangzhou Bay New Zone
        Technology Co. Limited            
    Colombia   Unilever Colombia SCC S.A.S.   NV 100   COP100.00 Ordinary   Av. El Dorado, No. 69B-45. Bogota Corporate Center Piso 7, Bogotá
    Colombia   Unilever Andina Colombia Limitada   NV 100   COP100.00 Ordinary   Av. El Dorado, No. 69B-45. Bogota Corporate Center Piso 7, Bogotá
    Costa Rica   Unilever de Centroamerica S.A.   NV 100   CRC1.00 Ordinary   La Asunción de Belén, Planta Industrial Lizano, Autopista Bernardo Soto
    Costa Rica   Unilever Costa Rica SCC S.A.   NV 100   CRC1000.00 Ordinary   Provincia de Heredia, Cantón Belén, Distrito de la Asunción,
                    de la intersección Cariari- Belén, 400 Mts. Oeste, 800 Mts., al Norte
89.98   Cote D’Ivoire   Unilever-Cote D’Ivoire   NV 0 PLC 89.98   XOF5,000.00 Ordinary   01 BP 1751 Abidjan 01, Boulevard de Vridi
    Cote D’Ivoire   Unilever Afrique de l’Ouest   PLC 100   CFA 10,000.00 Ordinary   Abidjan-Marcory, Boulevard Valery Giscard d’Estaing,
                    Immeuble Plein Ciel, Business Center, 26 BP 1377, Abidjan 26
    Croatia   Unilever Hrvatska d.o.o.   NV 100   HRK1.00 Ordinary   Strojarska cesta 20, 10000 Zagreb
84   Cyprus   Unilever Tseriotis Cyprus Limited   NV 0 PLC 84   EUR1.00 Ordinary   Head Offices, 195C Old Road Nicosia Limassol, CY-2540 Idalion
                    Industrial Zone – Nicosia
    Czech   Unilever BCS ČR, spol. s r.o.   NV 55.40 PLC 44.60   CZK100,000.00 Ordinary   Rohanské nábřeží 670/17, Karlín, Praha 8, 186 00
    Republic                
    Czech   Unilever ČR, spol. s r.o.   PLC 100   CZK210,000.00 Ordinary   Rohanské nábřeží 670/17, Karlín, Praha 8, 186 00
    Republic                
    Denmark   Unilever BCS Danmark A/S   NV 55.40 PLC 44.60   DKK1,000.00 Ordinary   Ørestads Boulevard 73, 2300 København S
    Denmark   Unilever Danmark A/S   NV 100   DKK1,000.00 Ordinary   Ørestads Boulevard 73, 2300 København S
    Denmark   Unilever Production ApS   NV 100   DKK100.00 Ordinary   Petersmindevej 30, 5000 Odense C
73.64   Denmark   Froosh ApS   NV 0 PLC 73.64   DKK1,000.00 Ordinary   Lindgreens Alle 12, 3 Sal, 2300 København S
    Dominican   Unilever Caribe, S.A.   NV 100   DOP1,000.00 Ordinary   Ave. Winston Churchill, Torre Acrópolis Piso 17, Santo Domingo
    Republic                
    Ecuador   Unilever Andina Ecuador S.A.   NV 100   USD1.00 Ordinary   Km 25 Vía a Daule, Guayaquil
    Egypt   Fine Tea Co (SAE)   PLC 100   EGP2.00 Ordinary   Bourg El-Arab City, Alexandria
    Egypt   Unilever Mashreq – Foods (SAE)   PLC 100   EGP20.00 Ordinary   Bourg El-Arab City, Alexandria
    Egypt   Unilever Mashreq – Home Care (SAE)   PLC 100   EGP2.00 Ordinary   6th of October City, 4th Industrial Zone, Piece Number 68, Giza
    Egypt   Unilever Mashreq International Company   PLC 100   USD1000.00 Ordinary   14th May Bridge, Ezbet Hegazy, Alexandria
60   Egypt   Unilever Mashreq Trading LLC   NV 0 PLC 60   EGP10.00 Ordinary   Industrial Zone – 14th May Bridge, Smouha, Alexandria
    Egypt   Unilever Mashreq – Personal Care (SAE)   PLC 100   EGP10.00 Ordinary   6th of October City, 4th Industrial Zone, Piece Number 68, Giza
    Egypt   Unilever Mashreq – Tea (SAE)   PLC 100   EGP100.00 Ordinary   Bourg El-Arab City, 1st Industrial Zone, Block 11, Piece Number 5,
                    Alexandria
    El Salvador   Unilever El Salvador SCC S.A. de C.V.   NV 100   USD1.00 Ordinary   Boulevard del Ejercito Nacional, Km. 3 1/2, San Salvador
    El Salvador   Unilever de Centro America S.A.   NV 100   USD100.00 Ordinary   Boulevard del Ejercito Nacional, Km. 3 1/2, San Salvador
    England   Accantia Group Holdings   NV 5.61 PLC 94.39   GBP0.01 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    and Wales   (unlimited company)            
    England   Alberto-Culver (Europe) Limited   NV 55.40 PLC 44.60   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    and Wales                

 

132   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    England and Wales   Alberto-Culver Company (U.K.) Limited   NV 5.61 PLC 94.39   GBP1.00 Ordinary   Unilever House, Springfield Drive, Leatherhead, KT22 7GR
    England and Wales   Alberto-Culver Group Limited   NV 55.40 PLC 44.60   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Alberto-Culver UK Holdings Limited   NV 55.40 PLC 44.60   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and   Alberto-Culver UK Products Limited   NV 55.40 PLC 44.60   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    Wales       NV 55.40 PLC 44.60  

GBP5.00 Preference

   
    England and Wales   Associated Enterprises Limited°   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   BBG Investments (France) Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Brooke Bond Assam Estates Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Brooke Bond Group Limited°   PLC 100   GBP0.25 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and   Brooke Bond South India Estates Limited°   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    Wales       PLC 100   GBP1.00 Redeemable Preference    
    England and Wales   CPC (UK) Pension Trust Limited   PLC 100   Limited by Guarantee   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Dermalogica (UK) Limited   PLC 100   GBP1.00 Ordinary   The Manser Building, Thorncroft Manor, Thorncroft Drive, Dorking, KT22 8JB
    England and Wales   Intuiskin Limited   NV 100   GBP1.00 Ordinary   16 Great Queen Street, Covent Garden, London, WC2B 5AH
    England and   Margarine Union (1930) Limited°   PLC 100   GBP0.01 Estate   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    Wales       PLC 100   GBP1.00 Ordinary    
            PLC 100   GBP1.00 Viscountcy    
    England and Wales   MBUK Trading Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Mixhold Investments Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Murad Europe Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Ren Limited   PLC 100   GBP1.00 Ordinary   1st Floor, 16 Charles II Street, London, SW1Y 4QU
    England and Wales   Ren Skincare Limited   PLC 100   GBP1.00 Ordinary   The Edison, 223 – 231 Old Marylebone Road, London, NW1 5QT
    England and Wales   T2 Tea (UK) Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   TIGI Holdings Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   TIGI International Limited   PLC 100   GBP1.00 Ordinary   Unilever House, Springfield Drive, Leatherhead, KT22 7GR
    England and Wales   TIGI Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Toni & Guy Products Limited°   PLC 100   GBP0.001 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   UAC International Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   UML Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unidis Forty Nine Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and   Unilever Australia Investments Limited   PLC 100   AUD10.00 Ordinary-A   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    Wales       PLC 100   GBP1.00 Ordinary    
    England and   Unilever Australia Partnership Limited   PLC 100   AUD10.00 Ordinary-A   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    Wales       PLC 100   GBP1.00 Ordinary    
    England and   Unilever Australia Services Limited   PLC 100   AUD10.00 Ordinary-A   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    Wales       PLC 100   GBP1.00 Ordinary    
    England and Wales   Unilever BCS Limited   NV 55.40 PLC 44.60   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and   Unilever BCS UK Limited°   NV 55.40 PLC 44.60   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    Wales       PLC 100  

GBP1.00 Redeemable

Golden Share

   
    England and Wales   Unilever BCS UK Services Limited°   NV 55.40 PLC 44.60 PLC 100  

GBP1.00 Ordinary

GBP1.00 Redeemable

Golden Share

  Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unilever Company for Industrial Development Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unilever Company for Regional Marketing and Research Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unilever Corporate Holdings Limited°   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unilever Employee Benefit Trustees Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unilever General Partner (Colworth Park) Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY

 

Annual Report on Form 20-F 2016   Financial Statements   133


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    England   Unilever Innovations Limited   PLC 100   GBP1.00 Deferred   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    and Wales       PLC 100   GBP0.10 Ordinary    
    England and Wales   Unilever Overseas Holdings Limited°   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England   Unilever Pension Trust Limited   PLC 100   GBP1.00 Ordinary   Unilever House, Springfield Drive, Leatherhead, KT22 7GR
    and Wales                
    England and Wales   Unilever Superannuation Trustees Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unilever U.K. Central Resources Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England and Wales   Unilever U.K. Holdings Limited°   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England   Unilever UK & CN Holdings Limited   PLC 100   GBP10.00 Class A   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    and Wales           Redeemable Preference    
            PLC 100   GBP10.00 Class B    
                Redeemable Preference    
            PLC 100   GBP1.00 Ordinary-A    
            PLC 100   GBP1.00 Ordinary-B    
    England   Unilever UK Group Limited   NV 49.86 PLC 50.14   GBP1.00 Ordinary-A   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    and Wales       NV 1.67 PLC 98.33   GBP1.00 Ordinary-B    
            NV 5.61 PLC 94.39   GBP1.00 Ordinary-C    
    England and Wales   Unilever UK Limited   NV 5.61 PLC 94.39   GBP1.00 Ordinary   Unilever House, Springfield Drive, Leatherhead, KT22 7GR
    England and Wales   Unilever UK Pension Fund Trustees Limited   PLC 100   GBP1.00 Ordinary   Unilever House, Springfield Drive, Leatherhead, KT22 7GR
    England and Wales   Unilever US Investments Limited°   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
86.25   England and Wales   Unilever Ventures III Limited Partnership   NV 57.50 PLC 28.75   Partnership Interest   1st Floor, 16 Charles II Street, London, SW1Y 4QU
    England and Wales   Unilever Ventures Limited   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    England   United Holdings Limited°   PLC 100   GBP1.00 Ordinary   Unilever House, 100 Victoria Embankment, London, EC4Y 0DY
    and Wales       NV 99.67 PLC 0.33   GBP500.00 Preferred    
    England and Wales   USF Nominees Limited   PLC 100   GBP1.00 Ordinary   Unilever House, Springfield Drive, Leatherhead, KT22 7GR
    Estonia   Unilever Eesti AS   NV 100   EUR6.30 Ordinary   Kalmistu tee 28a, Tallinna linn, Harju maakond, 11216
    Ethiopia   Unilever Manufacturing PLC   PLC 100   ETB1,000.00 Ordinary   Bole Sub City, Kebele 03/05, Lidiya Building, Addis Ababa
    Finland   Unilever Finland Oy   NV 100   EUR16.82 Ordinary   Post Box 254, 00101 Helsinki
    Finland   Unilever Ingman Production Oy   NV 100   EUR1.00 Ordinary   Post Box 254, 00101 Helsinki
    Finland   Unilever Spreads Finland Oy   NV 55.40 PLC 44.60   EUR1,250.00 Ordinary   Roineentie 10, 00510 Helsinki
73.64   Finland   Froosh OY   NV 0 PLC 73.64   EUR25.00 Ordinary   Energiataku 3, 00180 Helsinki
99.99   France   Alsa France S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Ruiel-Malmaison
99.99   France   Amora Maille Societe Industrielle S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   ZI de la Norge – Chevigny Saint-Sauveur, 21800 Quetigny
99.99   France   Bestfoods France Industries S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Cogesal-Miko S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Fralib Sourcing Unit S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
    France   Grom France S.a.r.l   NV 100   EUR10,000.00 Ordinary   81 Rue De Seine, 75006 Paris
    France   Intuiskin S.A.S.   NV 100   EUR1.00 Ordinary   Parc activillage des Fontaines 38926 Crolles Cedex
    France   Pégase S.A.S.   NV 64.54 PLC 35.45   EUR50.00 Ordinary   6 rue des Frères Caudron, 78 140 Velizy Villacoublay
99.99   France   Relai D’or Centrale S.A.S   NV 64.54 PLC 35.45   No Par Value Ordinary   7, rue Armand Peugeot 92500 Rueil-Malmaison
99.99   France   Saphir S.A.S.   NV 64.54 PLC 35.45   EUR1.00 Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Sfejer S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Tigi Services France S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
    France   Unilever BCS France S.A.S.   NV 55.40 PLC 44.60   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Unilever France S.A.S.   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Unilever France Holdings S.A.S.   NV 64.54 PLC 35.45   EUR1.00 Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Unilever France HPC Industries S.A.S.   NV 64.54 PLC 35.45   EUR1.00 Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
99.99   France   Unilever Retail Organization France   NV 64.54 PLC 35.45   No Par Value Ordinary   20, rue des Deux Gares, 92500, Rueil-Malmaison
    Germany   Dermalogica GmbH   NV 100   EUR25,000.00 Ordinary   Gerresheimer Landstraße 71, 40627 Düsseldorf
99.99   Germany   DU Gesellschaft für   NV 64.54 PLC 35.45   DEM50,000.00 Ordinary   Am Strandkai 1, 20457 Hamburg
        Arbeitnehmerüberlassung mbH            
99.99   Germany   Maizena Grundstücksverwaltung GmbH   NV 63.60 PLC 36.39   Partnership Interest   Schultetusstraße 37, 17153 Stavenhagen
        & Co. OHG LOGO            
99.99   Germany   Pfanni GmbH & Co. OHG LOGO   NV 64.54 PLC 35.45   Partnership Interest   Schultetusstraße 37, 17153 Stavenhagen
    Germany   Rizofoor GmbH   NV 96.45 PLC 3.55   EUR15,350.00 Ordinary   Schultetusstraße 37, 17153 Stavenhagen
            NV 100   EUR138,150.00 Ordinary    
    Germany   Schafft GmbH   NV 64.55 PLC 35.45   EUR63,920.00 Ordinary   Schultetusstraße 37, 17153 Stavenhagen
            NV 64.55 PLC 35.45   EUR100,000.00 Ordinary    
    Germany   TIGI Eurologistic GmbH   PLC 100   EUR100.00 Ordinary   Hertzstraße 6, 71083 Herrenberg-Gülstein
            PLC 100   EUR24.900.00 Ordinary    
    Germany   TIGI Haircare GmbH   PLC 100   EUR25,600.00 Ordinary   Hertzstraße 6, 71083 Herrenberg-Gülstein
    Germany   UBG Vermietungs GmbH   NV 64.74 PLC 35.26   EUR136,377,489.00   Schultetusstraße 37, 17153 Stavenhagen
                Ordinary    
    Germany   Unilever BCS Deutschland GmbH   NV 55.40 PLC 44.60   EUR25,000.00 Ordinary   Am Strandkai 1, 20457 Hamburg
    Germany   Unilever BCS Deutschland Immobilien   NV 66.22 PLC 33.78   Partnership Interest   Am Strandkai 1, 20457 Hamburg
        Leasing GmbH & Co. OHG LOGO            

 

134   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    Germany   Unilever BCS IP Deutschland GmbH & Co. OHG LOGO   NV 64.45 PLC 35.55   Partnership Interest   Am Strandkai 1, 20457 Hamburg
    Germany   Unilever BCS Sourcing Deutschland GmbH & Co. OHG LOGO   NV 64.45 PLC 35.55   Partnership Interest   Am Strandkai 1, 20457 Hamburg
    Germany   Unilever BCS Verwaltungs GmbH   NV 55.40 PLC 44.60   EUR25.000,00 Ordinary   Am Strandkai 1, 20457 Hamburg
    Germany   Unilever Deutschland GmbH   NV 64.55 PLC 35.45   EUR90,000,000.00 Ordinary   Am Strandkai 1, 20457 Hamburg
            NV 64.55 PLC 35.45   EUR2,000,000.00 Ordinary    
            NV 64.55 PLC 35.45   EUR1,000,000.00 Ordinary    
    Germany   Unilever Deutschland Holding GmbH   NV 64.55 PLC 35.45   EUR39,000.00 Ordinary   Am Strandkai 1, 20457 Hamburg
            NV 64.55 PLC 35.45   EUR18,000.00 Ordinary    
            NV 64.55 PLC 35.45   EUR14,300.00 Ordinary    
            NV 64.55 PLC 35.45   EUR5.200.00 Ordinary    
            NV 64.55 PLC 35.45   EUR6,500.00 Ordinary    
    Germany   Unilever Deutschland Immobilien Leasing GmbH & Co. OHG LOGO   NV 66.33 PLC 33.67   Partnership Interest   Schultetusstraße 37, 17153 Stavenhagen
    Germany   Unilever Deutschland IPR GmbH & Co. OHG LOGO   NV 64.55 PLC 35.45   Partnership Interest   Schultetusstraße 37, 17153 Stavenhagen
    Germany   Unilever Deutschland Produktions GmbH & Co. OHG LOGO   NV 64.55 PLC 35.45   Partnership Interest   Am Strandkai 1, 20457 Hamburg
    Germany   Unilever Deutschland Produktions Verwaltungs GmbH   NV 64.55 PLC 35.45   EUR179,000.00 Ordinary   Am Strandkai 1, 20457 Hamburg
    Germany   Unilever Deutschland Supply Chain Services GmbH   NV 64.55 PLC 35.45   EUR51,150.00 Ordinary   Am Strandkai 1, 20457 Hamburg
    Ghana   Millers Swanzy (Ghana) Limited   PLC 100   GHC1.00 Ordinary   Swanmill, Kwame Nkrumah Avenue, Accra
66.56   Ghana   Unilever Ghana Investments Limited   NV 0 PLC 66.56   GHC10.00 Ordinary   Plot No. Ind/A/3A-4, Heavy Industrial Area, Tema
66.56   Ghana   Unilever Ghana Limited   NV 0 PLC 66.56   GHC0.0192 Ordinary   Plot No. Ind/A/3A-4, Heavy Industrial Area, Tema
    Greece   Elais Unilever Hellas SA   NV 100   EUR10.00 Ordinary   Kymis ave & 10, Seneka str. GR-145 64 Kifissia
    Greece   Elanthi SA   NV 100   EUR10.00 Ordinary   Kymis ave & 10, Seneka str. GR-145 64 Kifissia
    Greece   Unilever Knorr SA   NV 100   EUR10.00 Ordinary   Kymis ave & 10, Seneka str. GR-145 64 Kifissia
    Greece   UL BCS Logistics Consulting SA   NV 100   EUR10.00 Ordinary   Kymis ave & 10, Seneka str. GR-145 64 Kifissia
    Greece   Unilever Logistics SA   NV 100   EUR10.00 Ordinary   Kymis ave & 10, Seneka str. GR-145 64 Kifissia
    Guatemala   Unilever de Centroamerica S.A. Guatemala   NV 100   GTQ60.00 Ordinary   Diagonal 6. 10-50 zona 10, Ciudad de Guatemala. Nivel 17 Torre Norte Ed. Interamericas World Financial Center
    Guatemala   Unilever Guatemala SCC S.A.   NV 100   GTQ100.00 Ordinary   24 Avenida , Calzada Atanacio Tzul, 35-87 Zona 12 Ciudad de Guatemala
    Honduras   Unilever de Centroamerica S.A. Honduras   NV 100   HNL10.00 Ordinary   Anillo Periférico 600 metros después de la colonia, Residencial Las Uvas contigua acceso de colonia residencial, Tegucigalpa
    Hong Kong   Blueair Asia Limited   NV 100   HKD0.01 Ordinary   Suite 1106-8, 11/F, Tai Yau Building, 181 Johnston Road, Wanchai
    Hong Kong   Kate Somerville Skincare, Hong Kong Limited   NV 100   HKD1.00 Ordinary   Room 1505, Wheelock House, 20 Pedder Street, Central
    Hong Kong   Unilever Hong Kong Limited   NV 64.55 PLC 35.45   HKD0.10 Ordinary   6 Dai Fu Street, Tai Po Industrial Estate, N.T.
    Hungary   Multifrozen Kereskedelmi Kft   PLC 100   HUF1.00 Ordinary   1138-Budapest, Váci u. 182
    Hungary   Unilever BCS Hungary Kft   NV 55.40 PLC 44.60   HUF1.00 Ordinary   1138-Budapest, Váci u. 182
    Hungary   Unilever Magyarország Kft   PLC 100   HUF1.00 Ordinary   1138-Budapest, Váci u. 182
67.20   India   Bhavishya Alliance Child Nutrition Initiatives   NV 0 PLC 67.20   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
    India   Blueair Limited   NV 99.98 PLC 0.02   INR10. 00 Ordinary   S-327, Greater Kailash – II, New Delhi – 110048, Delhi
67.20   India   Daverashola Estates Private Limited   NV 0 PLC 67.20   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
67.20   India   Hindlever Trust Limited   NV 0 PLC 67.20   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
67.20   India   Hindustan Unilever Limited°   NV 0 PLC 67.20   INR1.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
67.20   India   Jamnagar Properties Private Limited   NV 0 PLC 67.20   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
67.20   India   Lakme Lever Private Limited   NV 0 PLC 67.20   INR10.00 Ordinary   1st Floor, Shreeniwas House, H. Somani Marg, (behind Bombay Gymkhana) Fort, Mumbai 40001
67.20   India   Levers Associated Trust Limited   NV 0 PLC 67.20   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
67.20   India   Levindra Trust Limited   NV 0 PLC 67.20   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
67.20   India   Pond’s Exports Limited   NV 0 PLC 67.20   INR1.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
67.20   India   Unilever India Exports Limited   NV 0 PLC 67.20   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
    India   Unilever Industries Private Limited°   PLC 100   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
    India   Unilever Ventures India Advisory Private Limited   PLC 100   INR1.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
84.99   Indonesia   PT Unilever Indonesia Tbk   NV 54.86 PLC 30.13   IDR10.00 Ordinary   Grha Unilever, Green Office Park Kav 3, Jalan BSD Boulevard Barat, BSD City, Tangerang, 15345
99.26   Indonesia   PT Unilever Enterprises Indonesia   NV 64.07 PLC 35.19   IDR1,000.00 Ordinary   Grha Unilever, Green Office Park Kav 3, Jalan BSD Boulevard Barat, BSD City, Tangerang, 15345
    Indonesia   PT Unilever Oleochemical Indonesia   NV 100   IDR1,000,000.00 Ordinary   KEK Sei Mangkei, Nagori Sei Mangkei, Kecamatan Bosar Maligas, Kabupaten Simalungun 21183, Sumatera Utara
99.35   Iran   Unilever Iran (Private Joint Stock Company)   NV 99.35 PLC 0   IRR1,000,000.00 Ordinary   137 Shiraz Building, Corner of the 21st Street, Khaled Eslamboli Ave, Tehran
    Ireland   Lipton Soft Drinks (Ireland) Limited   PLC 100   EUR1.26 Ordinary   20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24

 

Annual Report on Form 20-F 2016   Financial Statements   135


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    Ireland   Unilever BCS Ireland Limited   NV 55.40 PLC 44.60   EUR1.00 Ordinary   20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24
    Ireland   Unilever Ireland (Holdings) Limited   PLC 100   EUR1.26 Ordinary   20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24
    Ireland   Unilever Ireland Limited   PLC 100   EUR1.26 Ordinary   20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24
    Ireland   Unilever Superannuation (Ireland) Trust Limited   PLC 100   EUR1.26 Ordinary   20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24
    Isle of Man   Rational International Enterprises Limited   PLC 100   USD1.00 Ordinary   Bridge Chambers, West Quay, Ramsey, Isle of Man, IM8 1DL
    Israel   Beigel & Beigel Mazon (1985) Limited   NV 12.8 PLC 87.2   ILS1.00 Ordinary   3 Gilboa St. Airport City, Ben Gurion Airport
    Israel   Bestfoods TAMI Holdings Limited   NV 25.11 PLC 74.89   ILS0.001 Ordinary   52 Julius Simon Street, Haifa
    Israel   Glidat Strauss Limited   PLC 100   ILS1.00 Management   Haharoshet 1, PO Box 2288, Akko, 24122
            PLC 100   ILS1.00 Ordinary    
            NV 0 PLC 0   ILS1.00 Dormant†    
    Israel   Israel Vegetable Oil Company Limited   NV 25.11 PLC 74.89   ILS0.0001 Ordinary   52 Julius Simon Street, Haifa
    Israel   Lever Distribution of Personal and   PLC 100   ILS0.0001 Ordinary   52 Julius Simon Street, Haifa
        Cleaning Products Limited            
    Israel   Unilever Israel Foods Limited   NV 25.10 PLC 74.90   ILS0.10 Class A   52 Julius Simon Street, Haifa
            NV 25.10 PLC 74.90   ILS0.10 Class B    
            NV 25.10 PLC 74.90   ILS0.10 Class C    
            NV 25.10 PLC 74.90   ILS0.0002 Special    
    Israel   Unilever Israel Home and Personal Care   PLC 100   ILS1.00 Ordinary   52 Julius Simon Street, Haifa
        Limited            
    Israel   Unilever Israel Marketing Limited   NV 25.11 PLC 74.89   ILS0.0001 Ordinary   52 Julius Simon Street, Haifa
    Israel   Unilever Shefa Israel Limited   NV 25.11 PLC 74.89   ILS1.00 Ordinary   52 Julius Simon Street, Haifa
    Italy   Gromart S.R.L.   NV 100   EUR1,815,800.00 Ordinary   Piazza Paleocapa 1/D, 10100, Torino
51   Italy   G.L.L. S.R.L.   NV 51 PLC 0   EUR40,000.00 Common   Via Crea 10, 10095, Grugliasco
    Italy   Grom-PD S.R.L.   NV 100   EUR40,000.00 Common   Via Roma 101, 35122, Padova
    Italy   Intuiskin S.R.L.   NV 100   EUR10,000.00 Ordinary   Via Tortona 25, cap 20144 – Milano
    Italy   Unilever BCS Italia S.R.L.   NV 55.40 PLC 44.60   EUR10,000.00 Ordinary   Via Paolo di Dono 3/A 00142 Roma
    Italy   Unilever Italia Administrative Services S.R.L.   NV 100   EUR70,000.00 Ordinary   Piazzale Biancamano n.8, 20121, Milano
    Italy   Unilever Italia Logistics S.R.L.   NV 100   EUR600,000.00 Ordinary   Via Paolo di Dono 3/A 00142 Roma
    Italy   Unilever Italia Manufacturing S.R.L.   NV 100   EUR10,000,000.00 Ordinary   Via Paolo di Dono 3/A 00142 Roma
    Italy   Unilever Italia Mkt Operations S.R.L.   NV 100   EUR25,000,000.00 Ordinary   Via Paolo di Dono 3/A 00142 Roma
    Italy   Unilever Italy Holdings S.R.L.   NV 100   EUR200,000,000.00   Via Paolo di Dono 3/A 00142 Roma
                Ordinary    
    Japan   Unilever Japan Beverage K.K.   NV 100   JPY50,000.00 Ordinary   2-1-1, Kamimeguro, Meguro-ku, Tokyo 153-8578
    Japan   Unilever Japan Customer Marketing K.K.   NV 100   JPY50,000.00 Ordinary   2-1-1, Kamimeguro, Meguro-ku, Tokyo 153-8578
    Japan   Unilever Japan Holdings K.K.   NV 100   JPY10,000.00 Ordinary   2-1-1, Kamimeguro, Meguro-ku, Tokyo 153-8578
    Japan   Unilever Japan K.K.   NV 100   JPY50,000.00 Ordinary   2-1-1, Kamimeguro, Meguro-ku, Tokyo 153-8578
73.64   Japan   Froosh K.K.   NV 0 PLC 73.64   JPY50,000.00 Ordinary   1–10–3–901 Roppongi, Minatu–ku, Tokyo 106–0032
    Japan   Unilever Japan Service K.K.   NV 100   JPY50,000.00 Ordinary   2-1-1, Kamimeguro, Meguro-ku, Tokyo 153-8578
    Jersey   Unilever Chile Investments Limited   NV 64.55 PLC 35.45   GBP1.00 Ordinary   13 Castle Street, St Helier, Jersey , JE4 5UT
98.19   Kenya   Brooke Bond Mombasa Limited   NV 0 PLC 98.19   KES1.00 Ordinary   Head Office, Kericho-Nakuru Road, P.O. BOX 20, 20200, Kericho
98.19   Kenya   Mabroukie Tea & Coffee Estates Limited   NV 0 PLC 98.19   KES1.00 Ordinary   Head Office, Kericho-Nakuru Road, P.O. BOX 20, 20200, Kericho
51.08   Kenya   The Limuru Tea Company Limited   NV 0 PLC 51.08   KES20.00 Ordinary   Head Office, Kericho-Nakuru Road, P.O. BOX 20, 20200, Kericho
    Kenya   Unilever Kenya Limited°   PLC 100   KES20.00 Ordinary   Commercial Street, Industrial Area, P.O. BOX 30062-00100, Nairobi
98.20   Kenya   Unilever Tea Kenya Limited   NV 0 PLC 98.20   KES1.00 Ordinary   Head Office, Kericho-Nakuru Road, P.O. BOX 20, 20200, Kericho
    Korea   Unilever Korea Chusik Hoesa   NV 100   KRW10,000.00 Ordinary   443 Taeheran-ro, Samsung-dong, Kangnam-gu, Seoul
            NV 100   KRW10,000.00 Preference    
    Laos   Unilever Services (Lao) Sole Co Limited   NV 100   LAK80,0000.00 Ordinary   Viengvang Tower, 4th Floor, Room no. 402A, Boulichan Road,
                    Dongpalan Thong Village, Sisattanak District, Vientiane Capital
    Latvia   Unilever Baltic LLC   NV 100   EUR1.00 Ordinary   Kronvalda bulvāris 3-10, Rīga, LV-1010
    Lebanon   Unilever Levant s.a.r.l.   NV 100   LBP1,000,000.00 Ordinary   Sin El Fil, Zakher Building, Floor 4, Beirut
    Lithuania   UAB Unilever Lietuva distribucija   NV 100   EUR3,620.25 Ordinary   Skuodo st. 28, Mazeikiai, LT-89100
    Lithuania   UAB Unilever Lietuva ledu gamyba   NV 100   EUR3,620.25 Ordinary   Skuodo st. 28, Mazeikiai, LT-89100
    Malawi   Unilever South East Africa (Private)   PLC 100   MWK2.00 Ordinary   Abdul Majid Motor City, Chipembere Highway, Ginnery Corner,
        Limited           Blantyre
70   Malaysia   Unilever (Malaysia) Holdings Sdn. Bhd.   NV 0 PLC 70   RM1.00 Ordinary   Level 34, Menara TM, Jalan Pantai Baru, 59200 Kuala Lumpur
70   Malaysia   Unilever (Malaysia) Services Sdn. Bhd.   NV 0 PLC 70   RM1.00 Ordinary   Level 34, Menara TM, Jalan Pantai Baru, 59200 Kuala Lumpur
    Malaysia   Unilever Foods (Malaysia) Sdn. Bhd.   PLC 100   RM75.00 Ordinary   Level 34, Menara TM, Jalan Pantai Baru, 59200 Kuala Lumpur
    Malaysia   Unilever Malaysia Aviance Sdn. Bhd.   PLC 100   RM1.00 Ordinary   Level 34, Menara TM, Jalan Pantai Baru, 59200 Kuala Lumpur
    Mexico   Unilever de Mexico S.de R.L. de C.V.   NV 64.55 PLC 35.45   Partnership Interest   Av. Tepalcapa No.2, Col. Rancho Santo Domingo, C.P. 54900 Tultitlán, Estado de México
    Mexico   Unilever Holding Mexico S.de R.L. de C.V.   NV 64.55 PLC 35.45   Partnership Interest   Av. Tepalcapa No.2, Col. Rancho Santo Domingo, C.P. 54900 Tultitlán, Estado de México
    Mexico   Unilever Manufacturera S.de R.L. de C.V.   NV 64.55 PLC 35.45   Partnership Interest   Av. Tepalcapa No.2, Col. Rancho Santo Domingo, C.P. 54900 Tultitlán, Estado de México
    Mexico   Servicios Professionales Unilever S.de R.L. de C.V.   NV 64.55 PLC 35.45   Partnership Interest   Av. Tepalcapa No.2, Col. Rancho Santo Domingo, C.P. 54900 Tultitlán, Estado de México
    Mexico   Unilever Mexicana S.de R.L. de C.V.   NV 64.55 PLC 35.45   Partnership Interest   Av. Tepalcapa No.2, Col. Rancho Santo Domingo, C.P. 54900 Tultitlán, Estado de México
    Mexico   Unilever Real Estate Mexico S.de R.L. de C.V.   NV 64.55 PLC 35.45   Partnership Interest   Av. Tepalcapa No.2, Col. Rancho Santo Domingo, C.P. 54900 Tultitlán, Estado de México
    Mexico   Unilever Servicios de Promotoria, S.de R.L. de C.V.   NV 64.55 PLC 35.45   Partnership Interest   Av. Tepalcapa No.2, Col. Rancho Santo Domingo, C.P. 54900 Tultitlán, Estado de México

 

136   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

99.98   Morocco   Unilever Maghreb S.A.   NV 99.98 PLC 0   MAD100.00 Ordinary   Km 10, Route Cotiere, Ain Sebaa, Casablanca
    Mozambique   Unilever Mocambique Limitada   NV 100   USD0.01 Ordinary   Avenida 24 de Julho, Edifício 24, nº 1097, 4º andar, Maputo
    Myanmar   Unilever (Myanmar) Limited   NV 100   MMK8,200.00 Ordinary   40,41,47, Mintheidie Kyaw Swar Street, Shwe Pyi Thar Industrial Zone (2), Yangon
    Myanmar   Unilever (Myanmar) Services Limited   NV 100   USD10.00 Ordinary   150, Kabar Aye Pagoda Road, Bahn Township, Yangon
53.76   Nepal   Unilever Nepal Limited   NV 0 PLC 53.76   NPR100.00 Ordinary   Basamadi V.D.C. – 5, P.O. Box-11, Hetauda, Dist. Makwanpur
    Netherlands   Alberto-Culver Netherlands B.V.*   NV 55.40 PLC 44.60   EUR1.00 Ordinary-A   Weena 455, 3013 AL Rotterdam
            NV 55.40 PLC 44.60   EUR1.00 Ordinary-B    
    Netherlands   Argentina Investments B.V.*   NV 64.55 PLC 35.45   EUR454.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Ben en Jerry’s Hellendoorn B.V.*   NV 100   EUR453.78 Ordinary   Reggeweg 15, 7447 AN Hellendoorn
    Netherlands   BFO Holdings B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   BFO TWO B.V.*   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   BrazH1 B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   BrazH2 B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Brazinvest B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Brazinvestee B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Chico-invest B.V.*   NV 64.55 PLC 35.45   EUR455.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Doma B.V.*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Handelmaatschappij Noorda B.V.°*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Immobilia Transhome B.V.*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Itaho B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Lever Faberge Europe-Sourcing Unit   NV 100   NLG1,000.00 Ordinary   Deltaweg 150, 3133 KM Vlaardingen
        Vlaardingen B.V.*            
    Netherlands   Lipoma B.V.°*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Marga B.V.°*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Mavibel (Maatschappij voor Internationale   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
        Beleggingen) B.V.°*            
    Netherlands   Mexinvest B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Mixhold B.V.*   NV 100   EUR1.00 Ordinary-A   Weena 455, 3013 AL Rotterdam
            PLC 100   EUR1.00 Ordinary-B    
            NV 55.40 PLC 44.60   EUR1.00 cumulative    
                preference shares    
    Netherlands   Naamlooze Vennootschap Elma°*†   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
            NV 0.25 PLC 99.75   NLG1,000.00 5%    
                Cumulative Preference    
    Netherlands   New Asia B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Nommexar B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Oprichting Tessa BV   NV 100   EUR1.00 Ordinary   Nassaukade 5, Rotterdam
    Netherlands   Ortiz Finance B.V.*   NV 64.55 PLC 35.45   NLG100.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Pabulum B.V.*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Rizofoor B.V.*   PLC 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Rolf von den Baumen’s Vetsmelterij B.V.*   NV 100   EUR454.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Rolon B.V.*   NV 64.55 PLC 35.45   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Saponia B.V.°*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   ThaiB1 B.V.*   NV 64.55 PLC 35.45   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   ThaiB2 B.V.   NV 64.55 PLC 35.45   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Administration Centre B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Alser B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever BCS Europe B.V.*   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever BCS Holdings B.V.*   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever BCS NL Holdings Two B.V.*   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever BCS Nederland B.V.*   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Nassaukade 5, 3071 JL Rotterdam
    Netherlands   Unilever BCS Research and Development   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Olivier van Noortlaan 120, 3133 AT Vlaardingen
        B.V.*            
    Netherlands   Unilever BCS Sourcing Nederland B.V.*   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Nassaukade 3, 3071 JL Rotterdam
    Netherlands   Unilever Berran B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Canada Investments B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Caribbean Holdings B.V.*   NV 100   EUR1,800.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Employee Benefits Management   PLC 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
        B.V.*            
    Netherlands   Unilever Employment Services B.V.*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Europe Business Center B.V.*   NV 100   EUR454.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Finance International B.V.°*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Foodsolutions B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Global Services B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Holdings B.V.*   NV 100   EUR454.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Home & Personal Care Nederland   NV 100   EUR100.00 Ordinary   Weena 455, 3013 AL Rotterdam
        B.V.*            
    Netherlands   Unilever Indonesia Holding B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Insurances N.V.   NV 100   EUR454.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Nederland B.V.*   NV 100   EUR454.00 Ordinary   Nassaukade 5, 3071 JL Rotterdam
    Netherlands   Unilever Nederland Foods Factories B.V.*   NV 100   EUR46.00 ordinary   Nassaukade 5, 3071 JL Rotterdam
    Netherlands   Unilever Netherlands Retail Operations B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Nederland Holdings B.V.°*   NV 100   EUR454.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Nederland Services B.V.*   NV 100   EUR460.00 Ordinary   Nassaukade 3, 3071 JL Rotterdam

 

Annual Report on Form 20-F 2016   Financial Statements   137


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    Netherlands   Unilever Overseas Holdings B.V.*   PLC 100   NLG1,000.00 Ordinary   Unilever House , 100 Victoria Embankment, London, EC4Y 0DY (Registered Seat: Rotterdam)
    Netherlands   Unilever Research and Development   NV 100   EUR460.00 Ordinary   Olivier van Noortlaan 120, 3133 AT Vlaardingen
        Vlaardingen B.V.*            
    Netherlands   Unilever Turkey Holdings B.V.*   NV 64.55 PLC 35.45   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever US Investments B.V.°*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Unilever Ventures Holdings B.V.   NV 100   EUR453.79 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Univest Company B.V.   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   UNUS Holding B.V.*†   NV 100   EUR0.10 Ordinary-A   Weena 455, 3013 AL Rotterdam
            PLC 100   EUR0.10 Ordinary-B    
            NV 0 PLC 0   EUR0.10 Ordinary–B    
                Non-voting†    
    Netherlands   Verenigde Zeepfabrieken B.V.*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Netherlands   Wemado B.V.°*   NV 100   NLG1,000.00 Ordinary   Weena 455, 3013 AL Rotterdam
    New Zealand   T2 NZ Limited   PLC 100   NZD1.00 Ordinary   Level 4, 103 Carlton Gore Rd, Newmarket, Auckland 1023
    New Zealand   Unilever New Zealand Limited   PLC 100   NZD2.00 Ordinary   Level 4, 103 Carlton Gore Rd, Newmarket, Auckland 1023
    New Zealand   Unilever New Zealand Superannuation   PLC 100   NZD1.00 Ordinary   Level 4, 103 Carlton Gore Rd, Newmarket, Auckland 1023
        Trustee Limited            
    New Zealand   Unilever New Zealand Trading Limited   PLC 100   NZD1.00 Ordinary   Level 4, 103 Carlton Gore Rd, Newmarket, Auckland 1023
    New Zealand   Ben & Jerry’s Franchising New Zealand Limited   PLC 100   NZD1.00 Ordinary   Level 4, 103 Carlton Gore Rd, Newmarket, Auckland 1023
    Nicaragua   Unilever de Centroamerica S.A. Nicaragua   NV 100   NIC50.00 Ordinary   Km 11.5, Carretera Vieja a León, 800 Mts Norte, 100 Mts Este, 300 Mts Norte, Managua
56.27   Niger   Unilever Niger S.A.   NV 0 PLC 56.27   XOF10,000.00 Ordinary   BP 10272 Niamey
60.06   Nigeria   Unilever Nigeria Plc   NV 0 PLC 60.06   NGN0.50 Ordinary   1 Billings Way, Oregun, Ikeja, Lagos
51   Nigeria   West Africa Popular Foods Nigeria Limited   NV 0 PLC 51   NGN1.00 Ordinary   1 Billings Way, Oregun, Ikeja, Lagos
    Norway   Unilever Norge AS   NV 100   NOK100.00 Ordinary   Martin Linges vei 25, Postbox 1, 1331 Fornebu
73.64   Norway   Froosh AS   NV 0 PLC 73.64   NOK100.00 Ordinary   Karl Johans Gate 2, Oslo, 0154
99.09   Pakistan   Lever Associated Pakistan Trust (Private) Limited   PLC 99.09   PKR10.00 Ordinary   Avari Plaza, Fatima Jinnah Road, Karachi – 75530
99.09   Pakistan   Lever Chemicals (Private) Limited   NV 0 PLC 99.09   PKR10.00 Ordinary   Avari Plaza, Fatima Jinnah Road, Karachi – 75530
99.09   Pakistan   Sadiq (Private) Limited   NV 0 PLC 99.09   PKR10.00 Ordinary   Avari Plaza, Fatima Jinnah Road, Karachi – 75530
    Pakistan   Unilever Birds Eye Foods Pakistan (Private) Limited   PLC 100   PKR10.00 Ordinary   Avari Plaza, Fatima Jinnah Road, Karachi – 75530
75.85   Pakistan   Unilever Pakistan Foods Limited   NV 42.02 PLC 33.83   PKR10.00 Ordinary   Avari Plaza, Fatima Jinnah Road, Karachi – 75530
99.09   Pakistan   Unilever Pakistan Limited   NV 0 PLC 99.09   PKR50.00 Ordinary   Avari Plaza, Fatima Jinnah Road, Karachi – 75530
70.52           NV 0 PLC 70.52   PKR100.00 Preference    
    Palestine   Unilever Market Development Company   PLC 100   ILS1.00 Ordinary   Ersal St. Awad Center P.O.B 3801 Al-Beireh, Ramallah
    Panama   Unilever Regional Services Panama S.A.   NV 100   USD1.00 Ordinary   Punta Pacífica, Calle Isaac Hanono Missri, P.H. Torre de las Américas, Torre C, Oficina 32, corregimiento de San Francisco, Distrito y Provincia de Panamá,
    Panama   Unilever de Centroamerica S.A. Panama   NV 100   No Nominal Value   Calle Isaac Hanoro, Torre de las Americas, torre C, piso 32, corregimiento de San Francisco, distrito y provincia de Panamá
    Paraguay   Unilever de Paraguay S.A.   NV 100   PYG1,000,000.00 Ordinary   4544 Roque Centurión Miranda N° 1635 casi San Martin. Edificio Aymac II, Asunción
    Peru   Unilever Andina Perú S.A.   NV 100   PEN1.00 Ordinary   Av. Paseo de la Republica 5895 OF. 401, Miraflores, Lima 18
    Philippines   Metrolab Industries, Inc.   NV 64.55 PLC 35.45   PHP1.00 Common   Linares Road, Gateway Business Park, Gen. Trias, Cavite
            NV 64.55 PLC 35.45   PHP10.00 Preference    
    Philippines   Unilever Philippines, Inc.   NV 64.55 PLC 35.45   PHP50.00 Common  

7th Floor, Bonifacio Stopover Corporate Center,

31st Street corner 2nd Avenue, Bonifacio Global City, Taguig City

    Philippines   Unilever Philippines Body Care, Inc.   NV 64.55 PLC 35.45   PHP100.00 Common   11th Avenue corner 39th Street, Bonifacio Triangle, Bonifacio Global City, Taguig City
    Philippines   Unilever Philippines Manufacturing, Inc.   NV 64.55 PLC 35.45   PHP1.00 Common   11th Avenue corner 39th Street, Bonifacio Triangle, Bonifacio Global City, Taguig City
50   Philippines   Unilever RFM Ice Cream, Inc.   NV 32.28 PLC 17.72   PHP1.00 Common-B   Manggahan Light Industrial Compound, A. Rodriguez Avenue, Bo. Manggahan, Pasig City
    Poland   Unilever Polska Sp. z o.o.   PLC 100   PLN50.00 Ordinary   Jerozolimskie 134, 02-305, Warszawa
    Poland   Unilever Poland Services Sp. z o.o.   PLC 100   PLN50.00 Ordinary   Jerozolimskie 134, 02-305, Warszawa
    Poland   Unilever Polska S.A.   PLC 100   PLN10.00 Ordinary   Jerozolimskie 134, 02-305, Warszawa
    Poland   Unilever BCS Polska Sp. z o.o.   NV 55.40 PLC 44.60   PLN50.00 Ordinary   Jerozolimskie 134, 02-305, Warszawa
    Poland   Unilever BCS Polska Holding Sp. z o.o.   PLC 100   PLN50.00 Ordinary   Jerozolimskie 134, 02-305, Warszawa
    Puerto Rico   Unilever de Puerto Rico, Inc°   NV 100   USD100.00 Ordinary   Professional Services Park 997, San Roverta St., Suite 7, San Juan
99   Romania   Unilever Romania S.A.   NV 99 PLC 0   ROL0.10 Ordinary   Ploiesti, 291 Republicii Avenue, Prahova County
    Romania   Unilever Distribution SRL   NV 100   ROL20.00 Ordinary   Ploiesti, 291 Republicii Avenue, Prahova County
    Romania   Unilever BCS SCE SRL   NV 55.40 PLC 44.60   ROL10.00 Ordinary   Ploiesti, 291 Republicii Avenue, Prahova County
    Romania   Unilever South Central Europe S.A.   NV 100   ROL260.50 Ordinary   Ploiesti, 291 Republicii Avenue, Prahova County
    Russia   Concern Kalina LLC   NV 7.12 PLC 92.88   Membership Interest   620138, 80, Komsomol’skaya, Ekaterinburg
    Russia   Inmarko Trade LLC   NV 7.12 PLC 92.88   Membership Interest   644031, 205, 10 let Oktyabrya, Omsk
98.29   Russia   JLLC Tulskiy Khladokombinat   NV 6.99 PLC 91.29   RUR1.00 Ordinary   300016, 78, Ostrovskogo Street, Tula
    Russia   OOO Unilever Rus   NV 7.12 PLC 92.88   Membership Interest   123022, 13, Sergeya Makeeva Street, Moscow
49   Saudi Arabia   Binzagr Unilever Limitedx   NV 0 PLC 49   SAR1,000.00 Ordinary   P.O.Box 5694, Jeddah 21432
    Serbia   Unilever Beograd d.o.o.   NV 100   Membership Interest   Belgrade, Serbia, Omladinskih brigada 90b – Novi Beograd
    Singapore   T2 Singapore PTE Limited   PLC 100   SGD1.00 Ordinary   20E Pasir Panjang Road, #06-22 Mapletree Business City, 117439
    Singapore   Unilever Asia Private Limited   NV 100   SGD1.00 Ordinary   20 Pasir Panjang Road, #06-22 Mapletree Business City, 117439
    Singapore   Unilever Singapore Pte. Limited   PLC 100   SGD1.00 Ordinary   20 Pasir Panjang Road, #06-22 Mapletree Business City, 117439

 

138   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    Slovakia   Unilever BCS Slovensko, spol. s r.o.   NV 55.40 PLC 44.60   EUR1.00 Ordinary   Karadzicova 10, 821 08 Bratislava
    Slovakia   Unilever Slovensko spol. s r.o.   NV 100   EUR1.00 Ordinary   Karadzicova 10, 821 08 Bratislava
74.25   South Africa   Nollsworth Park Properties (Pty) Limited   NV 11.21 PLC 63.04   ZAR2.00 Ordinary   15 Nollsworth Crescent, Nollsworth Park, La Lucia Ridge Office Estate, La Lucia, 4051
    South Africa   Unilever Market Development (Pty) Limited   PLC 100   ZAR1.00 Ordinary   15 Nollsworth Crescent, Nollsworth Park, La Lucia Ridge Office Estate, La Lucia, 4051
74.25   South Africa   Unilever South Africa (Pty) Limited   NV 11.21 PLC 63.04   ZAR2.00 Ordinary   15 Nollsworth Crescent, Nollsworth Park, La Lucia Ridge Office Estate, La Lucia, 4051
74.25   South Africa   Unilever South Africa Holdings (Pty)   NV 11.21 PLC 63.04   ZAR1.00 Ordinary   15 Nollsworth Crescent, Nollsworth Park, La Lucia Ridge Office
0.02       Limited r   NV 0.005 PLC 0.015   ZAR1.00 Ordinary-A   Estate, La Lucia, 4051
0.009           NV 0.002 PLC 0.007   ZAR1.00 Ordinary-B    
    Spain   Intuiskin S.L.U.   NV 100   EUR1.00 Ordinary   PA / Reding, 43, Izda 1, 29016 Malaga
    Spain   Unilever BCS Spain, S.L.U.   NV 55.40 PLC 44.60   EUR1.00 Ordinary   C/ Tecnología 19, 08840 Viladecans
    Spain   Unilever Espana S.A.   NV 100   EUR48.00 Ordinary   C/ Tecnología 19, 08840 Viladecans
    Spain   Unilever HPC Industrial Espana S.L.U.   NV 100   EUR1.00 Ordinary   C/ Fuente de la Mora, 3-5-7-Edificio A, 3ª planta, 28050 Madrid
    Spain   Unilever Services Espana S.A.   NV 100   EUR60.00 Ordinary   C/ Tecnología 19, 08840 Viladecans
    Spain   Unilever Foods Industrial Espana, S.L.U.   NV 100   EUR1.00 Ordinary   C/ Felipe del Río, 14 – 48940 Leioa
    Sri Lanka   Brooke Bond Ceylon Limited   PLC 100   LKR100.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Ceytea Limited   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Lever Brothers (Exports and Marketing)   PLC 100   LKR2.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
        Limited°            
    Sri Lanka   Maddema Trading Co. Limited   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Premium Exports Ceylon (Pvt) Limited   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   R.O. Mennell & Co. (Ceylon) Limited   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Tea Estates Ceylon Limited   PLC 100   LKR100.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Unilever Ceylon Services Limited   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Unilever Ceylon Marketing Limited   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Unilever Lipton Ceylon Limited   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sri Lanka   Unilever Sri Lanka Limited°   PLC 100   LKR10.00 Ordinary   258 M Vincent Perera Mawatha, Colombo 14
    Sweden   Alberto Culver AB   NV 55.40 PLC 44.60   SEK100.00 Ordinary   Box 1056, Svetsarevaegen 15, 17122, Solna
    Sweden   Blueair AB   NV 100   SEK100.00 Ordinary   Danderydsgatan 11, 114 26, Stockholm
    Sweden   Blueair Cabin Air AB   NV 100   SEK100.00 Ordinary   Danderydsgatan 11, 114 26, Stockholm
    Sweden   Unilever BCS Sourcing Sweden AB   NV 55.40 PLC 44.60   SEK1.00 Ordinary   Box 1056, Svetsarevaegen 15, 17122, Solna
    Sweden   Unilever BCS Sweden AB   NV 55.40 PLC 44.60   SEK1.00 Ordinary   Box 1056, Svetsarevaegen 15, 17122, Solna
    Sweden   Unilever Holding AB   NV 100   SEK100.00 Ordinary   Box 1056, Svetsarevaegen 15, 17122, Solna
    Sweden   Unilever Produktion AB   NV 100   SEK50.00 Ordinary   Box 1056, Svetsarevaegen 15, 17122, Solna
    Sweden   Unilever Sverige AB   NV 100   SEK100.00 Ordinary   Box 1056, Svetsarevaegen 15, 17122, Solna
74.72   Sweden   Froosh AB   NV 0 PLC 74.72   SEK0.10–A   Hammarby Kaj 24, Stockholm, 120 62
24.90           NV 0 PLC 24.90   SEK0.10–B    
73.64   Sweden   Froosh Sverige AB   NV 0 PLC 73.64   SEK100.00–A   Hammarby Kaj 24, Stockholm, 120 62
    Sweden   Jonborsten AB   NV 100   SEK1.00 Ordinary   Karlavagen 108, 115 26, Stockholm
    Switzerland   Intuiskin SARL   NV 100   CHF100.00 Ordinary   Chemin Frank-Thomas 34, 1208 Genève
    Switzerland   Knorr-Nährmittel AG   NV 100   CHF1,000.00 Ordinary   Bahnhofstrasse 19, CH 8240 Thayngen
    Switzerland   Oswald Nahrungsmittel GmbH   NV 100   CHF800,000.00 Ordinary   Hinterbergstr. 30, CH-6312 Steinhausen
    Switzerland   Unilever ASCC AG   NV 100   CHF1,000.00 Ordinary   Spitalstrasse 5, 8200, Schaffhausen
    Switzerland   Unilever BCS Schweiz GmbH   NV 55.40 PLC 44.60   CHF100.00 Ordinary   Bahnhofstrasse 19, CH-8240 , Thayngen
    Switzerland   Unilever Business and Marketing Support   NV 100   CHF1,000.00 Ordinary   Spitalstrasse 5, 8200 Schaffhausen
        AG            
    Switzerland   Unilever Finance International AG   NV 100   CHF1,000.00 Ordinary   Spitalstrasse 5, 8200, Schaffhausen
    Switzerland   Unilever Overseas Holdings AG   PLC 100   CHF1,000.00 Ordinary   Spitalstrasse 5, 8200, Schaffhausen
    Switzerland   Unilever Reinsurance AG   NV 100   CHF1,000.00 Ordinary   Baarerstrasse 75, CH-6302 Zug
    Switzerland   Unilever Schaffhausen Service AG   NV 100   CHF1,000.00 Ordinary   Spitalstrasse 5, 8200, Schaffhausen
    Switzerland   Unilever Schweiz GmbH   NV 100   CHF100,000.00 Ordinary   Bahnhofstrasse 19, CH-8240 Thayngen
    Switzerland   Unilever Supply Chain Company AG   NV 100   CHF1,000.00 Ordinary   Spitalstrasse 5, 8201, Schaffhausen
    Switzerland   Unilever Swiss Holdings AG   NV 100   CHF1,000.00 Ordinary   Spitalstrasse 5, 8200, Schaffhausen
99.92   Taiwan   Unilever Taiwan Limited   NV 64.50 PLC 35.42   TWD10.00 Ordinary   3F., No. 550, Sec. 4, Zhongxiao East Rd., Xinyi District, Taipei City
    Tanzania   Distan Limited   PLC 100   TZS20.00 Ordinary   Plot No.4A Pugu Road, Dar Es Salaam
    Tanzania   UAC of Tanzania Limited   PLC 100   TZS20.00 Ordinary   Plot No.4A Pugu Road, Dar Es Salaam
    Tanzania   Uniafric Trust Tanzania Limited   PLC 100   TZS20.00 Ordinary   Plot No.4A Pugu Road, Dar Es Salaam
    Tanzania   Unilever Tanzania Limited   PLC 100   TZS20.00 Ordinary   Plot 4A Nyerere Road, Dar Es Salaam
    Tanzania   Unilever Tea Tanzania Limited   PLC 100   TZS20.00 Ordinary   P.O. Box 40, Mufindi
    Thailand   Unilever Thai Holdings Limited   NV 64.55 PLC 35.45   THB100.00 Ordinary   161 Rama 9 Road, Huay Kwang, Bangkok 10310
    Thailand   Unilever Thai Services Limited   NV 64.55 PLC 35.45   THB100.00 Ordinary   161 Rama 9 Road, Huay Kwang, Bangkok 10310
    Thailand   Unilever Thai Trading Limited   NV 64.55 PLC 35.45   THB100.00 Ordinary   161 Rama 9 Road, Huay Kwang, Bangkok 10310
50.01   Trinidad & Tobago   Unilever Caribbean Limited   NV 0 PLC 50.01   TTD1.00 Ordinary   Eastern Main Road, Champs Fleurs
97.61   Tunisia   Unilever Tunisia S.A.   NV 97.61 PLC 0   TND6.00 Ordinary   Z.I. Voie Z4-2014 Mégrine Erriadh – Tunis
97.59   Tunisia   Unilever Maghreb Export S.A.   NV 97.59 PLC 0   TND5.00 Ordinary   Voie Z4-2014 Mégrine Erriadh – Tunis
47.82   Tunisia   UTIC Distribution S.A. x   NV 47.82 PLC 0   TND10.00 Ordinary   Z.I. Voie Z4 , Megrine Riadh, Tunis, 2014
99.98   Turkey   Unilever Gida Sanayi ve Ticaret AŞ°   NV 0.05 PLC 99.93   TRY0.01 Ordinary   Saray Mahallesi Dr. Adnan Büyükdeniz Cad. No.13 34768 Ümraniye – İstanbul
99.98   Turkey   Unilever Sanayi ve Ticaret Türk AŞ°   NV 64.54 PLC 35.44   TRY0.01 Ordinary  

Saray Mahallesi Dr. Adnan Büyükdeniz Cad. No.13 34768 Ümraniye –

İstanbul

99.99   Turkey   Besan Besin Sanayi ve Ticaret AŞ   NV 64.55 PLC 35.44   TRY0.01 Ordinary   Saray Mahallesi Dr. Adnan Büyükdeniz Cad. No.13 34768 Ümraniye – İstanbul

 

Annual Report on Form 20-F 2016   Financial Statements   139


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

99.64   Turkey   Dosan Konserve Sanayi ve Ticaret AŞ   NV 64.32 PLC 35.32   TRY0.01 Ordinary   Saray Mahallesi Dr. Adnan Büyükdeniz Cad. No.13 34768 Ümraniye – İstanbul
    Uganda   Unilever Uganda Limited   PLC 100   UGX20.00 Ordinary   Plot 10/12 Nyondo Close, Industrial Area, P.O. Box 3515 Kampala
    Ukraine   Pallada Ukraine LLC   NV 7.12 PLC 92.88   Membership Interest   04119, 27-T, Dehtyarivska Str., Kyiv
    Ukraine   Unilever Ukraine LLC   NV 100   Membership Interest   04119, 27-T, Dehtyarivska Str., Kyiv
50   United Arab Emirates   Severn Gulf FZCO x   NV 50 PLC 0   AED100,000.00 Ordinary   PO Box 17053, Jebel Ali, Dubai
49   United Arab Emirates   Unilever General Trading LLC x   NV 0 PLC 49   AED1,000.00 Ordinary   Parcel ID 598633, German Emarati Business Centre, Dubai Complex for Investment First, Office BC6, Dubai
    United Arab Emirates   Unilever Gulf FZE   PLC 100   AED1,000.00 Ordinary   P.O.Box 17055, Jebel Ali, Dubai
49   United Arab Emirates   Unilever Trading LLC x   NV 49 PLC 0   AED1,000.00 Ordinary   P.O.Box 18221 European Business Center Dubai Investments Park 1
    United States   ACI Brazil Holdings, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   ACUSA Brazil Holdings, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Alberto Share Holdings, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Alberto-Culver Company   NV 55.40 PLC 44.60   No Par Value Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Alberto-Culver International, Inc   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Alberto-Culver (P.R.), Inc   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Alberto-Culver USA, Inc   NV 55.40 PLC 44.60   No Par Value Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Ben & Jerry’s Franchising, Inc   NV 55.40 PLC 44.60   USD1.00 Common   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Ben & Jerry’s Gift Card, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Ben & Jerry’s Homemade, Inc   NV 55.40 PLC 44.60   USD0.01 Common   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Bestfoods International (Holdings) Inc   NV 55.40 PLC 44.60   USD100.00 Common   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Blueair Inc.   NV 100   No Par Value Ordinary   1013 Centre Road, City of Wilmington 19805, County of New Castle, Delaware
    United States   Carapina LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    United States   Chesebrough-Pond’s Manufacturing   NV 55.40 PLC 44.60   No Par Value Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
        Company            
    United States   Conopco, Inc   NV 55.40 PLC 44.60   USD1.00 Common   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Dermalogica, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Dollar Shave Club, Inc.   NV 55.40 PLC 44.60   Membership Interest   13335 Maxella Ave. Marina del Rey, CA 90292
    United States   DTJJS, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Grom Columbus LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    United States   Grom Franchising LLC   NV 100   Membership Interest   2711 Centerville Road, Suite 400, Wilmington, Delaware
    United States   Grom Malibu LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    United States   Grom USA LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    United States   Hollywood LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    United States   Intuiskin Inc   NV 100   No Par Value Ordinary   55 East 59th Street, New York, 10022
    United States   Kate Somerville Holdings, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Kate Somerville Skincare LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Lipton Industries, Inc   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Murad LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Pantresse, Inc   NV 55.40 PLC 44.60   USD120.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Personal Care Marketing & Research Inc   NV 55.40 PLC 44.60   USD 1.00 Common   420 South Robertson Dr., #260, Beverly Hills, CA 90212
    United States   Ren USA Inc   PLC 100   No Par Value Common   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Seventh Generation Canada, Inc.   NV 55.40 PLC 44.60   No Par Value Common   60 Lake Street, Suite 3N, Burlington, VT 05401
    United States   Seventh Generation, Inc.   NV 55.40 PLC 44.60   USD.001 Common Shares   60 Lake Street, Suite 3N, Burlington, VT 05401
    United States   Seventh Generation Ventures, Inc.   NV 55.40 PLC 44.60   USD.001 Common Shares   60 Lake Street, Suite 3N, Burlington, VT 05401
    United States   Skin Health Experts, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Spatula LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    United States   St. Ives Laboratories, Inc   NV 55.40 PLC 44.60   USD0.01 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   T2 US LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Talenti Gelato, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Talenti Holdings, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   TIGI Linea Corp   NV 55.40 PLC 44.60   No Par Value Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever AC Canada Holding, Inc   NV 55.40 PLC 44.60   USD10.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever BCS Sourcing US Inc   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever BCS US Inc   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever Bestfoods (Holdings) LLC   NV 25.10 PLC 74.90   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever Capital Corporation   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever Illinois Manufacturing, LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever Manufacturing (US), Inc   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever Trumbull Holdings, Inc   NV 42.54 PLC 57.46   USD1.00 Common   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever Trumbull Research Services, Inc   NV 55.40 PLC 44.60   USD1.00 Ordinary   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
            NV 55.40 PLC 44.60   USD1.00 Cumulative    
                Redeemable Preference    
    United States   Unilever United States Foundation, Inc   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever United States, Inc   NV 55.40 PLC 44.60   USD0.3333 Common   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    United States   Unilever Ventures Advisory LLC   NV 55.40 PLC 44.60   Membership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
    Uruguay   Unilever del Uruguay S.R.L.   NV 100   UYU1.00 Ordinary   Camino Carrasco 5975, Montevideu
    Uruguay   Unilever Uruguay SCC S.A.   NV 100   UYU1.00 Ordinary   Camino Carrasco 5976, Montevideu
    Uruguay   Lever S.A.   NV 100   UYP0.10 Ordinary   Camino Carrasco 5977, Montevideu
    Uruguay   Arisco Productos Alimenticios Uruguay S.A.   NV 64.55 PLC 35.45   UYP1.00 Ordinary   Camino Carrasco 5978, Montevideu

 

140   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    Venezuela   Unilever Andina Venezuela S.A.   NV 100   VEB1,000.00 Ordinary   Edificio Torre Corp Banca, Piso 15, entre Avenidas Blandín y Los Chaguaramos, Urbanización La Castellana, Caracas
    Vietnam   Unilever Vietnam International Company Limited   NV 100   Membership Interest   Lot A2-3, Tay Bac Cu Chi Industry Zone, Tan An Hoi Ward, Cu Chi District, Ho Chi Minh City
    Zambia   Unilever South East Africa Zambia Limited   PLC 100   ZMK2.00 Cumulative Redeemable Preference   Stand No. 7136, Mwembeshi Road, P.O.Box 31953 Lusaka
            PLC 100   ZMK2.00 Ordinary    
    Zimbabwe   Unilever – Zimbabwe (Pvt) Limited r   PLC 100   ZWD2.00 Ordinary   Box 950 Harare

SUBSIDIARY UNDERTAKINGS NOT INCLUDED IN THE CONSOLIDATION

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

    Cayman Islands   Personal Care Marketing & Technology Inc   NV 55.40 PLC 44.60   KYD1.00 Ordinary   Walker Nominees Limited, 190 Elgin Ave, Georgetown, GC KY1-9001
    China   Blueair Technology (Shenzen) Co. Limited   NV 100   Membership Interest   Unit 1A, Building B5, Zhaoshangju Guangming Science and Technology Park, Guanguang Road, Guangming New District, Shenzhen City
60   Cuba   Unilever Suchel, S.A.   NV 60 PLC 0   USD1,000.00 Ordinary   Zona Especial de Desarrollo Mariel, Provincia Artemisa
    Djibouti   Unilever Djibouti FZCO Limited   PLC 100   USD20.00 Ordinary   Haramous, BP 169
    Ecuador   Visanuasa S.A.   NV 100   USD1.00 Ordinary   Km 25 Vía a Daule, Guayaquil
67.39   England   Big Sync Music Limited r   NV 67.39 PLC 0   GBP0.001 A Ordinary   5th Floor, 6 St Andrew Street, London, EC4A 3AE
    and Wales       NV 100   GBP1.00 Preferred Ordinary    
97.67   England   Catexel Limited r   NV 0 PLC 97.67   GBP0.01 Ordinary-A   5th Floor, 6 St Andrew Street, London, EC4A 3AE
45.25   and Wales       NV 0 PLC 45.25   GBP0.01 Ordinary-G    
96.67           NV 0 PLC 96.67   GBP0.01 Preference    
79.52   England   Catexel Technologies Limited r   NV 0 PLC 79.52   GBP0.001 A Ordinary   5th Floor, 6 St Andrew Street, London, EC4A 3AE
    and Wales                
80.27   England   Catexel Cellulosics Limited r   NV 0 PLC 80.27   GBP0.001 A Ordinary   5th Floor, 6 St Andrew Street, London, EC4A 3AE
    and Wales                
    England   Unilever Ventures General Partner   PLC 100   GBP1.00 Ordinary   5th Floor, 6 St Andrew Street, London, EC4A 3AE
    and Wales   Limited            
    Ghana   United Africa Trust Limited   PLC 100   GHC10.00 Ordinary   Plot No. Ind/A/3A–4, Heavy Industrial Area, Tema
    Greece   Lipoma Management Consulting SA   NV 100   EUR10.00 Ordinary   Kymis ave & 10, Seneka str. GR-145 64 Kifissia
67.21   India   Hindustan Unilever Foundation   NV 0 PLC 67.21   INR10.00 Ordinary   Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai 400 099
    Indonesia   Unilever Trading Indonesia   NV 100   IDR1,000.00 Ordinary  

Graha Unilever, Jalan Jenderal Gatot Subroto Kav 15,

Jakarata 12930

    Israel   PCMR International Limited   NV 55.40 PLC 44.60   NIS0.10 Ordinary   3 Daniel Fisch St., Tel Aviv, 6473104, Israel
    Jamaica   Unilever Jamaica Limited   PLC 100   JMD1.00 Ordinary   White Marl Street, Spanish Town, PO Box 809, Parish Saint Catherine
    Jordan   Unilever Jordan LLC   NV 100   JOD10.00 Ordinary   Amman, Jordan
    Kenya   Union East African Trust Limited*   PLC 100   KES20.00 Ordinary   Commercial Street, P.O. BOX 40592-00100, Nairobi
    Morocco   Societe Commerciale du Rif   PLC 100   MAD50.00 Ordinary   Km 10, Route Cotiere, Ain Sebaa, Casablanca
    Morocco   Societe Tangeroise de Parfumerie et d’Hygiene S.A.R.L.   PLC 100   MAD50.00 Ordinary   Km 10, Route Cotiere, Ain Sebaa, Casablanca
79.52   Netherlands   Chemsenti B.V.   NV 0 PLC 79.52   EUR1.00 Ordinary   Wassenaarseweg 72, 2333 AL Leiden
    Netherlands   Unilever Europe B.V.*   NV 100   EUR1.00 Ordinary   Weena 455, 3013 AL Rotterdam
    Rwanda   Unilever Tea Rwanda Limited   PLC 100   RWF4270.00 Ordinary  

Nyarugenge, Nyarungenge, Umujyi wa Kigali, Rwanda,

P O BOX 6428 KIgali

    Scotland   Unilever Ventures (SLP) General Partner Limited   PLC 100   GBP1.00 Ordinary   15 Atholl Crescent, Edinburgh, EH3 8HA
49   United Arab Emirates   Unilever Home & Personal Care Products Manufacturing LLC x   NV 0 PLC 49   AED1,000.00 Ordinary   P.O.Box 18221 European Business Center Dubai Investments Park 1
    United States   DSC Distribution, Inc.   NV 55.40 PLC 44.60   Membership Interest   13335 Maxella Ave. Marina del Rey, CA 90292
    United States   Grom WTC LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    United States   Grom Century City LLC   NV 100   Membership Interest   233 Bleecker Street, New York, 10014
    Zimbabwe   Birds Eye Foods (Private) Limited   PLC 100   ZWD2.00 Ordinary   Box 950 Harare
    Zimbabwe   Hudson and Knight (Private) Limited   PLC 100   ZWD2.00 Ordinary   Box 950 Harare
    Zimbabwe   Van den Berghs and Jurgens (Private)   PLC 100   ZWD2.00 Ordinary   Box 950 Harare
        Limited            

 

Annual Report on Form 20-F 2016   Financial Statements   141


Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNILEVER GROUP CONTINUED

    

 

27. GROUP COMPANIES CONTINUED

ASSOCIATED UNDERTAKINGS

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

49   Bahrain   Unilever Bahrain Co. W.L.L.   NV 0 PLC 49   BHD50.00 Ordinary   161, Road 328, Block 358, Zinj, Manama
50   Brazil   ITB Ice Tea do Brazil Limitada   NV 32.28 PLC 17.72   BRL1.00 Quotas   Rod. Dom Gabriel Paulino Bueno Couto, km. 66 – Part
40   Canada   A&W Root Beer Beverages Canada Inc.   NV 25.82 PLC 14.18   No Par Value Class B Common  

171 West Esplanade, Suite 300, North Vancouver, British

Colombia V7M 3K9

49   Cyprus   Unilever PMT Limited r   NV 0 PLC 49   EUR1.71 Ordinary-B   2 Marcou Dracou str., Engomi Industrial Estate, 2409 Nicosia
24.22   England   Arecor Limited r   NV 0 PLC 24.22   GBP0.01 Ordinary   Chesterford Research Park, Little Chesterford, Saffron,
35.72   and Wales       NV 0 PLC 35.72   GBP0.01 A Ordinary   Waldon CB10 1XL
30.11   England and Wales   Blis Media Limited r   NV 30.11 PLC 0   GBP0.00001 Series A Participating Preference   3rd Floor, 101 New Cavendish Street, London W1W 6XH
49.53   England and Wales   CDDM Technology Limited r   NV 0 PLC 49.53   GBP0.01 Preferred Ordinary   First Floor, 59-61 High Street West, Glossop SK13 8AZ
46.30   England and Wales   Langholm Capital II L.P.   NV 46.30 PLC 0   Partnership Interest   1st Floor, Charles House, 5-11 Regent Street, London SW1Y 4LR
24.93   England and Wales   Limitless Technology Limited r   NV 24.93 PLC 0   GBP0.001 A Ordinary   Ashton, Hillbrow Road, Esher KT10 9UD
5.98  

England

and Wales

  SCA Investments Limited r   NV 5.98 PLC 0   GBP0.001 A Ordinary   Unit 3 Morris House, Swainson Road, London W3 7UP
74.60         NV 74.60 PLC 0   GBP0.001 H Ordinary    
25.19         NV 25.19 PLC 0   GBP0.001 I Ordinary    
29.84         NV 29.84 PLC 0   GBP0.001 J Ordinary    
64.22   England and Wales   Trinny London Limited r   NV 64.22 PLC 0   GBP0.01 Series A Preferred   Cambridge House, 16 High Street, Saffron Walden, Essex CB10 1AX
22.22  

England

and Wales

  Voltea Limited r   NV 0 PLC 22.22   EUR0.10 A Ordinary   5th Floor, 6 St Andrew Street, London EC4A 3AE
58.32         NV 0 PLC 58.32   EUR0.10 A Preferred    
25.41         NV 0 PLC 25.41   EUR0.10 A1 Preferred    
17.71         NV 0 PLC 17.71   EUR0.10 B Preferred    
49.99   France   Relais D’or Centrale S.A.S.   NV 32.27 PLC 17.72   No Par Value Ordinary   7 rue Armand Peugeot, 92500 Rueil-Malmaison
50   Germany   Hans Henglein & Sohn GmbH   NV 32.78 PLC 17.22   EUR100,000.00 Ordinary   Beerbachstraße 19, 91183 Abenberg
50   Germany   Henglein & Co. Handels-und Beteiligungs GmbH & Co. KG   NV 32 PLC 18   Partnership Interest   Beerbachstraße 19, 91183 Abenberg
50   Germany   Henglein Geschäftsführungs GmbH   NV 32 PLC 18   DEM 50,000.00 Ordinary   Beerbachstraße 19, 91183 Abenberg
50   Germany   Henglein GmbH   NV 32 PLC 18   DEM 50,000.00 Ordinary   Bad Bribaer Straße, 06647 Klosterhäseler
50   Germany   Hochreiter Frischteigwaren GmbH   NV 32.78 PLC 17.22   DEM250,000.00 Ordinary   Beerbachstruße 37, 17153 Stavenhagen
50   Germany   Nürnberger Kloßteig NK GmbH & Co. KG   NV 32 PLC 18   Partnership Interest   Beerbachstraße 19, 91183 Abenberg
33.61   India   Kimberly Clark Lever Private Limited   NV 0 PLC 33.61   INR10.00 Ordinary   GAT No. 934-937, Village Sanaswadi
40   Indonesia   PT Anugrah Mutu Bersama   NV 26.22 PLC 13.78   IDR1,000,000.00 Ordinary   Wisma Bango Lt.05, Jl.Sulaiman No.32, Jakarta Barat 11540
51.78   Ireland   Brandtone Holdings Limited r   NV 51.78 PLC 0   EUR0.001 A Ordinary   51-54 Pearse Street, Dublin 2
70.38         NV 70.38 PLC 0   EUR0.001 Preferred Ordinary    
21.58         NV 21.58 PLC 0   EUR0.001 Series 2 Preferred    
19.99         NV 19.99 PLC 0   EUR0.001 Series 3 Preferred    
23.70   Ireland   Clavis Technology Limited r   NV 23.70 PLC 0   EUR0.0025 Series A2 Convertible Redeemable Preference   7th Floor, O’Connell Bridge House, D’Olier Street, Dublin 2
9.95         NV 9.95 PLC 0   EUR0.0025 Series Convertible Redeemable Preference    
    Ireland   Pepsi Lipton International Limited r   NV 100   EUR1.00 B Ordinary   70 Sir John Rogersons Quay, Dublin 2
            NV 100   EUR1.00 C Preferred    
            NV 100   EUR1.00 E Ordinary    
            NV 100   EUR1.00 G Preferred    
99.74   Israel   Iluminage Beauty Limited r   NV 99.74 PLC 0   ILS1.00 Preference  

Kochav Yokneam Building, 4th Floor, P.O Box 14,

Yokneam Illit 20692

34   Japan   Grom Japan K.K   NV 34 PLC 0   JPY50,000.00 Ordinary   #308, 5–4–1, Minami Azabu, Tokyo
40.40   Mauritius   Capvent Asia Consumer Fund Limited r   NV 40.40 PLC 0   USD0.01 Class A  

3rd Floor, Harbour Front Building, President John Kennedy Street,

Port Louis

49   Oman   Towell Unilever LLC   NV 0 PLC 49   OMR10.00 Ordinary   Po Box 1711, Ruwi, Postal code 112
    Philippines   Sto Tomas Paco Land Corp r   NV 64.55 PLC 35.45   PHP1.00 Common  

11th Avenue corner 39th Street, Bonifacio Triangle,

Bonifacio Global City, Taguig City, M.M

    Philippines   WS Holdings Inc. r   NV 64.55 PLC 35.45   PHP1.00 Common B  

Manggahan Light Industrial Compound, A. Rodriguez Avenue,

Bo. Manggahan, Pasig City

    Philippines   Selecta Walls Land Corp r   NV 64.55 PLC 35.45   PHP10.00 Common B  

Manggahan Light Industrial Compound, A. Rodriguez Avenue,

Bo. Manggahan, Pasig City

    Philippines   Paco Platform 7.5 Inc. r   NV 64.55 PLC 35.45   PHP1.00 Common  

11th Avenue corner 39th Street, Bonifacio Triangle,

Bonifacio Global City, Taguig City, M.M

35.10   Philippines   Cavite Horizons Land, Inc.   NV 22.66 PLC 12.44   PHP1.00 Common   11th Avenue corner 39th Street, Bonifacio Triangle,
            NV 64.55 PLC 35.45   PHP10,000.00 Preference   Bonifacio Global City, Taguig City
45.40   Philippines   Industrial Realties, Inc.   NV 29.30 PLC 16.1   PHP1.00 Common  

11th Avenue corner 39th Street, Bonifacio Triangle,

Bonifacio Global City, Taguig City

55   Portugal   Fima Ola – Produtos Alimentares, S.A.   NV 0 PLC 55   EUR500.00 Ordinary   Largo Monterroio Mascarenhas, 1,1099–081 Lisboa
55   Portugal   Gallo Worldwide, Limitada   NV 0 PLC 55   EUR1,000,000.00 Quotas   Largo Monterroio Mascarenhas, 1,1099–081 Lisboa
54   Portugal   Transportadora Central do Infante, Limitada   NV 0 PLC 54   EUR1.00 Ordinary   Largo Monterroio Mascarenhas, 1,1099–081 Lisboa
55   Portugal   Unilever Jerónimo Martins, Limitada   NV 0 PLC 55   EUR26,295,157.00 Quotas   Largo Monterroio Mascarenhas, 1,1099–081 Lisboa
55   Portugal   Victor Guedes – Industria e Comercio, S.A.   NV 0 PLC 55   EUR5.00 Ordinary   Largo Monterroio Mascarenhas, 1,1070-184 Lisboa

 

142   Financial Statements    Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

27. GROUP COMPANIES CONTINUED

 

           

%

 

 

Country of
Incorporation

 

 

Name of

Undertaking

 

 

% holding

as between

NV/PLC

 

 

Class of share

held in subsidiary

undertaking

 

 

Registered

address

 

99.50   Sweden   SachaJuan Haircare AB r   NV 99.50 PLC 0   SEK1.00 Class B Shares   No 18 Office & Lounge, Briger Jarlsgatan 18,114 34 Stockholm
49   United Arab Emirates   Al Gurg Unilever LLC   NV 0 PLC 49   AED1,000.00 Ordinary   P.O.Box 49, Dubai
49   United Arab Emirates   Al Gurg Unilever LLC   NV 0 PLC 49   AED1,000.00 Ordinary   P.O.Box 49, Dubai
49   United Arab Emirates   Thani Murshid Unilever LLC   NV 49 PLC 0   AED1,000.00 Ordinary   Po Box 49, Abu Dhabi
8.30   United States   Discuss.io Inc r   NV 8.30 PLC 0   USD0.0001 Common Stock   C/O National Registered Agents, Inc.160 Green Tree Drive,
15.36           NV 15.36 PLC 0   USD0.0001 Series Seed   Suite 101, Dover, Delaware 19904
50   United States   Pepsi Lipton Tea Partnership   NV 27.70 PLC 22.30   Partnership Interest   700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201
57.27   United States   Physic Ventures L.P.   NV 57.27 PLC 0   Partnership Interest   2711 Centerville Road, Suite 400, Wilmington, Delaware

Notes:

*   Indicates an undertaking for which Unilever N.V. has issued a declaration of assumption of liability in accordance with section 403, Book 2, Dutch Civil Code.
o   Indicates an undertaking directly held by N.V. or PLC. All other undertakings are indirectly held. In the case of Hindustan Unilever Limited 51.50% is directly held and the remainder of 15.70% is indirectly held. In the case of Unilever Kenya Limited 39.13% is directly held and the remainder of 60.87% is indirectly held. In the case of Unilever Sri Lanka Limited 5.49% is directly held and the remainder of 94.51% is indirectly held. In the cases of each of Unilever BCS UK Services Limited and Unilever BCS UK Limited the ordinary shares are indirectly held and the redeemable golden share is directly held. In the case of Mixhold B.V. 27.71% is directly held and the remainder of 72.29% is indirectly held. In the cases of each of Unilever Gida Sarayi ve Ticaret A.Ş. and Unilever Sarayi ve Ticaret Turk A.Ş. a fractional amount is directly held and the remainder is indirectly held. In the case of United Holdings Limited, the ordinary shares are directly held and the preferred shares are indirectly held. In the case of Mixhold N.V., 55.37% of the ordinary – A shares are directly held, the remainder of 44.63% are indirectly held and the other share classes are indirectly held. In the case of Naamlooze Vernootschap Elma the ordinary shares are directly held and the cumulative preference shares are indirectly held.
  Shares the undertaking holds in itself.
r Denotes an undertaking where other classes of shares are held by a third party.
X Unilever Trading LLC, Binzagr Unilever Limited, Unilever Home and Personal Care Products Manufacturing LLC and UTIC Distribution S.A. are subsidiary undertakings pursuant to section 1162(2)(b) Companies Act 2006. Servern Gulf FZCO is a subsidiary undertaking pursuant to section 1162(4)(a) Companies Act 2006. The Unilever Group is entitled to 50% of the profits made by Binzagr Unilever Limited. The Unilever Group is entitled to 80% of the profits made by Unilever Trading LLC, Unilever Home and Personal Care Products Manufacturing LLC and Unilever General Trading LLC.
Accounted for as non-current investments within non-current financial assets.
LOGO Exemption pursuant to Section 264b German Commercial Code.

Further to the above disclosures (1) due to the unified board of Unilever N.V. and Unilever PLC, Unilever N.V. and Unilever PLC are each considered to be a subsidiary undertaking of the other in accordance with section 1162 (4) (b) of the Companies Act 2006 and (2) details of holdings of subsidiary undertakings in the share capitals of Unilever N.V. and Unilever PLC are given under the heading Our Shares on pages 30 to 32.

In addition, we have revenues either from our own operations or otherwise in the following locations: Afghanistan, Albania, Andorra, Angola, Antartica, Antigua, Armenia, Azerbaijan, Bahamas, Barbados, Belarus, Belize, Benin, Bhutan, Botswana, Brunei Darussalam, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Democratic Republic of Congo, Dominica, Equatorial Guinea, Eritrea, Fiji, French Guiana, Gabon, Gambia, Georgia, Grenada, Guadeloupe, Guinea, Guinea-Bissau, Guyana, Haiti, Iceland, Iraq, Kiribati, Kuwait, Kyrgyzstan, Lesotho, Liberia, Libya, Liechtenstein, Luxembourg, Macao, Macedonia, Madagascar, Maldives, Mali, Malta, Marshall Islands, Martinique, Mauritania, Mauritius, Micronesia (federated states of), Moldova (Republic of), Monaco, Mongolia, Montenegro, Namibia, Nauru, Palau, Papua New Guinea, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Senegal, Seychelles, Sierra Leone, Solomon Islands, Somalia, South Sudan, Sudan, Suriname, Swaziland, Syrian Arab Republic, Tajikistan, Timor Leste, Togo, Tonga, Turkmenistan, Tuvalu, Uzbekistan, Vanuatu and Yemen.

The Group has established branches in Argentina, Azerbaijan, Cuba, the Dominican Republic, Kazakhstan, Moldova, the Netherlands, the Philippines, Rwanda, Russia, Saudi Arabia, Slovenia and Turkey.

 

Annual Report on Form 20-F 2016   Financial Statements   143


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SHAREHOLDER INFORMATION

FINANCIAL CALENDAR

    

 

ANNUAL GENERAL MEETINGS

      Date    Voting Record date    Voting and Registration date    

NV

   1.30pm 26 April 2017    29 March 2017    19 April 2017    

PLC

   1.30pm 27 April 2017       25 April 2017    

QUARTERLY DIVIDENDS

Dates listed below are applicable to all four Unilever listings (NV ordinary shares, PLC ordinary shares, NV New York shares, and PLC ADRs).

 

     Announced   NV NY and PLC ADR
ex-dividend date
  NV and PLC   Record date   Payment date    

Quarterly dividend announced with the Q4 2016 results

  26 January 2017   8 February 2017   9 February 2017   10 February 2017   15 March 2017    

Quarterly dividend announced with the Q1 2017 results

  20 April 2017   3 May 2017   4 May 2017   5 May 2017   7 June 2017    

Quarterly dividend announced with the Q2 2017 results*

  20 July 2017   2 August 2017   3 August 2017   4 August 2017   6 September 2017    

Quarterly dividend announced with the Q3 2017 results

        19 October 2017         1 November 2017         2 November 2017         3 November 2017         13 December 2017    

 

* Also applicable for preferential dividends NV.

 

CONTACT DETAILS

Unilever N.V. and Unilever PLC

100 Victoria Embankment

London EC4Y 0DY

United Kingdom

Institutional Investors telephone +44 (0)20 7822 6830

Any queries can also be sent to us electronically via

www.unilever.com/resource/contactus

Private Shareholders telephone +44 (0)20 7822 5500

Private Shareholders can email us at

shareholder.services@unilever.com

SHARE REGISTRATION

THE NETHERLANDS

SGG Netherlands N.V.
Hoogoorddreef 15   
1101 BA Amsterdam   
Telephone    +31 (0)20 522 25 55
Telefax    +31 (0)20 522 25 35
Website    www.sgggroup.com
Email    registers@sgggroup.com
UK   
Computershare Investor Services PLC
The Pavilions   
Bridgwater Road   
Bristol BS99 6ZZ   
Telephone    +44 (0)370 600 3977
Telefax    +44 (0)370 703 6101
Website    www.investorcentre.co.uk
Email    webcorres@computershare.co.uk
US   
American Stock Transfer & Trust Company
Operations Center   
6201 15th Avenue   
Brooklyn, NY 11219   
Toll-free number    +1 866 249 2593
Direct dial    +1 718 921 8124
Email    DB@amstock.com

WEBSITE

Shareholders are encouraged to visit our website www.unilever.com which has a wealth of information about Unilever.

There is a section designed specifically for investors at www.unilever.com/investorrelations . It includes detailed coverage of the Unilever share price, our quarterly and annual results, performance charts, financial news and investor relations speeches and presentations. It also includes conference and investor/analyst presentations.

You can also view the Unilever Annual Report and Accounts 2016 (and the Additional Information for US Listing Purposes), and those for prior years, at www.unilever.com/investorrelations .

PUBLICATIONS

Copies of the Unilever Annual Report and Accounts 2016 (and the Additional Information for US Listing Purposes) and the Annual Report on Form 20-F 2016 can be accessed directly or ordered through www.unilever.com/investorrelations.

UNILEVER ANNUAL REPORT AND ACCOUNTS 2016

The Unilever Annual Report and Accounts 2016 (and the Additional Information for US Listing Purposes) forms the basis for the Form 20-F that is filed with the United States Securities and Exchange Commission, which is also available free of charge at www.sec.gov.

QUARTERLY RESULTS ANNOUNCEMENTS

Available in English with figures in euros.

 

 

Annual Report on Form 20-F 2016   Shareholder information   155


Table of Contents

INDEX

    

 

Accounting policies

     88 – 90  

Acquisitions

     22, 126 – 128, 178  

Americas, The

     92, 94, 105 – 106  

Annual General Meetings

     155  

Asia/AMET/RUB

     94, 105  

Associates

     84, 91 – 92, 107 – 108, 129, 142  

Audit Committee

     42 – 43  

Auditors

     37, 43, 79 – 83, 130, 150, 154  

Balance sheet

     25, 86, 97, 145, 151, 172 – 173  

Biographies

     3, 5  

Board committees

     29  

Boards

     2 – 3, 29 – 30  

Brand and marketing investments

     92  

Brands

     1, 10  

Capital expenditure

     87  

Cash

     25, 86, 87, 120 – 121  

Cash flow

     87, 99, 174  

Categories

     14 – 16, 24, 91  

Cautionary statement /safe harbour

     Inside back cover  

Chairman

     2 – 3, 29 – 30  

Chief Executive Officer

     4, 48 – 77  

Commitments

     125 – 126  

Company accounts, statutory and other information

     144 – 154  

Compensation Committee

     48 – 77  

Comprehensive income

     84, 97, 113, 144  

Connected 4 Growth

     1 – 22  

Constant core earnings per share

     27  

Contingent liabilities

     125 – 126, 150, 154  

Core earnings per share

     22 – 23, 27, 59, 103  

Core effective tax rate

     27  

Core operating margin

     12, 22 – 24, 27, 56, 59, 90, 168  

Core operating profit

     23 – 24, 27, 90, 91  

Corporate governance

     29 – 35  

Corporate responsibility

     44 – 45  

Corporate Responsibility Committee

     44 – 45  

Deferred tax

     101 – 102, 146 – 147, 152 – 153  

Depreciation

     25, 87, 91, 93, 102, 106 – 107, 125, 169  

Directors’ responsibilities

     78, 83  

Directors’ remuneration

     48 – 77  

Disposals

     126 – 128  

Diversity

     3, 21, 34, 47  

Dividends

     22, 85, 87, 104, 109, 130, 147, 152, 162  

Earnings per share

     23, 84, 103, 168  

Employees

     16, 20 – 21, 34, 94  

Equalisation Agreement

     29, 33, 88, 150  

Equity

     25, 84 – 86, 112 – 113, 144 – 145, 151  

Europe

     92, 94, 105 – 106  

Exchange rates

     26, 87 – 88, 162, 168, 174  

Executive Directors

     2 – 3, 29, 48 – 77, 94  

Finance and liquidity

     25, 177  

Finance costs and finance income

     84, 87, 100, 144, 146, 168  

Financial assets

     86 – 87, 120 – 124  

Financial calendar

     155  

Financial instruments

     110 – 124, 178  

Financial liabilities

     28, 86 – 87, 110 – 123, 148, 151, 153  

Financial review

     23 – 28, 175 – 178  

Foods

     12, 14, 24, 91, 176  

Free cash flow

     12, 22, 25 – 28, 59, 169, 177  

Geographies

     92  

Goodwill

     25, 28, 86, 88, 104 – 106, 126 – 128  

Gross profit

     92  

Home Care

     12, 15, 24, 91, 176  

Impairment

     25, 87, 91, 93, 102, 104 – 106, 121, 169  

Income statement

     23, 84  

Innovation

     8, 10  

Intangible assets

     104 – 106, 128, 148, 153  

International Financial Reporting Standards

     88  

Inventories

     108  

Joint ventures

     84, 91 – 92, 107 – 108  

Key management

     12, 94  

Key Performance Indicators

     168  

Leases

     125 – 126  

Market capitalisation

     25  

Net debt

     28, 119, 169  

Nominating and Corporate Governance Committee

     46 – 47  

Non-core items

     92 – 93  

Non-Executive Directors

     2 – 3, 29 – 30, 48 – 77  

Non-GAAP measures

     26 28, 177 – 178  

Operating costs

     92 – 93  

Operating profit

     23, 84, 87, 90 – 93,144  

Organisational Structure

     29  

Outlook

     178  

Payables

     109  

Pensions and similar obligations

     94 – 99  

Personal Care

     12, 14, 24, 91, 176  

Post balance sheet events

     130, 150, 154  

Preference shares and dividends

     30 – 32, 100  

Principal group companies

     131 – 143  

Property, plant and equipment

     106 – 107  

Provisions

     124  

Receivables

     108 – 109  

Refreshment

     12, 15, 24, 91, 176  

Related party transactions

     129, 160  

Research and development

     92  

Reserves

     85, 112, 144, 149  

Restructuring

     124  

Revenue

     90  

Risk management and control

     33 – 36, 43  

Risks

     37 – 41  

Segment information

     90 – 92  

Share-based payments

     99 – 100  

Share capital

     30 – 33, 111, 149, 151, 153  

Shareholders

     22, 32 – 33  

Share registration

     155  

Staff costs

     94  

Strategy

     10 – 11  

Taxation

     101 – 103  

Total shareholder return

     75  

Treasury

     110 – 124  

Turnover

     84, 90 – 92  

Underlying volume growth

     12, 27  

Underlying sales growth

     12, 26 – 27  

Unilever Leadership Executive

     5  

Voting

     29  

Zero based budgeting

     11  

Website

     155  
 

 

156      Annual Report on Form 20-F 2016


Table of Contents

ADDITIONAL INFORMATION FOR US LISTING PURPOSES

    

    

 

 

 

FORM 20-F REFERENCES

 

Item 1   Identity of Directors, Senior Management and Advisers   n/a
Item 2   Offer Statistics and Expected Timetable   n/a
Item 3   Key Information
  A.      Selected Financial Data   111, 162, 168 – 170
  B.      Capitalisation and Indebtedness   n/a
  C.      Reasons for the offer and use of proceeds   n/a
  D.      Risk factors   36 – 41
Item 4   Information on the Company
  A.      History and development of the company   17 – 18, 22 – 35, 87, 106 –107, 126 –128, 155, 175 – 178
  B.      Business overview   1, 6 – 11, 14 – 29, 41, 90 – 92, 175 – 178
  C.      Organisational structure   29, 131 – 143
  D.      Property, plant and equipment   106 – 107, 178
Item 4A   Unresolved Staff Comments   n/a
Item 5   Operating and Financial Review and Prospects
  A.      Operating results   4, 6 – 7, 12, 21 – 22, 23 – 28, 41, 117 – 118, 175 – 178
  B.      Liquidity and capital resources   25, 36, 78, 87, 106 – 107, 110 – 111, 114 – 126, 177 – 178
  C.      Research and development, patents and licences, etc.   8 – 9, 92 – 93
  D.      Trend information   4, 6 – 7, 23 – 28, 37 – 41, 175 – 178
  E.      Off-balance sheet arrangements   115 – 120, 122 – 126
  F.      Tabular disclosure of contractual obligations   26, 106 – 107, 114, 125 – 126
  G.      Safe harbour   Inside back cover
Item 6   Directors, Senior Management and Employees
  A.      Directors and senior management   3, 29, 159
  B.      Compensation   25, 41, 48, 63, 94 – 100
  C.      Board practices   3, 5, 29, 30, 42 – 47, 62 – 63, 73, 75
  D.      Employees   94, 159
  E.      Share ownership   67, 70 – 74, 99 – 100, 159
Item 7   Major Shareholders and Related Party Transactions
  A,      Major shareholders   29, 31 – 33, 160
  B.      Related party transactions   129, 160
  C.      Interest of experts and counsel   n/a
Item 8   Financial Information
  A.      Consolidated statements and other financial information   78, 79, 84 – 143, 155, 162, 170 – 174
  B.      Significant changes   130
Item 9   The Offer and Listing
  A.      Offer and listing details   160 – 161
  B.      Plan of distribution   n/a
  C.      Markets   30 – 32
  D.      Selling shareholders   n/a
  E.      Dilution   n/a
  F.      Expenses of the issue   n/a
Item 10   Additional Information
  A.      Share capital   n/a
  B.      Articles of association   29 – 35, 46 – 47, 71, 111, 163
  C.      Material contracts   29, 33, 163
  D.      Exchange controls   163
  E.      Taxation   164 – 165
  F.      Dividends and paying agents   n/a
  G.      Statement by experts   n/a
  H.      Documents on display   155, 163
  I.      Subsidiary information   n/a

 

Annual Report on Form 20-F 2016     157


Table of Contents

ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

Item 11   Quantitative and Qualitative Disclosures About Market Risk   94 – 99, 108 – 111, 115 – 124, 178
Item 12   Description of Securities Other than Equity Securities
  A.            Description of debt securities   n/a
  B.            Description of warrants and rights   n/a
  C.            Description of other securities   n/a
  D.1            Name of depositary and address of principal executive   n/a
  D.2            Title of ADRS and brief description of provisions   n/a
  D.3            Transfer agent fees and charges   166
  D.4            Transfer agent payments – fiscal year 2016   166
Item 13   Defaults, Dividend Arrearages and Delinquencies
  A.            Defaults     166
  B.            Dividend arrearages and delinquencies   166
Item 14   Material Modifications to the Rights of Security Holders and Use of Proceeds   n/a
Item 15   Controls and Procedures   35 – 36, 43, 79, 167
Item 16   Reserved   n/a
Item 16A   Audit Committee Financial Expert   30, 42
Item 16B   Code of Ethics   35, 36, 44
Item 16C   Principal Accountant Fees and Services   42 – 43, 167
Item 16D   Exemptions From The Listing Standards For Audit Committees   n/a
Item 16E   Purchases Of Equity Securities By The Issuer and Affiliated Purchasers   30 – 32, 167
Item 16F   Change in Registrant’s Certifying Accountant   n/a
Item 16G   Corporate Governance   29 – 35
Item 16H         Mine Safety Disclosures   n/a
Item 17   Financial Statements   78, 79, 84 – 143, 170 – 174
Item 18   Financial Statements   78, 79, 84 – 143, 170 – 174
Item 19   Exhibits  

Please refer to the Exhibit list located immediately following

the signature page for this document as filed with the SEC.  

 

158      Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

 

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

EMPLOYEES

The average number of employees for the last three years is provided in note 4A on page 94. The average number of employees during 2016 included 9,297 seasonal workers. We believe our relationship with our employees and any labour unions of which they may be part is satisfactory in all material respects.

GLOBAL EMPLOYEE SHARE PLANS (SHARES)

In November 2014, Unilever’s new global employee plan ‘SHARES’ was launched in 17 countries. SHARES gives eligible Unilever employees below senior management level the opportunity to invest between 25 and 200 per month from their net salary in Unilever shares. For every three shares our employees buy (Investment Shares), Unilever will give them one free Matching Share, which will vest if employees hold their Investment Shares for at least three years. The Matching Shares are not subject to any performance conditions. In 2015, SHARES was rolled out globally and is now offered in more than 100 countries. Executive Directors are not eligible to participate in SHARES. As of 21 February 2017, awards for 182,558 NV and 130,942 PLC shares were outstanding under SHARES.

NORTH AMERICAN SHARE PLANS

Unilever also maintains share plans for its North American employees that are governed by an umbrella plan referred to as the Unilever North America Omnibus Equity Compensation Plan. These plans are the North American equivalents of the GSIP, MCIP and SHARES plans. The rules governing these share plans are materially the same as the rules governing the GSIP, MCIP and SHARES plans, respectively. However, the plans contain non-competition and non-solicitation covenants and they are subject to US and Canadian employment and tax laws. The plans are administered by the North America Compensation Committee of Unilever United States Inc. and they are governed by New York law.

The foregoing description of the Unilever North America Omnibus Equity Compensation Plan does not purport to be complete and is qualified in its entirety by reference to the Unilever North America Omnibus Equity Compensation Plan, including all amendments thereto, filed as Exhibit 99.1 to the Form S-8 (File No. 333-185299) filed with the SEC on 6 December 2012, which is incorporated herein by reference.

COMPENSATION COMMITTEE

The Committee is concerned with the remuneration of the Executive and Non-Executive Directors and the tier of management directly below the Boards. It also has responsibility for the cash and executive and all employee share-based incentive plans, the Remuneration Policy and performance evaluation of the Unilever Leadership Executive and senior corporate executives.

DIRECTORS AND SENIOR MANAGEMENT

FAMILY RELATIONSHIP

There are no family relationships between any of our Executive Directors, members of the ULE or Non-Executive Directors.

OTHER ARRANGEMENTS

None of our Non-Executive Directors, Executive Directors or other key management personnel are elected or appointed under any arrangement or understanding with any major shareholder, customer, supplier or otherwise.

 

Annual Report on Form 20-F 2016     159


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ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

MAJOR SHAREHOLDERS

The voting rights of the significant shareholders of NV and PLC are the same as for other holders of the class of share held by such significant shareholder.

The principal trading markets upon which Unilever shares are listed are Euronext Amsterdam for NV ordinary and 6% and 7% cumulative preference shares and the depositary receipts of these NV ordinary and 7% cumulative 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. Deutsche Bank Trust Company Americas (Deutsche Bank) acts for NV and PLC as issuer, transfer agent and, in respect of the PLC American Depositary Receipts, depositary.

At 21 February 2017 (the latest practicable date for inclusion in this report), there were 4,647 registered holders of NV New York Registry Shares and 977 registered holders of PLC American Depositary Receipts in the United States. We estimate that approximately 11% of NV’s ordinary shares (including shares underlying NV New York Registry shares) were held in the United States (approximately 10% in 2015) and approximately 13% of PLC’s ordinary shares (including shares underlying PLC American Depositary Receipts) were held in the United States (approximately 13% in 2015).

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. On a going concern basis, you have largely equal rights over our combined net profit and capital reserves as shown in the consolidated accounts.

To Unilever’s knowledge, the Unilever Group is not owned or controlled, directly or indirectly, by another corporation, any foreign government or by any other legal or natural person, severally or jointly. The Group is not aware of any arrangements the operation of which may at any subsequent date result in a change of control of Unilever.

RELATED PARTY TRANSACTIONS

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 Note 23 to the consolidated financial statements (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 2016 up to 21 February 2017 (the latest practicable date for inclusion in this report).

 

 

 

THE OFFER AND LISTING

SHARE PRICES AT 31 DECEMBER 2016

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

 

   

 NV per 0.16 ordinary share in Amsterdam

 

    

 

39.12

 

 

 

 NV per 0.16 ordinary share in New York

 

    

 

US$41.06

 

 

 

 PLC per 3 1 / 9 p ordinary share in London

 

    

 

£32.93

 

 

 

 PLC per 3 1 / 9 p ordinary share in New York

 

    

 

US$40.70

 

 

 

 

160      Annual Report on Form 20-F 2016


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MONTHLY HIGH AND LOW PRICES FOR THE MOST RECENT SIX MONTHS

 

                                                                                                       
            August      September      October      November      December      January      February  
              2016      2016      2016      2016      2016      2017      2017  

 NV per 0.16 ordinary share in Amsterdam

     High        41.89        42.94        41.79        38.30        39.28        39.37        44.80 (a)  

(in )

     Low        40.58        40.23        38.18        36.39        36.80        37.40        37.49 (a)  

 NV per 0.16 ordinary share in New York

     High        46.84        47.88        46.43        42.19        41.06        42.32        48.79 (a)  

(in US$)

     Low        44.93        44.94        41.67        38.66        39.12        40.27        40.56 (a)  

 PLC per 3 1 / 9 p ordinary share in London

     High        36.42        36.63        37.64        34.44        32.93        34.03        37.97 (a)  

(in £)

     Low        34.78        35.05        34.18        31.07        30.92        31.91        32.04 (a)  

 PLC per 3 1 / 9 p ordinary share in New York

     High        47.34        48.63        47.75        42.15        40.79        42.58        48.53 (a)  

(in US$)

     Low            45.86        46.02        41.67        38.78        39.14        40.51        41.11 (a)  

 

(a)   Through 21 February 2017 (the latest practicable date for inclusion in this report).

QUARTERLY HIGH AND LOW PRICES FOR 2016 AND 2015

 

                                                                                         
                   1st      2nd      3rd      4th  
                   Quarter      Quarter      Quarter      Quarter  
                      2016      2016      2016      2016  

 NV per 0.16 ordinary share in Amsterdam (in )

        High        40.89        41.91        42.94        41.79  
                Low        36.69        38.15        40.23        36.39  

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

        High        45.52        47.05        47.88        46.43  
                Low        40.27        42.87        44.93        38.66  

 PLC per 3 1 / 9 p ordinary share in London (in £)

        High        31.90        35.79        36.79        37.64  
                Low        27.63        30.42        34.78        30.92  

 PLC per 3 1 / 9 p ordinary share in New York (in US$)

        High        45.77        47.91        48.63        47.75  
                Low        40.09        43.62        45.86        38.78  
                   1st      2nd      3rd      4th  
                   Quarter      Quarter      Quarter      Quarter  
                      2015      2015      2015      2015  

 NV per 0.16 ordinary share in Amsterdam (in )

        High        40.52        41.88        42.32        42.48  
                Low        31.55        36.86        33.87        35.82  

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

        High        43.94        44.98        46.51        46.04  
                Low        37.64        41.40        38.43        40.25  

 PLC per 3 1 / 9 p ordinary share in London (in £)

        High        29.52        30.15        29.66        29.60  
                Low        25.73        27.30        25.24        26.82  

 PLC per 3 1 / 9 p ordinary share in New York (in US$)

        High        44.67        45.08        46.07        45.72  
                Low        39.03        41.83        39.08        40.84  
ANNUAL HIGH AND LOW PRICES                  
              2016      2015      2014      2013      2012  

 NV per 0.16 ordinary share in Amsterdam (in )

     High        42.94        42.48        33.49        32.89        29.50  
       Low        36.39        31.55        27.16        27.50        24.56  

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

     High        47.88        46.51        44.31        42.78        38.75  
       Low        38.66        37.64        36.72        37.27        30.79  

 PLC per 3 1 / 9 p ordinary share in London (in £)

     High        37.64        30.15        27.29        28.85        24.29  
       Low        27.63        25.24        23.06        23.19        19.94  

 PLC per 3 1 / 9 p ordinary share in New York (in US $)

     High        48.63        46.07        45.85        43.54        39.37  
       Low        38.78        39.03        37.85        37.67        31.04  

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

 

Annual Report on Form 20-F 2016     161


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ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

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 Annual General Meetings (AGMs) and separate meetings of ordinary shareholders, the Equalisation Agreement was modified to facilitate the payment of quarterly dividends from 2010 onwards.

 

      2016      2015      2014      2013      2012  

Dividends declared for the year

              

NV dividends

              

Dividend per 0.16

     €1.28        1.21        1.14        1.08        0.97  

Dividend per 0.16 (US Registry)

     US$1.42        US$1.32        US$1.47        US$1.44        US$1.25  

PLC dividends

              

Dividend per 3 1 / 9 p

     £1.09        £0.88        £0.90        £0.91        £0.79  

Dividend per 3 1 / 9 p (US Registry)

     US$1.42        US$1.32        US$1.47        US$1.44        US$1.25  

Dividends paid during the year

              

NV dividends

              

Dividend per 0.16

     €1.26        1.19        1.12        1.05        0.95  

Dividend per 0.16 (US Registry)

     US$1.40        US$1.32        US$1.51        US$1.40        US$1.23  

PLC dividends

              

Dividend per 3 1 / 9 p

     £1.04        £0.87        £0.91        £0.89        £0.77  

Dividend per 3 1 / 9 p (US Registry)

       US$1.40          US$1.32          US$1.51          US$1.40          US$1.23  

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.

 

      2016      2015      2014      2013      2012  

Year end

              

1 = US$

     1.049        1.092        1.215        1.378        1.318  

1 = £

     0.857        0.736        0.781        0.833        0.816  

Average

              

1 = US$

     1.111        1.111        1.334        1.325        1.283  

1 = £

             0.815                0.725                0.807                0.849              0.811  

On 21 February 2017 (the latest practicable date for inclusion in this report), 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$1.063 and 1 = £0.855.

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:

 

      2016      2015      2014      2013      2012  

Year end

              

1 = US$

     1.055        1.086        1.210        1.378        1.319  

Average

              

1 = US$

     1.103        1.110        1.330        1.328        1.286  

High

              

1 = US$

     1.152        1.202        1.393        1.382        1.346  

Low

              

1 = US$

             1.038                1.052                1.210                1.277              1.206  

On 17 February 2017 (the latest available data for inclusion in this report), the Noon buying rate was 1 = US$1.061.

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

 

     August      September      October      November      December      January      February  
      2016      2016      2016      2016      2016      2017      2017 (a)  

High

1 = US $

     1.133        1.127        1.121        1.112        1.076        1.079        1.080  

Low

1 = US $

             1.108                1.116                1.087                1.056            1.038                1.042            1.058  

 

(a)   Through 17 February 2017 (the latest available data for inclusion in this report).

 

162      Annual Report on Form 20-F 2016


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ARTICLES OF ASSOCIATION

NV’s Articles of Association contain, among other things, the objects clause, which sets out the scope of activities that NV is authorised to undertake. They are drafted to give a wide scope and provide that the primary objectives are: to carry on business as a holding company, to manage any companies in which it has an interest and to operate and carry into effect the Equalisation Agreement. At the 2010 PLC AGM, the shareholders agreed that the objects clause be removed from PLC’s Articles of Association so that there are no restrictions on its objects.

DIRECTORS’ BORROWING POWERS

The borrowing powers of NV Directors on behalf of NV are not limited by NV’s Articles of Association. PLC Directors have the power to borrow on behalf of PLC up to three times the PLC proportion of the adjusted capital and reserves of the Unilever Group, as defined in PLC’s Articles of Association, without the approval of shareholders (by way of an ordinary resolution).

ALLOCATION OF PROFITS

Under NV’s Articles of Association, available profits are distributed first to 7% and 6% cumulative preference shareholders by a dividend of 7% and 6%, respectively, calculated on the basis of the original nominal value of 1,000 Dutch guilders converted to euros at the official conversion rate. The remaining profits are distributed to ordinary shareholders in proportion to the nominal value of their holdings.

Distributable profits of PLC are paid first at the rate of 5% per year on the paid-up nominal capital of 3 1 / 9 p of the ordinary shares, in a further such dividend and then at the rate of 6% per year on the paid-up nominal capital of the deferred stock of £100,000. The surplus is paid by way of a dividend on the ordinary shares.

LAPSE OF DISTRIBUTIONS

The right to cash and the proceeds of share distributions by NV lapses five and 20 years, respectively, after the first day the distribution was obtainable. Unclaimed amounts revert to NV. Any PLC dividend unclaimed after 12 years from the date of the declaration of the dividend reverts to PLC.

REDEMPTION PROVISIONS AND CAPITAL CALL

Under Dutch law, NV may only redeem treasury shares (including shares underlying depositary receipts) or shares whose terms permit redemption. Outstanding PLC ordinary shares and deferred shares cannot be redeemed. NV and PLC may make capital calls on money unpaid on shares and not payable on a fixed date. NV and PLC only issue fully paid shares.

MODIFICATION OF RIGHTS

Modifications to NV’s or PLC’s Articles of Association must be approved by a general meeting of shareholders. Any modification that prejudices the rights of 7% or 6% cumulative preference shareholders of NV must be approved by three quarters of votes cast (excluding treasury shares) at a meeting of affected holders.

Modifications that prejudicially affect the rights and privileges of a class of PLC shareholders require the written consent of three quarters of the affected holders (excluding treasury shares) or a special resolution passed at a general meeting of the class at which at least two persons holding or representing at least one third of the paid-up capital (excluding treasury shares) must be present. Every shareholder is entitled to one vote per share held on a poll and may demand a poll vote. At any adjourned general meeting, present affected class holders may establish a quorum.

MATERIAL CONTRACTS

The descriptions of the foundation agreements set forth in the Unilever Annual Report and Accounts 2016 do not purport to be complete and are qualified in their entirety by reference to the Equalisation Agreement between Unilever N.V. and Unilever PLC, the Deed of Mutual Covenants and the Agreement for Mutual Guarantees of Borrowing, including all amendments thereto, filed as Exhibits 4.1(a), 4.1(b) and 4.1(c), respectively, to this report, which are incorporated herein by reference.

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 NV.

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.

UNILEVER ANNUAL REPORT ON FORM 20-F 2016

Filed with the SEC on the SEC’s website. Printed copies are available, free of charge, upon request to Unilever PLC, Investor Relations department, 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.

 

 

Annual Report on Form 20-F 2016     163


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ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

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 shareholders’ 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.

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 advisers regarding the possible application of this disclosure requirement to their investment in the shares.

 

 

164      Annual Report on Form 20-F 2016


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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 OR AMERICAN DEPOSITARY 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 or American Depositary Shares (ADSs). 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 or ADSs 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 or ADSs, and thereafter is treated as a gain on a disposition of the shares or ADSs.

 

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 advisers regarding the possible application of this disclosure requirement to their investment in the shares or ADSs.

UK TAXATION ON CAPITAL GAINS

Under United Kingdom law, when you dispose of shares you may be liable to pay United Kingdom tax in respect of any gain accruing on the disposal. However, if you are either:

  an individual who is not resident in the United Kingdom for the year in question; or
  a company which is not resident in the United Kingdom when the gain accrues

you will generally not be liable to United Kingdom tax on any capital 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, agency or permanent establishment; or if the shares are held by an individual who becomes resident in the UK having left the UK for a period of non-residence of five years or less and who was 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 generally 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.

Where ordinary shares are held on trust, they will generally not be subject to United Kingdom inheritance tax where the settlor at the time of the settlement:

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

An exception is if the shares are part of the business property of a permanent establishment of the shareholder 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.

Where ordinary shares are subject to United Kingdom inheritance tax and United States federal gift or federal estate tax, the amount of the tax paid in one jurisdiction can generally be credited against the tax due in the other jurisdiction.

Where a United Kingdom inheritance tax liability is prima facie not payable by virtue of the convention, that tax can become payable if any applicable federal gift or federal estate tax on the shares in the United States is not paid.

 

 

Annual Report on Form 20-F 2016     165


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DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Deutsche Bank serves as both the transfer agent and registrar pursuant to the NV New York Registered Share Program and the depositary (Depositary) for PLC’s American Depositary Receipt Program.

TRANSFER AGENT FEES AND CHARGES FOR NV

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 Deutsche Bank 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 Registry Share (NYRS) holder may have to pay the following service fees to the transfer agent:

  Issuance of NYRSs: up to US 5¢ per NYRS issued.
  Cancellation of NYRSs: up to US 5¢ per NYRS cancelled.

An NYRS 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 (ie 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); 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 NYRSs are typically paid to the transfer agent by the brokers (on behalf of their clients) receiving the newly-issued NYRSs from the transfer agent and by the brokers (on behalf of their clients) delivering the NYRSs 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.

DEPOSITARY FEES AND CHARGES FOR 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.
  Processing of dividend and other cash distributions not made pursuant to a cancellation or withdrawal: up to US 5¢ per ADS held.

An ADS holder will also be responsible for paying 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 (ie 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.

TRANSFER AGENT PAYMENTS – FISCAL YEAR 2016 FOR NV

In relation to 2016, NV received $1,225,000.00 from Deutsche Bank, the transfer agent and registrar for its New York Registered Share program since 1 July 2014, including the reimbursement of listing fees (NYSE), reimbursement of settlement infrastructure fees (including DTC feeds), reimbursement of proxy process expenses (printing, postage and distribution), tax reclaim services and program-related expenses (that include expenses incurred from the requirements of the Sarbanes-Oxley Act of 2002).

DEPOSITARY PAYMENTS – FISCAL YEAR 2016 FOR PLC

In relation to 2016, PLC received $4,061,680.12 from Deutsche Bank, the depositary bank for its American Depositary Receipt Program since 1 July 2014, including processing of cash distributions, reimbursement of listing fees (NYSE), reimbursement of settlement infrastructure fees (including DTC feeds), reimbursement of proxy process expenses (printing, postage and distribution), dividend fees and program-related expenses (that include expenses incurred from the requirements of the Sarbanes-Oxley Act of 2002).

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

DEFAULTS

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

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.

 

 

166      Annual Report on Form 20-F 2016


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PURCHASES OF EQUITY SECURITIES

SHARE PURCHASES DURING 2016

Please also refer to ‘Our shares’ section on pages 30 to 32.

 

                          € million  
                       Of which, number of      Maximum value that  
                   shares purchased          may yet be purchased  
     Total number of      Average price      as part of publicly      as part of publicly  
                  shares purchased                  paid per share (€)      announced plans      announced plans  

January

     -        -        -        -  

February (a)

     13,434        38.82        -        -  

March

     -        -        -        -  

April

     -        -        -        -  

May (a)

     3,076,000        40.22        -        -  

June (a)

     3,081,750        40.45        -        -  

July

     -        -        -        -  

August

     -        -        -        -  

September

     -        -        -        -  

October

     -        -        -        -  

November

     -        -        -        -  

December

     -        -        -        -  

Total

     6,171,184        40.33        -        -  

 

(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 99 and 100.

Between 31 December 2016 and 21 February 2017 (the latest practicable date for inclusion in this report) neither NV or PLC conducted any share repurchases.

 

 

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 (2013) to evaluate the effectiveness of our internal control over financial reporting. Management believes that the COSO framework (2013) 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 2016, and has concluded that such internal control over financial reporting is effective; and
  KPMG LLP and KPMG Accountants N.V., who have audited the consolidated financial statements of the Group for the year ended 31 December 2016, have also audited the effectiveness of internal control over financial reporting as at 31 December 2016 and have issued an attestation report on internal control over financial reporting.

 

 

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

          € million
2016
           million
2015
           million
2014
 

Audit fees (a)

     14        14        14  

Audit-related fees (b)

     (c)        (c)        (c)  

Tax fees

     (c)        (c)        (c)  

All other fees

     (c)        (c)        (c)  

 

(a)   Amount payable to KPMG in respect of services supplied to associated pension schemes was less than 1 million individually and in aggregate (2015: less than 1 million individually and in aggregate; 2014: less than 1 million individually and in aggregate).
(b)   Includes other audit services which comprise audit and similar work that regulations or agreements with third parties require the auditors to undertake.
(c)   Amounts paid in relation to each type of service are individually less than 1 million. In aggregate the fees paid were 1 million (2015: 1 million, 2014: less than 1 million).

 

Annual Report on Form 20-F 2016     167


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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    2016     2015     2014     2013     2012  

Turnover

     52,713       53,272       48,436       49,797       51,324  

Operating profit

     7,801       7,515       7,980       7,517       6,977  

Net finance costs

     (563     (493     (477     (530     (535
Share of net profit/(loss) of joint ventures and associates and other income/(loss) from non-current investments      231       198       143       127       91  

Profit before taxation

     7,469       7,220       7,646       7,114       6,533  

Taxation

     (1,922     (1,961     (2,131     (1,851     (1,697

Net profit

     5,547       5,259       5,515       5,263       4,836  

Attributable to:

          

Non-controlling interests

     363       350       344       421       468  

Shareholders’ equity

     5,184       4,909       5,171       4,842       4,368  
           € million             million             million             million             million  
Combined earnings per share (a)    2016     2015     2014     2013     2012  

Basic earnings per share

     1.83       1.73       1.82       1.71       1.54  

Diluted earnings per share

     1.82       1.72       1.79       1.66       1.50  

 

(a)  For the basis of the calculations of combined earnings per share see Note 7 ‘Combined earnings per share’ on page 103.

   

           € million             million             million             million             million  
Consolidated balance sheet    2016     2015     2014     2013     2012  

Non-current assets

     42,545       39,612       35,680       33,391       34,042  

Current assets

     13,884       12,686       12,347       12,122       12,147  

Total assets

     56,429       52,298       48,027       45,513       46,189  

Current liabilities

     20,556       20,019       19,642       17,382       15,815  

Non-current liabilities

     18,893       16,197       14,122       13,316       14,425  

Total liabilities

     39,449       36,216       33,764       30,698       30,240  

Shareholders’ equity

     16,354       15,439       13,651       14,344       15,392  

Non-controlling interests

     626       643       612       471       557  

Total equity

     16,980       16,082       14,263       14,815       15,949  

Total liabilities and equity

     56,429       52,298       48,027       45,513       46,189  
     € million     million     million     million     million  
Consolidated cash flow statement    2016     2015     2014     2013     2012  

Net cash flow from operating activities

     7,047       7,330       5,543       6,294       6,836  

Net cash flow from/(used in) investing activities

     (3,188     (3,539     (341     (1,161     (755

Net cash flow from/(used in) financing activities

     (3,073     (3,032     (5,190     (5,390     (6,622

Net increase/(decrease) in cash and cash equivalents

     786       759       12       (257     (541

Cash and cash equivalents at the beginning of the year

     2,128       1,910       2,044       2,217       2,978  

Effect of foreign exchange rates

     284       (541     (146     84       (220

Cash and cash equivalents at the end of the year

     3,198       2,128       1,910       2,044       2,217  
Key performance indicators    2016     2015     2014     2013     2012  

Underlying sales growth (%) (b)

     3.7       4.1       2.9       4.3       6.9  

Underlying volume growth (%) (b)

     0.9       2.1       1.0       2.5       3.4  

Core operating margin (%) (b)

     15.3       14.8       14.5       14.1       13.7  

Free cash flow ( million) (b)

     4,802       4,796       3,100       3,856       4,333  

 

(b)   Non–GAAP measures are defined and described on pages 26 to 28. Reconciliations of non-GAAP measures to relevant GAAP measures are also detailed on pages 26 to 28.

 

168      Annual Report on Form 20-F 2016


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Ratios and other metrics                2016                 2015                 2014                 2013                 2012  

Operating margin (%)

     14.8       14.1       16.5       15.1       13.6  

Net profit margin (%) (c)

     9.8       9.2       10.7       9.7       8.5  

Net debt ( million) (b)

     12,614       11,505       9,900       8,456       7,355  

Ratio of earnings to fixed charges (times) (d)

     10.8       11.4       12.3       11.7       10.2  

 

(b)     Non–GAAP measures are defined and described on pages 26 to 28. Reconciliations of non-GAAP measures to relevant GAAP measures are also detailed on pages 26 to 28.

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

(d)     In the ratio of earnings to fixed charges, earnings consist of net profit from continuing operations excluding net profit or loss of joint ventures and associates increased by fixed charges, income taxes and dividends received from joint ventures and associates. Fixed charges consist of interest payable on debt and a portion of lease costs determined to be representative of interest. This ratio takes no account of interest receivable although Unilever’s treasury operations involve both borrowing and depositing funds.

 

     

     

     

Underlying sales growth (%)    2016
vs 2015
    2015
vs 2014
    2014
vs 2013
    2013
vs 2012
    2012
vs 2011
 

Turnover growth (%)

     (1.0     10.0       (2.7     (3.0     10.5  

Effect of acquisitions (%)

     0.8       0.7       0.4             1.8  

Effect of disposals (%)

     (0.2     (0.8     (1.3     (1.1     (0.7

Effect of exchange rates (%)

     (5.1     5.9       (4.6     (5.9     2.2  

Underlying sales growth (%)

     3.7       4.1       2.9       4.3       6.9  
Underlying volume growth (%)    2016
vs 2015
    2015
vs 2014
    2014
vs 2013
    2013
vs 2012
    2012
vs 2011
 

Underlying volume growth (%)

     0.9       2.1       1.0       2.5       3.4  

Effect of price changes (%)

     2.8       1.9       1.9       1.8       3.3  

Underlying sales growth (%)

     3.7       4.1       2.9       4.3       6.9  
Core operating margin and core operating profit          € million
2016
            million
2015
            million
2014
            million
2013
            million
2012
 

Operating profit

     7,801       7,515       7,980       7,517       6,977  

Acquisition and disposal-related cost

     132       105       97       112       190  

(Gain)/loss on disposal of group companies

     95       9       (1,392     (733     (117

Impairments and other one-off items

     18       236       335       120       -  

Core operating profit

     8,046       7,865       7,020       7,016       7,050  

Turnover

     52,713       53,272       48,436       49,797       51,324  

Operating margin (%)

     14.8       14.1       16.5       15.1       13.6  

Core operating margin (%)

     15.3       14.8       14.5       14.1       13.7  
Net profit to free cash flow (FCF)    € million
2016
    million
2015
    million
2014
    million
2013
    million
2012
 

Net profit

     5,547       5,259       5,515       5,263       4,836  

Taxation

     1,922       1,961       2,131       1,851       1,697  

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

     (231     (198     (143     (127     (91

Net finance costs

     563       493       477       530       535  

Depreciation, amortisation and impairment

     1,464       1,370       1,432       1,151       1,199  

Changes in working capital

     51       720       8       200       822  

Pensions and similar obligations less payments

     (327     (385     (364     (383     (369

Provisions less payments

     65       (94     32       126       (43

Elimination of (profits)/losses on disposals

     127       26       (1,460     (725     (236

Non-cash charge for share-based compensation

     198       150       188       228       153  

Other adjustments

     (81     49       38       (15     13  

Cash flow from operating activities

     9,298       9,351       7,854       8,099       8,516  

Income tax paid

     (2,251     (2,021     (2,311     (1,805     (1,680

Net capital expenditure

     (1,878     (2,074     (2,045     (2,027     (2,143

Net interest and preference dividends paid

     (367     (460     (398     (411     (360
         

Free cash flow

     4,802       4,796       3,100       3,856       4,333  

Net cash flow (used in)/from investing activities

     (3,188     (3,539     (341     (1,161     (755

Net cash flow (used in)/from financing activities

     (3,073     (3,032     (5,190     (5,390     (6,622

 

Annual Report on Form 20-F 2016     169


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ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

Total financial liabilities to net debt          € million
2016
            million
2015
            million
2014
            million
2013
            million
2012
 

Total financial liabilities

     (16,595     (14,643     (12,722     (11,501     (10,221

Current financial liabilities

     (5,450     (4,789     (5,536     (4,010     (2,656

Non-current financial liabilities

     (11,145     (9,854     (7,186     (7,491     (7,565

Cash and cash equivalents as per balance sheet

     3,382       2,302       2,151       2,285       2,465  

Cash and cash equivalents as per cash flow statement

     3,198       2,128       1,910       2,044       2,217  

Add bank overdrafts deducted therein

     184       174       241       241       248  

Other current financial assets

     599       836       671       760       401  

Net debt

     (12,614     (11,505     (9,900     (8,456     (7,355

 

 

GUARANTOR STATEMENTS (AUDITED)

On 30 September 2014, Unilever N.V. and Unilever Capital Corporation (UCC) filed a US Shelf registration, which is unconditionally and fully guaranteed, jointly and severally, by Unilever N.V., Unilever PLC and Unilever United States, Inc. (UNUS) and that superseded the NV and UCC US Shelf registration filed on 1 November 2011, which was 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$6.3 billion of Notes were outstanding at 31 December 2016 (2015: US$5.6 billion; 2014: US$5.0 billion) with coupons ranging from 0.85% to 5.9%. These Notes are repayable between 2 August 2017 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 2016

    



Unilever
Capital
Corporation
subsidiary
issuer
 
 
 
 
 
    


Unilever

parent
entities

(a)  

 
 

   



Unilever
United
States Inc.
subsidiary
guarantor
 
 
 
 
 
   

Non-
guarantor
subsidiaries
 
 
 
    Eliminations      
Unilever
Group
 
 

Turnover

     -        -       -       52,713       -       52,713  

Operating profit

     -        269       (5     7,537       -       7,801  

Net finance income/(costs)

     1        (110     (331     (29     -       (469

Pensions and similar obligations

     -        (3     (27     (64     -       (94

Other income/(losses)

     -        -       -       231       -       231  

Profit before taxation

     1        156       (363     7,675       -       7,469  

Taxation

     -        (114     -       (1,808     -       (1,922

Net profit before subsidiaries

     1        42       (363     5,867       -       5,547  

Equity earnings of subsidiaries

     -        5,142       804       (4,559     (1,387     -  

Net profit

     1        5,184       441       1,308       (1,387     5,547  

Attributable to:

             

Non-controlling interests

     -        -       -       363       -       363  

Shareholders’ equity

     1        5,184       441       945       (1,387     5,184  

Total comprehensive income

     1        5,170       468       517       (1,387     4,769  

 

(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.

 

170      Annual Report on Form 20-F 2016


Table of Contents

    

    

    

 

 

     million     million     million     million     million     million  
     Unilever           Unilever                    
     Capital           United                    
     Corporation       Unilever (a)       States Inc.       Non-      
Income statement    subsidiary     parent     subsidiary     guarantor           Unilever  
for the year ended 31 December 2015    issuer     entities     guarantor     subsidiaries     Eliminations     Group  

Turnover

     -       -       -       53,272       -       53,272  

Operating profit

     -       990       (5     6,530       -       7,515  

Net finance income/(costs)

     -       (103     (327     58       -       (372

Pensions and similar obligations

     -       (3     (29     (89     -       (121

Other income/(losses)

     -       439       -       (241     -       198  

Profit before taxation

     -       1,323       (361     6,258       -       7,220  

Taxation

     -       (461     (87     (1,413     -       (1,961

Net profit before subsidiaries

     -       862       (448     4,845       -       5,259  

Equity earnings of subsidiaries

     -       4,047       690       (9,408     4,671       -  

Net profit

     -       4,909       242       (4,563     4,671       5,259  

Attributable to:

            

Non-controlling interests

     -       -       -       350       -       350  

Shareholders’ equity

     -       4,909       242       (4,913     4,671       4,909  

Total comprehensive income

     (1     4,922       332       (4,162     4,671       5,762  
     million     million     million     million     million     million  
     Unilever           Unilever                    
     Capital           United                    
     Corporation       Unilever (a)       States Inc.       Non-      
Income statement    subsidiary     parent     subsidiary     guarantor           Unilever  
for the year ended 31 December 2014    issuer     entities     guarantor     subsidiaries     Eliminations     Group  

Turnover

     -       -       -       48,436       -       48,436  

Operating profit

     -       363       (6     7,623       -       7,980  

Net finance costs

     -       (97     (258     (28     -       (383

Pensions and similar obligations

     -       (4     (26     (64     -       (94

Other income

     -       -       -       143       -       143  

Profit before taxation

     -       262       (290     7,674       -       7,646  

Taxation

     -       (93     (562     (1,476     -       (2,131

Net profit before subsidiaries

     -       169       (852     6,198       -       5,515  

Equity earnings of subsidiaries

     -       5,002       1,713       (5,269     (1,446     -  

Net profit

     -       5,171       861       929       (1,446     5,515  

Attributable to:

            

Non-controlling interests

     -       -       -       344       -       344  

Shareholders’ equity

     -       5,171       861       585       (1,446     5,171  

Total comprehensive income

     (1     5,165       754       (317     (1,446     4,155  

 

(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.

 

Annual Report on Form 20-F 2016     171


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ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

     € million            € million     € million      € million      € million           € million  
     Unilever            Unilever                      
     Capital            United                      
     Corporation        Unilever (a)       States Inc.        Non-       
     subsidiary      parent     subsidiary      guarantor            Unilever  
Balance sheet at 31 December 2016    issuer      entities     guarantor      subsidiaries      Eliminations     Group  

Assets

               

Non-current assets

               

Goodwill and intangible assets

     -        2,202       -        25,231        -       27,433  

Deferred tax assets

     -        86       -        1,268        -       1,354  

Other non-current assets

     -        70       2        13,686        -       13,758  

Amounts due from group companies

     14,931        4,569       -        -        (19,500     -  

Net assets of subsidiaries (equity accounted)

     -        39,676       20,052        -        (59,728     -  
     14,931        46,603       20,054        40,185        (79,228     42,545  

Current assets

               

Amounts due from group companies

     14        2,539       5,293        33,211        (41,057     -  

Trade and other current receivables

     -        70       4        5,028        -       5,102  

Current tax assets

     -        90       -        227        -       317  

Other current assets

     -        6       -        8,459        -       8,465  
     14        2,705       5,297        46,925        (41,057     13,884  

Total assets

     14,945        49,308       25,351        87,110        (120,285     56,429  

Liabilities

               

Current liabilities

               

Financial liabilities

     2,415        1,700       1        1,334        -       5,450  

Amounts due to group companies

     6,682        26,514       15        7,846        (41,057     -  

Trade payables and other current liabilities

     63        193       18        13,597        -       13,871  

Current tax liabilities

     -        -       21        823        -       844  

Other current liabilities

     -        4       -        387        -       391  
     9,160        28,411       55        23,987        (41,057     20,556  

Non-current liabilities

               

Financial liabilities

     5,437        4,577       -        1,131        -       11,145  

Amounts due to group companies

     -        -       14,925        4,575        (19,500     -  

Pensions and post-retirement healthcare liabilities:

               

Funded schemes in deficit

     -        7       101        2,055        -       2,163  

Unfunded schemes

     -        96       513        1,095        -       1,704  

Other non-current liabilities

     -        -       46        3,835        -       3,881  
     5,437        4,680       15,585        12,691        (19,500     18,893  

Total liabilities

     14,597        33,091       15,640        36,678        (60,557     39,449  
           

Shareholders’ equity

     348        16,217       9,711        49,806        (59,728     16,354  

Non-controlling interests

     -        -       -        626        -       626  
           

Total equity

     348        16,217       9,711        50,432        (59,728     16,980  
           

Total liabilities and equity

     14,945        49,308       25,351        87,110        (120,285     56,429  

 

(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.

 

172      Annual Report on Form 20-F 2016


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     million              million     million      million      million             million  
     Unilever            Unilever                      
     Capital            United                      
     Corporation        Unilever (a)       States Inc.        Non-       
     subsidiary      parent     subsidiary      guarantor            Unilever  
Balance sheet at 31 December 2015    issuer      entities     guarantor      subsidiaries      Eliminations     Group  

Assets

               

Non-current assets

               

Goodwill and intangible assets

     -        2,429       -        22,630        -       25,059  

Deferred tax assets

     -        160       90        935        -       1,185  

Other non-current assets

     -        8       3        13,357        -       13,368  

Amounts due from group companies

     12,961        2,763       -        -        (15,724     -  

Net assets of subsidiaries (equity accounted)

     -        39,770       18,952        -        (58,722     -  
     12,961        45,130       19,045        36,922        (74,446     39,612  

Current assets

               

Amounts due from group companies

     86        2,917       4,290        33,450        (40,743     -  

Trade and other current receivables

     -        69       5        4,730        -       4,804  

Current tax assets

     -        92       -        138        -       230  

Other current assets

     -        4       1        7,647        -       7,652  
     86        3,082       4,296        45,965        (40,743     12,686  

Total assets

     13,047        48,212       23,341        82,887        (115,189     52,298  

Liabilities

               

Current liabilities

               

Financial liabilities

     1,990        1,551       4        1,244        -       4,789  

Amounts due to group companies

     6,077        27,351       22        7,293        (40,743     -  

Trade payables and other current liabilities

     57        170       38        13,523        -       13,788  

Current tax liabilities

     -        -       10        1,117        -       1,127  

Other current liabilities

     -        5       -        310        -       315  
     8,124        29,077       74        23,487        (40,743     20,019  

Non-current liabilities

               

Financial liabilities

     4,589        3,723       -        1,542        -       9,854  

Amounts due to group companies

     -        -       12,960        2,764        (15,724     -  

Pensions and post-retirement healthcare liabilities:

               

Funded schemes in deficit

     -        9       92        1,468        -       1,569  

Unfunded schemes

     -        97       543        1,045        -       1,685  

Other non-current liabilities

     -        22       2        3,065        -       3,089  
     4,589        3,851       13,597        9,884        (15,724     16,197  

Total liabilities

     12,713        32,928       13,671        33,371        (56,467     36,216  
           

Shareholders’ equity

     334        15,284       9,670        48,873        (58,722     15,439  

Non-controlling interests

     -        -       -        643        -       643  

Total equity

     334        15,284       9,670        49,516        (58,722     16,082  

Total liabilities and equity

     13,047        48,212       23,341        82,887        (115,189     52,298  

 

(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.

 

Annual Report on Form 20-F 2016     173


Table of Contents

ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

     € million     € million     € million     € million     € million           € million  
     Unilever           Unilever                    
     Capital           United                    
     Corporation       Unilever (a)       States Inc.       Non-      
Cash flow statement    subsidiary     parent     subsidiary     guarantor           Unilever  
for the year ended 31 December 2016    issuer     entities     guarantor     subsidiaries     Eliminations     Group  

Net cash flow from/(used in) operating activities

     -       45       (177     7,179       -       7,047  
           

Net cash flow from/(used in)investing activities

     (1,053     (679     (783     (1,712     1,039       (3,188

Net cash flow from/(used in) financing activities

     1,048       621       959       (4,662     (1,039     (3,073

Net increase/(decrease) in cash and cash equivalents

     (5     (13     (1     805       -       786  

Cash and cash equivalents at beginning of year

     -       3       (1     2,126       -       2,128  

Effect of foreign exchange rates

     5       15       -       264       -       284  

Cash and cash equivalents at end of year

     -       5       (2     3,195       -       3,198  
     million     million     million     million     million     million  
     Unilever           Unilever                    
     Capital           United                    
     Corporation       Unilever (a)       States Inc.       Non-      
Cash flow statement    subsidiary     parent     subsidiary     guarantor           Unilever  
for the year ended 31 December 2015    issuer     entities     guarantor     subsidiaries     Eliminations     Group  

Net cash flow from/(used in) operating activities

     (1     (699     (140     8,170       -       7,330  
           

Net cash flow from/(used in) investing activities

     (1,005     231       (729     (2,955     919       (3,539

Net cash flow from/(used in) financing activities

     1,000       558       871       (4,542     (919     (3,032

Net increase/(decrease) in cash and cash equivalents

     (6     90       2       673       -       759  

Cash and cash equivalents at beginning of year

     -       5       (3     1,908       -       1,910  

Effect of foreign exchange rates

     6       (91     -       (456     -       (541

Cash and cash equivalents at end of year

     -       4       (1     2,125       -       2,128  
     million     million     million     million     million     million  
     Unilever           Unilever                    
     Capital           United                    
     Corporation       Unilever (a)       States Inc.       Non-      
Cash flow statement    subsidiary     parent     subsidiary     guarantor           Unilever  
for the year ended 31 December 2014    issuer     entities     guarantor     subsidiaries     Eliminations     Group  

Net cash flow from/(used in) operating activities

     -       579       (764     5,728       -       5,543  
           

Net cash flow from/(used in) investing activities

     (1,038     (2,284     (662     2,606       1,037       (341

Net cash flow from/(used in) financing activities

     1,033       1,676       1,426       (8,288     (1,037     (5,190

Net increase/(decrease) in cash and cash equivalents

     (5     (29     -       46       -       12  

Cash and cash equivalents at beginning of year

     -       3       (2     2,043       -       2,044  

Effect of foreign exchange rates

     5       31       -       (182     -       (146

Cash and cash equivalents at end of year

     -       5       (2     1,907       -       1,910  

 

(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.

 

174      Annual Report on Form 20-F 2016


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OPERATING AND FINANCIAL REVIEW

AND PROSPECTS

FINANCIAL REVIEW 2015

GROUP RESULTS AND EARNINGS PER SHARE

The following discussion summarises the results of the Group during the years 2015 and 2014. 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 162.

In 2015 and 2014, no disposals qualified to be disclosed as discontinued operations for purposes of reporting.

 

      2015      2014      % change  

Turnover ( million)

             53,272                48,436        10  

Operating profit ( million)

     7,515        7,980        (6

Core operating profit ( million)

     7,865        7,020        12  

Profit before tax ( million)

     7,220        7,646        (6

Net profit ( million)

     5,259        5,515        (5

Diluted earnings per share ( )

     1.72        1.79        (4

Core earnings per share ( )

     1.82        1.61        14  

Turnover grew by 10% to 53.3 billion helped by a positive currency impact of 5.9% (2014: negative 4.6%) with a strong boost in the first half of the year due to a weaker euro. Underlying sales growth was 4.1% (2014: 2.9%) balanced between volume growth of 2.1% (2014: 1.0%) and pricing of 1.9% (2014: 1.9%). Acquisitions and disposals had a negative impact of 0.1% (2014: negative 0.9%). Emerging markets contributed 58% of total turnover (2014: 57%) with underlying sales growth of 7.1% (2014: 5.7%) of which 2.7% was volume growth. Currency devaluation continued to push up the cost of living for consumers in many of the emerging markets. Our performance in developed markets was flat with good volume growth in Europe being offset by price deflation.

Core operating margin was up 0.3 percentage points to 14.8%. Gross margin was up 0.8 percentage points to 42.2% driven by margin-accretive innovation, pricing and continued delivery from our savings programmes, which more than offset currency-related cost increases and higher costs on brand and marketing investment. Commodity costs increased by about 4%. While the price of many commodities, such as oil, in US dollars fell during 2015, commodity costs in local currencies increased as devaluing currencies imported inflation into local raw material production. Overheads increased by 0.3 percentage points reflecting an adverse currency translation impact and favourable one-off items in 2014, such as property sales in India.

 

Operating profit was down 6% at 7.5 billion compared with 8.0 billion in 2014. This includes a charge of 350 million for non-core items (2014: credit of 960 million including a 1,392 million gain from business disposals).

The net cost of financing borrowings was 372 million compared with 383 million in 2014. The average interest rate on net debt improved to 3.0% (2014: 3.5%) largely as a result of higher returns on investments. Pensions financing was a charge of 121 million compared with 94 million in 2014.

The effective tax rate was 27.6% versus 28.2% in 2014 which included 0.8 billion tax relating to business disposals.

Net profit from joint ventures and associates together with other income from non-current investments was 198 million compared with 143 million in 2014. This reflects increased profit on disposal of associates and higher income from joint ventures. At 1.72, diluted EPS was down 4% as 2014 included the profit on business disposals. Core EPS increased by 14% to 1.82, including a favourable currency impact of 3%.

ADDITIONAL COMMENTS ON 2015 EXPENSES AND OPERATING PROFIT

Core operating profit increased by 0.8 billion compared to 2014, driven by an improvement across most categories, with an increase in Personal Care of 0.5 billion, Home Care by 0.2 billion, and Refreshment by 0.1 billion. Foods core operating profit was in line with 2014. Operating profit decreased by 0.5 billion as prior year contained the impact of profit on disposal of the Ragu & Bertolli brands and related assets.

Cost of raw and packing material and goods purchased for resale (material costs) increased by 1.7 billion, driven primarily by exchange rate depreciation of 1.1 billion; at constant exchange rates it was up by 0.6 billion. At constant exchange rates, gross total input costs (including material costs, distribution and supply chain indirects) increase of 1.5 billion was more than offset by favourable price changes of 0.9 billion, and material costs savings of 0.9 billion during the year, resulting in gross margin improvement of 0.5 percentage points to 41.9%.

Staff costs increased by 0.5 billion reflecting the impact of employee wage increases for the year. Our brand marketing investment increased by 0.8 billion (increase of 0.2 percentage points to 15.0%) as we stepped up investment behind our brands.

The impact of input costs and investment in our brands is discussed further in our segmental disclosures, which also provide additional details of the impact of brands, products and sub categories on driving top-line growth.

 

 

Annual Report on Form 20-F 2016     175


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ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

PERSONAL CARE

 

 

      2015      2014      % change  

Turnover ( million)

         20,074            17,739        13.2  

Operating profit ( million)

     3,637        3,259        11.6  

Core operating profit ( million)

     3,788        3,325        13.9  

Core operating margin (%)

     18.9        18.7        0.2  

Underlying sales growth (%)

     4.1        3.5     

Underlying volume growth (%)

     2.3        1.2     

Effect of price changes (%)

     1.8        2.3           

KEY DEVELOPMENTS

  Turnover growth was 13.2% of which 7.6% was currency impact. Underlying sales growth, while still below historical rates, improved to 4.1% compared with 3.5% in 2014. Growth benefited from innovations that boosted the core of our business including the launch of dry spray deodorants in North America, the launch of Lux Luminique in Japan and the roll-out of Dove Advanced Hair Series. 2015 also marked our entry into the prestige skin care business with the acquisitions of Dermalogica, Murad, Kate Somerville and REN.
  Core operating profit was 463 million higher than 2014 and this included a 196 million favourable impact from exchange rate movement. Acquisitions and disposal activities contributed 105 million while underlying sales growth and margin improvement added 137 million and 25 million respectively. Operating margin improvement was principally driven by margin-accretive innovation. Gross margin was up 0.5 percentage points and brand and marketing investment was up 13%.

FOODS

 

                  %  
      2015      2014     Change  

Turnover ( million)

         12,919            12,361       4.5  

Operating profit ( million)

     2,298        3,607       (36.3

Core operating profit ( million)

     2,354        2,305       2.1  

Core operating margin (%)

     18.2        18.6       (0.4

Underlying sales growth (%)

     1.5        (0.6  

Underlying volume growth (%)

     0.8        (1.1  

Effect of price changes (%)

     0.8        0.6          

KEY DEVELOPMENTS

  Turnover growth was 4.5% which included a 5.6% positive currency impact and 2.5% negative impact from acquisitions and disposal activities. Underlying sales growth improved to 1.5% (from negative 0.6% in 2014) with both price and volume contributing 0.8%. Savoury showed good volume-driven growth led by cooking products in emerging markets and by innovations around naturalness and health. In dressings, Hellmann’s demonstrated good growth, with 7% underlying sales growth despite increased competition from new market entrants. Spreads gained market share but turnover declined 5%, reflecting market competition in developed markets.
  Core operating profit was up by 49 million despite a profit reduction of 82 million relating to acquisitions and disposal activities. Underlying sales growth added 35 million and the impact of exchange rate movements was a favourable 151 million. In addition, higher supply chain costs led to decline in margins and this reduced profit by 55 million. Brand and marketing investment was up 5%.
 

 

HOME CARE

 

                   %  
      2015      2014      Change  

Turnover ( million)

         10,159              9,164        10.9  

Operating profit ( million)

     740        576        28.5  

Core operating profit ( million)

     775        579        33.9  

Core operating margin (%)

     7.6        6.3        1.3  

Underlying sales growth (%)

     5.9        5.8     

Underlying volume growth (%)

     4.0        2.4     

Effect of price changes (%)

     1.9        3.4           

KEY DEVELOPMENTS

  Home Care turnover grew by 10.9% including a 4.5% favourable currency impact. Underlying sales growth was 5.9%, heavily geared toward volume growth which contributed 4.0%. The category delivered broad-based growth including the roll-out of new Omo with enhanced formulation and improved cleaning technology, the success of fabric conditioners helped by the launch of Comfort Intense, and the introduction of Cif to new markets.
  Core operating profit increased by 196 million including a 22 million increase from exchange rate movement. Underlying sales growth contributed 41 million while improved margin added 133 million. Gross margin was up 2.7 percentage points as a result of improved mix, cost savings and simplification programmes. Brand and marketing investment was up 19%.

REFRESHMENT

 

                   %  
      2015      2014      Change  

Turnover ( million)

         10,120              9,172        10.3  

Operating profit ( million)

     840        538        56.1  

Core operating profit ( million)

     948        811        16.9  

Core operating margin (%)

     9.4        8.8        0.6  

Underlying sales growth (%)

     5.4        3.8     

Underlying volume growth (%)

     1.5        2.0     

Effect of price changes (%)

     3.9        1.8           

KEY DEVELOPMENTS

  Refreshment turnover grew by 10.3% including 4.1% favourable currency impact. In ice cream both Magnum and Ben & Jerry’s delivered double-digit growth contributing to the 5.4% underlying sales growth. We continued to build our presence in the premium gelato business with the acquisitions of Talenti and Grom. In tea more T2 stores opened in 2015 and Lipton and PG Tips were extended further into fruit, herbal and speciality teas.
  Core operating profit was 137 million higher compared with prior year due to exchange rate movements which added 31 million, underlying sales growth which contributed 47 million, operating margin improvement of 53 million and a 6 million increase from acquisitions and disposal activities. Gross margin was up 0.3 percentage points driven by mix and savings in ice cream. Brand and marketing investment was up 8%.
 

 

176      Annual Report on Form 20-F 2016


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FINANCE AND LIQUIDITY

We concentrate cash in the parent and central finance companies for maximum flexibility. These companies provide loans to our subsidiaries that are also funded through retained earnings and third party borrowings. We maintain access to global debt markets through an infrastructure of short and long-term debt programmes. We make use of plain vanilla derivatives, such as interest rate swaps and foreign exchange contracts, to help mitigate risks.

At 31 December 2015 approximately 1.8 billion (or 79%) of the Group’s cash and cash equivalents were held in foreign subsidiaries which repatriate distributable reserves on a regular basis. For most countries this is done through dividends free of tax. In a few countries we face cross-border foreign exchange controls and/or other legal restrictions that inhibit our ability to make these balances available in any means for general use by the wider business. The amount of cash held in these countries at 31 December 2015 was 284 million (2014: 452 million). The cash is generally invested or held in the relevant country and, given the other capital resources available to the Group, does not significantly affect the ability of the Group to meet its cash obligations.

We closely monitor all our exposures and counterparty limits. Unilever has committed credit facilities in place for general corporate purposes. The undrawn bilateral committed credit facilities in place on 31 December were US$6,550 million.

NON-GAAP MEASURES

UNDERLYING SALES GROWTH (USG)

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

 

TOTAL GROUP

    
     2015     2014  
      vs 2014     vs 2013  

Underlying sales growth (%)

     4.1       2.9  

Effect of acquisitions (%)

     0.7       0.4  

Effect of disposals (%)

     (0.8     (1.3

Effect of exchange rates (%)

     5.9       (4.6

Turnover growth (%) (a)

     10.0       (2.7

PERSONAL CARE

    
     2015     2014  
      vs 2014     vs 2013  

Underlying sales growth (%)

     4.1       3.5  

Effect of acquisitions (%)

     1.0       -  

Effect of disposals (%)

     -       (0.1

Effect of exchange rates (%)

     7.6       (5.0

Turnover growth (%) (a)

     13.2       (1.8

FOODS

    
     2015     2014  
      vs 2014     vs 2013  

Underlying sales growth (%)

     1.5       (0.6

Effect of acquisitions (%)

     -       -  

Effect of disposals (%)

     (2.5     (3.6

Effect of exchange rates (%)

     5.6       (3.9

Turnover growth (%) (a)

     4.5       (7.9

HOME CARE

    
     2015     2014  
      vs 2014     vs 2013  

Underlying sales growth (%)

     5.9       5.8  

Effect of acquisitions (%)

     0.2       1.8  

Effect of disposals (%)

     (0.1     -  

Effect of exchange rates (%)

     4.5       (4.8

Turnover growth (%) (a)

     10.9       2.4  

REFRESHMENT

    
     2015     2014  
      vs 2014     vs 2013  

Underlying sales growth (%)

     5.4       3.8  

Effect of acquisitions (%)

     1.3       0.4  

Effect of disposals (%)

     (0.7     (1.6

Effect of exchange rates (%)

     4.1       (4.6

Turnover growth (%) (a)

     10.3       (2.1

 

(a)   Turnover growth is made up of distinct individual growth components, namely underlying sales, currency impact, acquisitions and disposals. Turnover growth is arrived at by multiplying these individual components on a compounded basis as there is a currency impact on each of the other components. Accordingly, turnover growth is more than just the sum of the individual components.

UNDERLYING VOLUME GROWTH (UVG)

The relationship between UVG and USG is set out below:

 

     2015      2014  
      vs 2014      vs 2013  

Underlying volume growth (%)

     2.1        1.0  

Effect of price changes (%)

     1.9        1.9  

Underlying sales growth (%)

     4.1        2.9  

FREE CASH FLOW (FCF)

The reconciliation of FCF to net profit is as follows:

 

      million      million  
      2015     2014  

Net profit

     5,259       5,515  

Taxation

     1,961       2,131  

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

     (198     (143

Net finance cost

     493       477  

Depreciation, amortisation and impairment

     1,370       1,432  

Changes in working capital

     720       8  

Pensions and similar obligations less payments

     (385     (364

Provisions less payments

     (94     32  

Elimination of (profits)/losses on disposals

     26       (1,460

Non-cash charge for share-based compensation

     150       188  

Other adjustments

     49       38  

Cash flow from operating activities

     9,351       7,854  

Income tax paid

     (2,021     (2,311

Net capital expenditure

     (2,074     (2,045

Net interest and preference dividends paid

     (460     (398

Free cash flow

     4,796       3,100  

Net cash flow (used in)/from investing activities

     (3,539     (341

Net cash flow (used in)/from financing activities

     (3,032     (5,190

CORE OPERATING PROFIT AND CORE OPERATING MARGIN

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

 

      million       million  
      2015      2014  

Operating profit

     7,515        7,980  

Acquisition and disposal-related costs

     105        97  

(Gain)/loss on disposal of group companies

     9        (1,392

Impairments and other one-off items

     236        335  

Core operating profit

     7,865        7,020  

Turnover

     53,272        48,436  

Operating margin

     14.1%        16.5%  

Core operating margin

     14.8%        14.5%  

 

 

 

Annual Report on Form 20-F 2016     177


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ADDITIONAL INFORMATION FOR US LISTING PURPOSES CONTINUED

    

    

 

 

NET DEBT

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

 

      million      million  
      2015     2014  

Total financial liabilities

    

 

(14,643

 

 

   

 

(12,722

 

 

Current financial liabilities

     (4,789     (5,536

Non-current financial liabilities

     (9,854     (7,186

Cash and cash equivalents as per balance sheet

     2,302       2,151  

Cash and cash equivalents as per cash flow

     2,128       1,910  

Bank overdrafts deducted therein

     174       241  

Current financial assets

     836       671  

Net debt

     (11,505     (9,900

2014 ACQUISITIONS AND DISPOSALS

On 17 January 2014 the Group sold its Royal pasta brand in the Philippines to RFM Corporation, for US$48 million.

On 7 March 2014 the Group acquired a 55% equity stake in the Qinyuan Group, a leading Chinese water purification business for an undisclosed amount.

On 1 April 2014 the Group completed the sale of its meat snacks business, including the Bifi and Peperami brands, to Jack Link’s for an undisclosed amount.

On 30 June 2014 the Group sold its global Ragú and Bertolli pasta sauce business to Mizkan Group for a total cash consideration of approximately US$2.15 billion.

On 10 July 2014 the Group sold its Slim.Fast brand to Kainos Capital for an undisclosed amount. Unilever retains a minority stake in the business.

On 2 December 2014 the Group acquired Talenti Gelato & Sorbetto for an undisclosed amount.

The Group’s capital expenditure is mainly on purchase of property, plant and equipment as well as acquisition of group companies.

FINANCIAL INSTRUMENTS AND RISK

The key financial instruments used by Unilever are short-term and long-term borrowings, cash and cash equivalents, and certain plain vanilla derivative instruments, principally comprising interest rate swaps and foreign exchange contracts. Treasury processes are governed by standards approved by the Unilever Leadership Executive. Unilever manages a variety of market risks, including the effects of changes in foreign exchange rates, interest rates, commodity costs and liquidity.

OUTLOOK

Our priorities for 2017 continue to be volume growth ahead of our markets, a further increase in core operating margin and strong cash flow. The tough market conditions which made the end of the year particularly challenging are likely to continue in the first half of 2017. Against this background, we expect a slow start with growth improving as the year progresses.

 

 

OTHER INFORMATION ON THE COMPANY

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, either directly or as a result of movements in foreign exchange rates. In 2016 we saw market inflation at low levels relative to recent years, although price rises accelerated through the year, especially in

crude oil and some soft commodities, notably butter and other dairy products. Foreign exchange volatility exacerbated this inflation, especially in Latin America, parts of Africa and the Middle East and Brexit in the UK.

Looking ahead to 2017 we remain watchful for continued turbulence in foreign exchange markets and for steadily increasing rates of inflation in key commodities, particularly crude oil where the exceptionally low prices seen in early 2016 mean that year-on-year increases for 2017 as a whole are likely to be significant.

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 fast-moving consumer goods (FMCG) 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 2016, sales in Iran were significantly less than one percent of Unilever’s worldwide turnover. During the year, Unilever did not have any gross revenues or net profits derived from transactions with the Government of Iran or affiliated entities. 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 with various banks 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 we plan to continue these activities.

PROPERTY, PLANT AND EQUIPMENT

We have interests in properties in most of the countries where there are Unilever operations. However, none are 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.

 

 

178      Annual Report on Form 20-F 2016


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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 Unilever Group (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; the effect of climate change on Unilever’s business; financial risks; failure to meet high and ethical standards; and managing regulatory, tax and legal matters.

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.

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 Unilever Annual Report and Accounts 2016.

This document is not prepared in accordance with US GAAP and should not therefore be relied upon by readers as such.

In addition, a printed copy of the Annual Report on Form 20-F 2016 is available, free of charge, upon request to Unilever, Investor Relations Department, 100 Victoria Embankment, London EC4Y 0DY, United Kingdom.

This document comprises regulated information within the meaning of Sections 1:1 and 5:25c of the Act on Financial Supervision (‘Wet op het financieel toezicht (Wft)’) in the Netherlands.

The brand names shown in this report are trademarks owned by or licensed to companies within the Group.

References in this document to information on websites (and/or social media sites) are included as an aid to their location and such information is not incorporated in, and does not form part of, the Annual Report on Form 20-F 2016.

Designed and produced by Unilever Communications.

Printed at Pureprint Group, ISO 14001. FSC ® certified and CarbonNeutral ® .

This document is printed on Revive 100% Recycled Silk. These papers have been exclusively supplied by Denmaur Independent Papers which has offset the carbon produced by the production and delivery of them to the printer.

These papers are 100% recycled and manufactured using de-inked post-consumer waste. All the pulp is bleached using an elemental chlorine free process (ECF). Printed in the UK by Pureprint using its alcofree ® and pureprint ® environmental printing technology. Vegetable inks were used throughout. Pureprint is a CarbonNeutral ® company. Both the manufacturing mill and the printer are registered to the Environmental Management System ISO 14001 and are Forest Stewardship Council ® (FSC) chain-of-custody certified.

If you have finished with this document and no longer wish to retain it, please pass it on to other interested readers or dispose of it in your recycled paper waste. Thank you.


Table of Contents

 

UNILEVER N.V.    UNILEVER PLC
Head Office and Registered Office    Head Office
Weena 455, PO Box 760    100 Victoria Embankment
3000 DK Rotterdam    London EC4Y 0DY
The Netherlands    United Kingdom
T +31 (0)10 217 4000    T +44 (0)20 7822 5252
Commercial Register Rotterdam    Registered Office
Number: 24051830    Unilever PLC
   Port Sunlight
   Wirral
   Merseyside CH62 4ZD
   United Kingdom
   Registered in England and Wales Company Number: 41424

FOR FURTHER INFORMATION ABOUT

UNILEVER PLEASE VISIT OUR WEBSITE:

WWW.UNILEVER.COM

 

 


Table of Contents

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this Annual Report on its behalf.

Unilever PLC.

(Registrant)

 

/s/ T. E. Lovell

T. E. LOVELL,
Group Secretary

Date: 28 February 2017


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UNILEVER PLC — 20-F EXHIBIT LIST

 

Exhibit Number   Description of Exhibit
1.1   Articles of Association of Unilever PLC 1
2.1   Trust Deed dated as of July 22, 1994, among Unilever N.V., Unilever PLC, Unilever Capital Corporation, Unilever United States, Inc. and The Law Debenture Trust Corporation p.l.c., relating to Guaranteed Debt Securities 2
2.2   Twenty-first Supplemental Trust Deed as of April 22, 2016, incorporating the Trust Deed as of July 22, 1994, as Amended and Restated on April 22, 2016
2.3   Amended and Restated Indenture as of September 22, 2014, among Unilever Capital Corporation, Unilever N,V. Unilever PLC, Unilever United States, Inc. and The Bank of New York Mellon, as Trustee, relating to Guaranteed Debt Securities 3
2.4   Second Amended and Restated Deposit Agreement dated as of July 1, 2014 by and among Unilever PLC and Deutsche Bank Trust Company Americas, as Depositary, and the Holders and Beneficial Owners of American Depositary Shares issued thereunder 4
4.1(a)   Equalisation Agreement between Unilever N.V. and Unilever PLC 5
4.1(b)   Deed of Mutual Covenants 6
4.1(c)   Agreement for Mutual Guarantees of Borrowing 7
4.2   Service Contracts of the Executive Directors of Unilever PLC 8
4.3   Letters regarding compensation of Executive Directors of Unilever PLC
4.4   Unilever North America 2002 Omnibus Equity Compensation Plan as Amended and Restated as of November 1, 2012 9
4.5   The Unilever PLC International 1997 Executive Share Option Scheme 10
4.6   The Unilever Long Term Incentive Plan 11
4.7   Global Share Incentive Plan 2007 12
4.8   The Management Co-Investment Plan 13
7.1   Calculation of Ratio of Earnings to Fixed Charges
8.1   List of Subsidiaries 14
12.1   Certifications of the Chief Executive Officer and Financial Director/Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1   Certifications of the Chief Executive Officer and Financial Director/Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1   Consent of KPMG LLP and KPMG Accountants N.V.


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Certain instruments which define rights of holders of long-term debt of the Company and its subsidiaries are not being filed because the total amount of securities authorized under each such instrument does not exceed 10% of the total consolidated assets of the Company and its subsidiaries. The Company and its subsidiaries hereby agree to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.

 

1   Incorporated by reference to Exhibit 1.1 of Form 20-F (File No: 001-04546) filed with the SEC on March 08, 2013.
2   Incorporated by reference to Exhibit 2.2 of Form 20-F (File No: 001-04546) filed with the SEC on March 28, 2002.
3  

Incorporated by reference to Exhibit 2.3 of Form 20-F (File No: 333-196985) filed with the SEC on March 6, 2015.

4   Incorporated by reference to Exhibit 99(A) of Form F-6 (File No: 001-04546) filed with the SEC on June 24, 2014.
5  

Incorporated by reference to Exhibit 4.1 of Form 20-F (File No: 001-04546) filed with the SEC on March 5, 2010.

6   Incorporated by reference to Exhibit 4.1(b) of Form 20-F (File No: 001-04546) filed with the SEC on March 6, 2015.
7  

Incorporated by reference to Exhibit 4.1(c) of Form 20-F (File No: 001-04546) filed with the SEC on March 6, 2015.

8   Incorporated by reference to Exhibit 4.2 of Form 20-F (File No: 001-04546) filed with the SEC on March 4, 2011.
9   Incorporated by reference to Exhibit 99.1 of Form S-8 (File No: 333-185299) filed with the SEC on December 6, 2012.
10   Incorporated by reference to Exhibit 4.5 of Form 20-F (File No: 001-04546) filed with the SEC on March 28, 2002.
11   Incorporated by reference to Exhibit 4.7 of Form 20-F (File No: 001-04546) filed with the SEC on March 28, 2002.
12   Incorporated by reference to Exhibit 4.7 of Form 20-F (File No: 001-04546) filed with the SEC on March 26, 2008.
13   Incorporated by reference to Exhibit 4.8 of Form 20-F (File No: 001-04546) filed with the SEC on March 4, 2011.
14   The required information is set forth on pages 131 to 143 of the Annual Report on Form 20-F 2016.

Exhibit 2.2

CONFORMED COPY

Dated 22 April 2016

UNILEVER N.V.

and

UNILEVER PLC

and

UNILEVER JAPAN HOLDINGS K.K.

and

UNILEVER UNITED STATES, INC.

and

THE LAW DEBENTURE TRUST CORPORATION P.L.C.

TWENTY-FIRST SUPPLEMENTAL TRUST DEED

relating to a U.S.$15,000,000,000

Debt Issuance Programme

 

LOGO

Ref: EXM/SW

Linklaters LLP

 


This Twenty-First Supplemental Trust Deed is made 22 April 2016 between :

 

(1) UNILEVER N.V. (“ N.V. ”), a company incorporated under the laws of The Netherlands, whose corporate seat is in Rotterdam and its address at Weena 455, 3013 AL, Rotterdam, The Netherlands, UNILEVER PLC (“ PLC ”), a company incorporated under the laws of England, whose registered office is at Port Sunlight, Wirral, Merseyside CH62 4UJ, United Kingdom, UNILEVER JAPAN HOLDINGS K.K. , a company incorporated under the laws of Japan, whose registered office is at 1-1, Kamimeguro 2-chome, Meguro-ku, Tokyo 153-8578, Japan and UNILEVER UNITED STATES, INC. (“ UNUS ”), a company incorporated under the laws of the State of Delaware, United States of America, whose registered office is at 1209 Orange Street, Wilmington, Delaware 19801, United States of America; and

 

(2) THE LAW DEBENTURE TRUST CORPORATION p.l.c. , a company incorporated under the laws of England, whose registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX, United Kingdom (the “ Trustee ”, which expression shall, wherever the context so admits, include any other trustee or trustees for the time being of these presents).

Whereas :

 

(A) This Deed is supplemental to the Trust Deed dated 22 July 1994 made between the parties hereto (the “ Principal Trust Deed ”) as amended by the First Supplemental Trust Deed dated 24 July 1995, the Second Supplemental Trust Deed dated 11 July 1996, the Third Supplemental Trust Deed dated 13 November 1997, the Fourth Supplemental Trust Deed dated 11 November 1998, the Fifth Supplemental Trust Deed dated 4 July 2000, the Sixth Supplemental Trust Deed dated 2 July 2001, the Seventh Supplemental Trust Deed dated 1 July 2002 the Eighth Supplemental Trust Deed dated 27 June 2003, the Ninth Supplemental Trust Deed dated 2 June 2004, the Tenth Supplemental Trust Deed dated 10 August 2005, the Eleventh Supplemental Trust Deed dated 15 May 2007, the Twelfth Supplemental Trust Deed dated 13 May 2008, the Thirteenth Supplemental Trust Deed dated 11 May 2009, the Fourteenth Supplemental Trust Deed dated 6 May 2010, the Fifteenth Supplemental Trust Deed dated 5 May 2011, the Sixteenth Supplemental Trust Deed dated 4 May 2012, the Seventeenth Supplemental Trust Deed dated 3 May 2013, the Nineteenth Supplemental Trust Deed dated 2 May 2014 and the Twentieth Supplemental Trust Deed dated 1 May 2015.

 

(B) The parties of the first part hereto desire to modify certain provisions of the Principal Trust Deed, as amended.

Now this Twenty-First Supplemental Trust Deed witnesses and it is agreed and declared as follows:

 

1 Definitions

All expressions defined in the Principal Trust Deed shall, unless there is anything in the subject or context inconsistent therewith, have the same meanings in this Twenty-First Supplemental Trust Deed.

 

2 The Trust Deed

 

  (A) The Principal Trust Deed is hereby amended and restated as of the effective date hereof and as set out in Clause 3 below and shall henceforth be read and construed as one document in the form set out in the Schedule to this Twenty-First Supplemental Trust Deed.

 

    

 

2

    


  (B) Save to the extent specifically referred to in this Twenty-First Supplemental Trust Deed, nothing contained in this Twenty-First Supplemental Trust Deed shall be construed as a waiver, variation, modification or amendment of the provisions of the Principal Trust Deed and the Principal Trust Deed, all issued Notes, all issued Coupons and all issued Receipts shall continue in full force and effect. For the avoidance of doubt, this Twenty-First Supplemental Trust Deed only governs Notes issued after the date hereof.

 

3 Effectiveness

The amendments to the Principal Trust Deed effected by this Twenty-First Supplemental Trust Deed shall take effect on the date of execution by the last party to this Twenty-First Supplemental Trust Deed.

 

4 Notices

Pursuant to Clause 17(A) of the Principal Trust Deed, the Trustee hereby agrees that notice of the execution of this Twenty-First Supplemental Trust Deed need not be given to the Noteholders in accordance with Condition 14 of the Notes.

 

5 Counterparts

This Twenty-First Supplemental Trust Deed may be executed in any number of counterparts, each of which shall be identical and all of which, when taken together, shall constitute one and the same instrument and any one of the parties hereby may execute this Twenty-First Supplemental Trust Deed by signing any such counterpart.

 

6 Rights of Third Parties

The parties to this Twenty-First Supplemental Trust Deed do not intend that any term of this Twenty-First Supplemental Trust Deed should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Twenty-First Supplemental Trust Deed.

 

7 Governing Law

This Twenty-First Supplemental Trust Deed, and any non-contractual obligations arising out of or in connection with it, is governed by, and shall be construed in accordance with, the laws of England and the provisions relating to jurisdiction contained in Clause 34 of the Principal Trust Deed shall apply, mutatis mutandis , hereto.

 

    

 

3

    


In witness whereof this Twenty-First Supplemental Trust Deed has been executed as a deed by the parties hereto and is intended to be and is hereby delivered on the date first above written.

 

EXECUTED as a DEED by

UNILEVER PLC

acting by:

  LOGO   

/s/ R C Hazell

R.C. HAZELL

in the presence of:

 

Witness’s signature

    
Name     

/s/ Spenta Magol

SPENTA MAGOL

Address     

100 VICTORIA EMBANKMENT

BLACKFRIARS

LONDON EC4Y 0DY

Occupation      CHARTERED SECRETARY

 

EXECUTED as a DEED

UNILEVER N.V.

(having its corporate seat in

Rotterdam, The Netherlands)

acting by

  LOGO   

in the capacity as Duly

Authorised Attorney under its

authority acting by:

    

/s/ R C Hazell

R.C. HAZELL

 

    

 

4

    


EXECUTED as a DEED by the

said UNILEVER JAPAN

HOLDINGS K.K.

  LOGO   

acting by

 

under its authority:

    

/s/ R C Hazell

R.C. HAZELL

 

EXECUTED as a DEED by the

said UNILEVER UNITED

STATES, INC.

  LOGO   

acting by

 

under its authority:

    

/s/ R C Hazell

R.C. HAZELL

 

    

 

5

    


THE COMMON SEAL of THE

LAW DEBENTURE TRUST

CORPORATION P.L.C. was

affixed to this deed

 

LOGO

  
in the presence of:     

Director:

    

/s/ Julian Mason-Jebb

JULIAN MASON-JEBB

Authorised signatory:

    

/s/ Sonal Ambasna

SONAL AMBASNA

 

    

 

6

    


SCHEDULE

Dated 22 July 1994

as amended and restated on 22 April 2016

UNILEVER N.V.

and

UNILEVER PLC

and

UNILEVER JAPAN HOLDINGS K.K.

and

UNILEVER UNITED STATES, INC.

and

THE LAW DEBENTURE TRUST CORPORATION P.L.C.

TWENTY FIRST SUPPLEMENTAL TRUST DEED

relating to a U.S.$15,000,000,000 Debt Issuance Programme

(as amended by the First Supplemental Trust Deed dated

24 July 1995 the Second Supplemental Trust Deed

dated 11 July 1996, the Third Supplemental Trust Deed

dated 13 November 1997, the Fourth Supplemental Trust Deed

dated 11 November 1998, the Fifth Supplemental

Deed dated 4 July 2000, the Sixth Supplemental Trust

Deed dated 2 July 2001, the Seventh Supplemental

Trust Deed dated 1 July 2002, the Eighth Supplemental

Trust Deed dated 27 June 2003, the Ninth Supplemental

Trust Deed dated 2 June, 2004, the Tenth Supplemental

Trust Deed dated 10 August 2005, the Eleventh

Supplemental Trust Deed dated 15 May 2007, the

Twelfth Supplemental Trust Deed dated 13 May 2008, the

Thirteenth Supplemental Trust Deed dated 11 May 2009,

the Fourteenth Supplemental Trust Deed dated 6 May

2010, the Fifteenth Supplemental Trust Deed dated 5 May

2011, the Sixteenth Supplemental Trust Deed dated

4 May 2012, the Seventeenth Supplemental Trust Deed

dated 3 May 2013, the Nineteenth Supplemental Trust Deed

dated 2 May 2014, the Twentieth Supplemental Trust Deed dated 1 May 2015

and the Twenty-First Supplemental Trust Deed dated 22 April 2016)

 

LOGO

Ref: EXM/SW

Linklaters LLP

 

    

 

i

    


Table of Contents

 

Contents    Page  
1    Definitions      1   
2    Amount of the Notes      11   
3    Covenant to repay and to pay interest      12   
4    Issue and constitution of Notes      14   
5    Forms and issue of the Notes      15   
6    Stamp Duties      17   
7    Covenant to observe provisions of the Trust Deed and Schedules      18   
8    Guarantee      18   
9    Application of moneys received by the Trustee      20   
10    Power to retain and invest less than 10 per cent.      21   
11    Authorised investments      21   
12    Indemnification of the Trustee upon enforcement      21   
13    Payment to Noteholders, Receiptholders and Couponholders      22   
14    Production of Notes, Receipts and Coupons      22   
15    Covenants by the Issuers and the Guarantors      22   
16    Remuneration of the Trustee      25   
17    Modifications and Substitution      27   
18    Redemption, Purchase and Cancellation      31   
19    Noteholders to be treated as holding all Receipts and Coupons      32   
20    No notice to Receiptholders or Couponholders      33   
21    Trustee may enter into other transactions with N.V., PLC or any of their group companies      33   
22    Provisions supplemental to the Trustee Act 1925 and the Trustee Act 2000 in favour of the Trustee      33   
23    Disapplication      36   
24    Trustee entitled to assume due performance      36   
25    Waiver      37   
26    Power to delegate      37   

 

    

 

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27    Competence of a majority of Trustees      37   
28    Appointment of New Trustees      38   
29    Retirement of Trustees      38   
30    Powers of the Trustee are additional      39   
31    Currency Indemnity      39   
32    Notices      39   
33    Contracts (Rights of Third Parties) Act 1999      41   
34    Governing Law      41   
The First Schedule Form of Temporary Global Note      43   
The Second Schedule Form of Permanent Global Note      56   
The Third Schedule Form of Definitive Note      64   
The Fourth Schedule Terms and Conditions of the Notes      80   
The Fifth Schedule Form of Supplemental Deed increasing Programme Limit      113   
The Sixth Schedule Form of Supplemental Deed joining a New Issuer      114   
The Seventh Schedule Form of Supplemental Deed releasing an Issuer      118   
The Eighth Schedule Provisions for Meetings of Holders of Notes      120   

 

    

 

ii

    


This Trust Deed is made on the 22nd day of July, 1994 and amended and restated on 22 April 2016 between :

 

(1) UNILEVER N.V. (“ N.V. ”), a company incorporated under the laws of The Netherlands, whose corporate seat is in Rotterdam and its address at Weena 455, 3013 AL, Rotterdam, The Netherlands, UNILEVER PLC (“ PLC ”), a company incorporated under the laws of England, whose registered office is at Port Sunlight, Wirral, Merseyside CH62 4UJ, United Kingdom, UNILEVER JAPAN HOLDINGS K.K. (“ UJH ”), a company incorporated under the laws of Japan, whose registered office is at 1-1, Kamimeguro 2-chome, Meguro-ku, Tokyo 153-8578, Japan and UNILEVER UNITED STATES, INC. (“ UNUS ”), a company incorporated under the laws of the State of Delaware, United States of America, whose registered office is at 1209 Orange Street, Wilmington, Delaware 19801, United States of America; and

 

(2) THE LAW DEBENTURE TRUST CORPORATION p.l.c. , a company incorporated under the laws of England, whose registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX, United Kingdom (hereinafter called the “ Trustee ”, which expression shall, wherever the context so admits, include any other trustee or trustees for the time being of these presents).

Whereas :

 

(A) N.V., PLC, UJH and UNUS have authorised the establishment of a programme for the issuance of debt instruments (the “ Programme ”) to be constituted in the manner hereinafter appearing.

 

(B) N.V., PLC, UJH and UNUS have duly authorised the issue of a maximum aggregate principal amount of U.S.$15,000,000,000 (or its equivalent in other currencies) (or such greater amount as shall be established pursuant to Clause 2(B) hereof) of notes outstanding under the Programme (the “ Programme Limit ”).

 

(C) Each issue will be represented by notes issued in bearer form.

 

(D) Pursuant to powers contained in their constitutional documents, N.V., PLC, UJH and UNUS have duly authorised the execution of these presents as the principal instrument subject to which Notes (as defined below) may from time to time be issued by any of the Issuers (as defined below) and constituted.

 

(E) Each of the Guarantors (as defined below) has agreed to guarantee in the manner hereinafter appearing such obligations of the Issuers as are hereinafter specified and in respect of whose obligations under these presents and under the Notes the relevant Guarantor has given its guarantee hereunder.

 

(F) The Law Debenture Trust Corporation p.l.c. has agreed to act as trustee of these presents for the Noteholders and the Couponholders upon the terms and subject to the conditions hereinafter contained.

Now this deed witnesseth and it is hereby declared as follows:

 

1 Definitions

 

  (A) In these presents (including the recitals), unless there is something in the subject or context inconsistent therewith, the expressions following shall have the meanings hereinafter mentioned (that is to say):

 

    

 

1

    


Auditors ” means the auditors for the time being respectively of N.V., PLC, UJH and UNUS as the case may be, and, in the case of joint auditors, the joint auditors thereof or in the event of their being unable or unwilling to carry out any action requested of them pursuant to the terms of these presents, such other firm of accountants as may be nominated or approved by the Trustee for the purpose;

Calculation Agency Agreement ” means any agreement made between the relevant Issuer, the relevant Guarantors, the Trustee and the Calculation Agent in the form, or substantially in the form of the Calculation Agency Agreement set out in the first schedule to the Paying Agency Agreement;

Calculation Agent means the institution appointed as such by the relevant Issuer and relevant Guarantors with the prior approval of the Trustee for any Series of Notes issued by such Issuer and specified in the relevant Final Terms;

CGN ” means a Note in global form which is not a New Global Note, as so specified in the Final Terms relating to the applicable Tranche;

Clearstream, Luxembourg ” means Clearstream Banking, société anonyme ;

Common Safekeeper ” means an ICSD or such person as may be nominated by the ICSDs to act as common safekeeper;

Conditions ” means:

in relation to any Tranche of Notes issued prior to the First Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed prior to its amendment by the First Supplemental Trust Deed;

in relation to any Tranche of Notes issued on or after the First Effective Date but before the Second Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Schedule to the First Supplemental Trust Deed;

in relation to any Tranche of Notes issued on or after the Second Effective Date but before the Third Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Second Effective Date;

in relation to any Tranche of Notes issued on or after the Third Effective Date but before the Fourth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Third Effective Date;

in relation to any Tranche of Notes issued on or after the Fourth Effective Date but before the Fifth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Fourth Effective Date;

in relation to any Tranche of Notes issued on or after the Fifth Effective Date but before the Sixth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Fifth Effective Date;

in relation to any Tranche of Notes issued on or after the Sixth Effective Date but before the Seventh Effective Date, the terms and conditions applicable thereto, in the form or substantially in

 

    

 

2

    


the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Sixth Effective Date;

in relation to any Tranche of Notes issued on or after the Seventh Effective Date but before the Eighth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Seventh Effective Date;

in relation to any Tranche of Notes issued on or after the Eighth Effective Date but before the Ninth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Eighth Effective Date;

in relation to any Tranche of Notes issued on or after the Ninth Effective Date, but before the Tenth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Ninth Effective Date;

in relation to any Tranche of Notes issued on or after the Tenth Effective Date, but before the Eleventh Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Tenth Effective Date;

in relation to any Tranche of Notes issued on or after the Eleventh Effective Date, but before the Twelfth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Eleventh Effective Date;

in relation to any Tranche of Notes issued on or after the Twelfth Effective Date, but before the Thirteenth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Twelfth Effective Date;

in relation to any Tranche of Notes issued on or after the Thirteenth Effective Date, but before the Fourteenth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Thirteenth Effective Date;

in relation to any Tranche of Notes issued on or after the Fourteenth Effective Date, but before the Fifteenth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Fourteenth Effective Date;

in relation to any Tranche of Notes issued on or after the Fifteenth Effective Date, but before the Sixteenth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Fifteenth Effective Date;

in relation to any Tranche of Notes issued on or after the Sixteenth Effective Date, but before the Seventeenth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Sixteenth Effective Date;

in relation to any Tranche of Notes issued on or after the Seventeenth Effective Date, but before the Eighteenth Effective date, the terms and conditions applicable thereto, in the form or

 

    

 

3

    


substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Seventeenth Effective Date;

in relation to any Tranche of Notes issued on or after the Eighteenth Effective Date, but before the Nineteenth Effective date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Eighteenth Effective Date; and

in relation to any Tranche of Notes issued on or after the Nineteenth Effective Date, the terms and conditions applicable thereto, in the form or substantially in the form set out in the Fourth Schedule to this Trust Deed as amended and restated on the Nineteenth Effective Date,

in each case, as the same may have been or may be supplemented as described in the Final Terms relating to such Tranche, and as the same may, from time to time, be altered in accordance with the provisions of these presents, and any reference in these presents to a particular numbered Condition shall be construed in relation to such Tranche as a reference to the provision (if any) in the Conditions thereof which corresponds to the particular numbered Condition in the Conditions applicable to such Tranche;

Couponholders ” means the several persons who are for the time being Holders of Coupons;

Coupons ” means the bearer interest coupons (if any) appertaining to Notes or, as the context may require, a specific number thereof and includes any replacement Coupon or Coupons issued pursuant to Condition 13 and, unless the context otherwise requires, includes the Talons, such Coupons being, if appertaining to a Fixed Rate Note, substantially in the form set out in Part B of the Third Schedule or, if appertaining to a Floating Rate Note, substantially in the form set out in Part C of the Third Schedule;

Dealer ” means any person or institution appointed as such pursuant to the Dealer Agreement;

Dealer Agreement ” means the dealer agreement dated 22 July 1994 between, inter alia , the Issuers, the Guarantors and the Dealers, the terms of which (as novated, amended, amended and restated, varied or supplemented from time to time) are incorporated into any sale and purchase agreement relating to Notes reached between the relevant Issuer, the relevant Guarantors and any Dealer(s);

Definitive Note ” means a definitive Note issued or, as the case may require, to be issued by the relevant Issuer in exchange for a Temporary Global Note or a Permanent Global Note or part thereof, such Definitive Note being substantially in the form set out in Part A of the Third Schedule hereto with such modifications as may be agreed between the relevant Issuer, the relevant Guarantors, the Principal Paying Agent, the Trustee and the relevant Dealer(s) and having (where so specified in the relevant Final Terms) Coupons attached thereto on issue;

Eighteenth Effective Date ” means 1 May 2015;

Eighth Effective Date ” means 2 June 2004;

Eleventh Effective Date ” means 13 May 2008;

 

    

 

4

    


euro means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended;

Euroclear ” means Euroclear Bank S.A./N.V.;

Eurosystem ” means the central banking system for the Euro;

Eurosystem-eligible NGN ” means a NGN which is intended to be held in a manner which would allow Eurosystem eligibility, as stated in the Final Terms relating to the applicable Tranche;

Event of Default ” means any of the events listed in Condition 10 upon the happening of which any Series of the Notes would (subject only to notice by the Trustee as provided in that Condition) become immediately due and repayable;

Extraordinary Resolution ” has the meaning set out in paragraph 20 of the Eighth Schedule;

Fifteenth Effective Date ” means 4 May 2012;

Fifth Effective Date ” means 2 July 2001;

Final Terms ” means, in relation to a Tranche, a Final Terms or Pricing Supplement duly executed by the relevant Issuer, referring to this Trust Deed and specifying the relevant provisions of such Tranche (including any changes to the Conditions);

First Effective Date ” means 24 July 1995;

First Supplemental Trust Deed means the first supplemental trust deed dated 24 July 1995 and made between the same parties as are party hereto;

Fixed Rate Notes means Notes on which interest is calculated at a fixed rate payable in arrear on such dates as are specified in the relevant Final Terms;

Floating Rate Notes ” means Notes on which interest is calculated at a floating rate payable at intervals of such period of months as are specified in the relevant Final Terms;

Fourteenth Effective Date ” means 5 May 2011;

Fourth Effective Date ” means 4 July 2000;

Group Company ” means, in relation to N.V. and PLC, those companies required to be consolidated in accordance with Netherlands and United Kingdom legislative requirements relating to consolidated accounts and, for the avoidance of doubt, N.V. and PLC together constitute a single group for the purpose of meeting Netherlands and United Kingdom requirements for consolidated accounts;

Guarantee ” means the guarantees contained in these presents pursuant to which the Notes issued by (i) N.V. are guaranteed unconditionally and irrevocably on a joint and several basis by PLC and UNUS, (ii) PLC are guaranteed unconditionally and irrevocably on a joint and several basis by N.V. and UNUS and (iii) UJH are guaranteed unconditionally and irrevocably on a joint and several basis by PLC and N.V.;

 

    

 

5

    


Guarantors ” means N.V., PLC and UNUS and any company which, pursuant to Clause 17, has become a Guarantor but excluding any such company which has ceased to be a Guarantor, and “ Guarantor ” means any of them;

ICSD Direct Agreement ” means an agreement between the ICSDs and an Issuer in respect of New Global Notes that such Issuer may request be made eligible for settlement with the ICSDs;

ICSDs ” means Euroclear and Clearsteam, Luxembourg;

Instalment Note ” means a Note, the principal amount of which is repayable by instalments;

Interest Basis ” means the basis on which the relevant Notes will bear interest (which may be a fixed or floating rate or on a zero coupon basis);

Issue Date ” means, in respect of any Note, the date of issue and purchase thereof pursuant to, and in accordance with, the Paying Agency Agreement, being, in the case of any Note in the form of a Permanent Global Note or a Definitive Note, the same date as the date of issue of the Temporary Global Note which initially represented such Note;

Issuers ” means, at any time, the Original Issuers and any other company which, pursuant to Clause 17, has become an Issuer but excluding any such company which has ceased to be an Issuer, and “ Issuer ” means any of them;

Maturity Date ” means, in respect of any Note, the date (if any) on which it is due to be redeemed in accordance with the provisions of Condition 7;

month ” means calendar month;

Ninth Effective Date ” means 10 August 2005;

Nineteenth Effective Date ” means 22 April 2016;

NGN ” or “ New Global Note ” means a Note in global form which is a new global note, as so specified in the applicable Final Terms;

Non-eligible NGN ” means a NGN which is not intended to be held in a manner which would allow Eurosystem eligibility, as stated in the applicable Final Terms;

Note ” means a note in bearer form ( provided that the minimum maturity and/or the maximum maturity (as the case may be) shall comply with all applicable legal and regulatory requirements of the jurisdiction of the currency in which the relevant Notes are denominated), the actual maturity (if any) being specified in the relevant Final Terms, issued or to be issued by any of the Issuers pursuant to the Dealer Agreement and shall be in, or substantially in, the relevant form set out in the relevant Schedule, which shall initially be represented by, and comprised in, a Temporary Global Note. Any Temporary Global Note may (in accordance with the terms of such Temporary Global Note) be exchanged for Definitive Notes (if so specified in the relevant Final Terms) and otherwise for a Permanent Global Note which, in turn, may (in accordance with the terms of such Permanent Global Note) be exchanged for Definitive Notes;

Noteholders ” means the several persons who are for the time being Holders of outstanding Notes save that, in respect of the Notes of any Series, so long as such

 

    

 

6

    


Notes or any part thereof are represented by Notes in global form, each person who is for the time being shown in the records of an ICSD or any other relevant clearing system (other than Clearstream, Luxembourg, if Clearstream, Luxembourg shall be an accountholder of Euroclear or such other relevant clearing system, and Euroclear, if Euroclear shall be an accountholder of Clearstream, Luxembourg or such other relevant clearing system) as the Holder of a particular nominal amount of the Notes of such Series (in which regard any certificate or other document or such other evidence and/or information and/or certification issued by an ICSD or such other relevant clearing system or any form of record made by any of them as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest or proven error) shall, for the purpose only of the exercise by the Trustee of all rights, duties, discretions, powers and authorities imposed or conferred on the Trustee which are to be exercised or performed by reference to, or in favour of, the Noteholders but not for any other purpose, be deemed to be and shall be treated as the Holder of such nominal amount of such Notes; and the expressions “ Noteholder ”, “ Holder of Notes ” and related expressions shall be construed accordingly;

Notes in global form ” means Notes represented by a Temporary Global Note or a Permanent Global Note;

Original Issuers ” means N.V., PLC and UJH and “ Original Issuer ” means any of them;

outstanding ” means, in relation to the Notes, all the Notes other than:

 

  (i) those which have been redeemed in accordance with these presents or the Conditions;

 

  (ii) those in respect of which the date for redemption (including, but not limited to, the due date for payment of the final instalment in respect of an Instalment Note) in accordance with the provisions of these presents or the Conditions has occurred and the redemption moneys wherefore (including premium (if any) and all interest in respect thereof) have been duly paid to the Trustee in the manner provided in these presents, or to the Principal Paying Agent in the manner provided in the Paying Agency Agreement (and, where appropriate, notice to that effect has been given to the relative Noteholders in accordance with Condition 14) and remain available for payment against presentation of those Notes, Receipts and/or Coupons (as the case may be);

 

  (iii) those which have become void under Condition 12;

 

  (iv) those which have been purchased by any of the Issuers, the Guarantors or any Group Company as provided in Condition 7 and not resold;

 

  (v) those mutilated or defaced Notes which have been surrendered and cancelled and in respect of which replacement Notes have been issued pursuant to Condition 13;

 

  (vi) (for the purpose only of ascertaining the amount of the Notes outstanding and without prejudice to the status for any other purpose of the Notes) those Notes which are alleged to have been lost, stolen or destroyed and in respect of which replacements have been issued pursuant to Condition 13;

 

    

 

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  (vii) any Temporary Global Note to the extent that it has been exchanged for the relative Permanent Global Note or, as the case may be, the relative Definitive Notes pursuant to its provisions; and

 

  (viii) any Permanent Global Note to the extent that it has been exchanged for the relative Definitive Notes pursuant to its provisions;

Paying Agency Agreement ” means the paying agency agreement dated 22 July 1994 made between the Issuers, the Guarantors and the various agents named therein and the Trustee (as amended, restated or supplemented from time to time) and includes any other agreement the terms of which have been previously approved by the Trustee in writing appointing further or other Paying Agents or appointing any other Principal Paying Agent or amending the terms of any such appointment;

Paying Agents ” means the several institutions (including, where the context permits or requires, the Principal Paying Agent) at their respective specified offices named as such in the Third Schedule or at such other offices as are notified to the Noteholders in accordance with the Paying Agency Agreement or such other or further specified paying agents for all or any Series of Notes, Receipts or Coupons as may from time to time be appointed in respect thereof by the relevant Issuer and the relevant Guarantors with the prior approval of the Trustee in writing and (in respect only of any Series already issued and remaining outstanding at the time of such appointment) notice of whose appointment is given to the Noteholders of such Series in accordance with Condition 14;

Permanent Global Note ” means a global note substantially in the form set out in the Second Schedule with such modifications (if any) as may be agreed between the relevant Issuer, the relevant Guarantors, the Principal Paying Agent, the Trustee and the relevant Dealer(s), comprising Notes of a single Tranche issued or, as the case may require, to be issued by the relevant Issuer pursuant to the Dealer Agreement or any other agreement and these presents in exchange for the whole or part of the Temporary Global Note issued in respect of the Notes of such Tranche;

Principal Paying Agent ” means Deutsche Bank AG, London Branch at its office at Winchester House, 1 Great Winchester Street, London EC2N 2DB, United Kingdom or such other principal paying agent for Notes, Receipts and Coupons of all or any Series as may from time to time be appointed by the relevant Issuer and the relevant Guarantors with the prior approval of the Trustee in writing and (in respect only of any Series already issued and remaining outstanding at the time of such appointment) notice of whose appointment has been given to the Noteholders of such Series in accordance with Condition 14;

Procedures ” means the written administrative procedures and guidelines relating to the terms of Notes which may be issued and the settlement of issues of Notes as shall be agreed upon from time to time by the Issuers, the Guarantors, the Dealers, the Principal Paying Agent and the Trustee;

Receipt ” means a receipt for payment of instalments of principal attached to an Instalment Note, such Receipt being in, or substantially in, the form set out in Part E of the Third Schedule hereto or in such form as the relevant Issuer, the relevant

 

    

 

8

    


Guarantors, the Principal Paying Agent, the Trustee and the relevant Dealer(s) may agree and includes any replacement Receipt issued pursuant to Condition 13;

Relevant Date ” means, in respect of any payment, the date on which such payment first becomes due and payable, but if the full amount of the moneys payable has not been made available to the Trustee or the Principal Paying Agent, as the case may be, on or prior to such due date, it means the first date on which, the full amount of such moneys having been so made available, notice to that effect shall have been duly given to the Holders of Notes of the relevant Series in accordance with Condition 14;

Relevant Guarantors ” means, in respect of an issue of Notes (i) by N.V., PLC and UNUS, (ii) by PLC, N.V. and UNUS and (iii) by UJH, N.V. and PLC;

repay ” shall include “ redeem ” and vice versa and “ repaid ”, “ repayable ” and “ repayment” and “ redeemed ”, redeemable ” and “ redemption ” shall be construed accordingly;

Requisite Currency ” means, in relation to any Notes, the currency in which such Notes are denominated;

Second Effective Date ” means 13 November 1997;

Securities Act ” means the United States Securities Act of 1933, as amended;

Series ” means all Notes which are denominated in the same currency and which have the same Maturity Date (if any or otherwise which are Undated Notes) and Interest Basis (both as indicated in the relevant Final Terms) and interest payment dates (if any) and the terms of which (save for the Issue Date, denomination, issue price and first interest payment (all as indicated in the relevant Final Terms)) are otherwise identical (including listing) and the expressions “ Notes of the relevant Series ”, “ Holders of Notes of the relevant Series ” and kindred expressions shall be construed accordingly;

Seventeenth Effective Date ” means 2 May 2014;

Seventh Effective Date ” means 27 June 2003;

Sixteenth Effective Date ” means 3 May 2013;

Sixth Effective Date means 1 July 2002;

Sterling ” means the lawful currency for the time being of the United Kingdom;

stock exchange ” means the stock exchange or stock exchanges upon which the Notes of any Series are for the time being or are to be listed;

successor in business ” means, in relation to any Issuer or any Guarantor, any company which, as the result of any amalgamation, merger, reconstruction or transfer, either:

 

  (i) owns beneficially the major part of the undertaking, property and assets owned by such Issuer or Guarantor immediately prior thereto; or

 

  (ii) carries on, as successor to such Issuer or Guarantor, the major part of the business carried on by such Issuer or Guarantor immediately prior thereto;

 

    

 

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Talon ” means a bearer talon for further Coupons or, as the case may be, Receipts in the form set out in Part D of the Third Schedule and includes any replacement talon issued pursuant to Condition 13;

Temporary Global Note ” means a global note substantially in the form set out in the First Schedule with such modifications (if any) as may be agreed between the relevant Issuer, the relevant Guarantors, the Principal Paying Agent, the Trustee and the relevant Dealer(s), comprising Notes of a single Tranche, issued by any of the Issuers pursuant to the Dealer Agreement or any other agreement and these presents;

Tenth Effective Date ” means 15 May 2007;

Third Effective Date means 11 November 1998;

Thirteenth Effective Date ” means 6 May 2010;

Tranche ” means all Notes of the same Series with the same Issue Date;

these presents ” means this Trust Deed and the Schedules (as from time to time modified in accordance with the provisions herein contained) and includes any deed or other document executed in accordance with the provisions hereof (as from time to time modified as aforesaid) and expressed to be supplemental hereto;

trust corporation ” means a corporation entitled by rules made under the Public Trustee Act 1906 to act as a custodian trustee;

Twelfth Effective Date ” means 11 May 2009;

Undated Notes ” means Notes which are specified in the relevant Final Terms as having no fixed maturity date;

United States ” means the United States of America (including the States and the District of Columbia) and its “ possessions ” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands;

U.S. Person ” means (i) any person who is a citizen or resident of the United States; (ii) a domestic partnership; (iii) a domestic corporation or other entity taxable as a corporation; (iv) any estate the income of which is subject to United States federal income taxation regardless of its source; or (v) a trust if it (x) is subject to the primary supervision of a court within the United States and one or more “United States persons” within the meaning of the Internal Revenue Code of 1986, as amended, have the authority to control all of its substantial decisions or (y) has made a valid election under applicable Treasury Regulations to be treated as a domestic trust provided that the term “ U.S. Person ” shall not include foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv)) purchasing for their own account or for resale;

Words denoting the masculine gender only shall include the feminine gender also; and

Words denoting persons only shall include companies, corporations, partnerships and all other legal entities.

 

  (B) In these presents references to:

 

    

 

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  (i) any provision of any statute shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under such modification or re-enactment;

 

  (ii) principal and/or interest in respect of the Notes shall be deemed also to include references to any additional amounts which may be payable under Condition 9 or under any obligation undertaken pursuant to Clause 6;

 

  (iii) costs, charges or expenses shall include any value added tax or similar tax charged or chargeable in respect thereof; and

 

  (iv) principal ” in the context of the payment of principal on a Note shall be deemed to include a reference to the redemption amount (if any) payable on such Note.

 

  (C) References in this Trust Deed to Schedules, Clauses, sub-clauses, paragraphs and sub-paragraphs shall be construed as references to the Schedules to this Trust Deed and to the Clauses, sub-clauses, paragraphs and sub-paragraphs of this Trust Deed respectively.

 

  (D) Unless the context otherwise requires, words and expressions contained in these presents shall bear the same meanings as in the Companies Acts 1985 and 1989.

 

  (E) The headings are inserted herein only for convenience and shall not affect the construction hereof.

 

2 Amount of the Notes

 

  (A) The Notes will be issued in Series in an aggregate principal amount from time to time outstanding which shall not exceed U.S.$15,000,000,000 or such greater amount as shall be established pursuant to sub-clause (B) of this Clause, and for this purpose:

 

  (i) each Note denominated in a currency other than U.S. dollars shall be converted into U.S. dollars using the spot rate of exchange for the purchase of the relevant currency against payment of U.S. dollars being quoted by the Principal Paying Agent on the date on which the agreement for the issuance of such Notes was made;

 

  (ii) the principal amount of each Note with a zero coupon and other Notes issued at a discount shall be the net proceeds receivable by the relevant Issuer for the particular Tranche pursuant to the Dealer Agreement; and

 

  (iii) the currency in which any Notes are payable, if different from the currency of their denomination, shall be disregarded,

 

  (iv) and otherwise, subject to these presents, subject to such provisions and on such terms and conditions and at such time or times as the relevant Issuer and the relevant Guarantors shall determine and the Trustee shall not be responsible for such conversion or the receipt or application of the proceeds of issue by the relevant Issuer.

 

  (B)

The amount specified in sub-clause (A) of this Clause may be increased from time to time by a deed expressed to be supplemental hereto executed by the Issuers,

 

    

 

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  the Guarantors and the Trustee substantially in the form set out in the Fifth Schedule.

 

3 Covenant to repay and to pay interest

 

  (A) Each Issuer (in respect of Notes issued by it) covenants with the Trustee that it will, as and when the Notes of any Series or any of them become due to be redeemed or any principal or redemption amount on the Notes of any Series or any of them becomes due to be repaid in accordance with the Conditions, unconditionally pay or procure to be paid to, or to the order of, the Trustee in immediately available funds and/or same day funds, as the case may be, in the relevant currency the principal amount (or instalment thereof) or, as the case may be, redemption amount of the Notes of such Series becoming due for redemption or repayment on that date and (where such Notes bear interest) shall (subject to the provisions of the Conditions) until such payment (as well after as before any judgment or other order of any court of competent jurisdiction) is duly made, unconditionally pay or procure to be paid to or to the order of the Trustee as aforesaid on the dates provided for in the Conditions interest on the principal amount (or such other amount as may be specified in the relevant Final Terms) (or, in the case of Instalment Notes, on each instalment of principal) of the Notes of such Series outstanding from time to time in the relevant currency at the rate calculated from time to time in accordance with, and at the times, provided in the Conditions; provided that :

 

  (i) every payment of principal, redemption amount or interest in respect of such Notes made to or to the order of the Principal Paying Agent in the manner provided in the Paying Agency Agreement shall be in satisfaction pro tanto of the relevant covenant by such Issuer contained in this Clause and shall be deemed for the purposes of this Clause to have been paid to the order of the Trustee except to the extent that there is default in the subsequent payment thereof to the Holders of the Notes, Receipts and/or Coupons of such Series (as the case may be) in accordance with the Conditions in which event interest will again commence to accrue from the date of such default until the date upon which payment is duly made in accordance with this Clause;

 

  (ii) in the case of any payment of principal, redemption amount or interest in respect of the Notes of such Series made after the due date, payment shall be deemed not to have been made until the full amount due has been received by the Trustee or the Principal Paying Agent (as the case may be) and, unless the Trustee otherwise agrees, notice to that effect has been given to the Holders of Notes of such Series in accordance with Condition 14;

 

  (iii)

in any case where interest on the Notes of such Series falls to be paid in respect of a period of less than a full year interest will be calculated on the basis of 360 days (or 365 days, or 366 days in the case of an Interest Period falling in a leap year, in respect of (i) Fixed Rate Notes of which euro is the Requisite Currency or (ii) Floating Rate Notes of which Sterling is the Requisite Currency) and the actual number of days elapsed or on such

 

    

 

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  other basis as may be specified in the Conditions or in the relevant Final Terms; and

 

  (iv) in any case where payment of the whole or any part of the principal amount (or instalment thereof) or redemption amount due in respect of any Note of such Series is improperly withheld or refused upon due presentation of such Note, interest shall accrue at the rate aforesaid on the whole or such part of the principal amount (or instalment thereof) or redemption amount (as the case may be) from the date of such withholding or refusal until the date on which notice is given to the Holders of Notes of such Series either in accordance with Condition 14 or individually that the full amount payable in respect of the amount of principal (or instalment thereof) or redemption amount in the relevant currency has been paid to the Principal Paying Agent and the relevant Issuer covenants that it shall unconditionally pay the interest so accrued to or to the order of the Trustee as aforesaid.

 

  (B) Each Issuer may, from time to time without the consent of the Noteholders of any Series, create and issue further notes, bonds or debentures having the same terms and conditions as the Notes of such Series ranking pari passu in all respects (or in all respects except for the first payment of interest, if any, on them and/or the denomination thereof) so as to form a single series with any previously existing Series of Notes.

 

  (C) At any time after an Event of Default shall have occurred in respect of the Notes of any Series, the Trustee may:

 

  (i) by notice in writing to the relevant Issuer, the relevant Guarantors, the Principal Paying Agent, the other Paying Agents and the relevant Calculation Agent require the Principal Paying Agent, the other Paying Agents and the relevant Calculation Agent or any of them:

 

  (a) to act thereafter as Principal Paying Agent, Paying Agents and relevant Calculation Agent respectively of the Trustee in relation to payments to be made by or on behalf of the Trustee under the terms of these presents and on the terms provided in the Paying Agency Agreement or, as the case may be, the relevant Calculation Agency Agreement mutatis mutandis in relation to such Notes (save that the Trustee’s liability under any provisions thereof for the indemnification of the Paying Agents or any Calculation Agent shall be limited to amounts for the time being held by the Trustee on the terms of these presents in relation to such Notes which are available to the Trustee for such purpose) and thereafter to hold all such Notes and the relative Receipts and Coupons (if any) and all sums, documents and records held by them in respect of such Note and Coupons (if any) on behalf of the Trustee; and/or

 

  (b)

to deliver up all Notes, Receipts and Coupons (if any) of such Series and all sums, documents and records held by them in respect of such Notes and Coupons to the Trustee or as the Trustee shall direct in such notice provided that such notice shall be deemed not to apply to any document or record which the relative Paying Agent or

 

    

 

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  relevant Calculation Agent is obliged not to release by any law or regulation; and

 

  (ii) by notice in writing to the relevant Issuer and the relevant Guarantors require each of them to make all subsequent payments in respect of the Notes, Receipts and Coupons of the relevant Series to or to the order of the Trustee and not to the Principal Paying Agent or relevant Calculation Agent (as the case may be) and, with effect from the issue of any such notice until such notice is withdrawn, proviso (i) to sub-clause (A) of this Clause shall cease to have effect.

 

  (D) If any Series of Floating Rate Notes becomes immediately due and repayable pursuant to Condition 10, the rate of interest and interest amounts in respect of them shall continue to be calculated in accordance with the Conditions until all such Floating Rate Notes of such Series shall have been repaid, except that the rates of interest and interest amounts need not be notified in accordance with the Conditions.

 

  (E) All payments in respect of, under and in connection with these presents and the Notes, Receipts and Coupons of any Series shall be made to the relevant Noteholders, Receiptholders and Couponholders in the relevant currency as specified in the applicable Final Terms.

 

  (F) The Notes of each Series shall form a separate Series and accordingly, unless for any purpose the Trustee at its absolute discretion shall otherwise determine, all the provisions of these presents shall apply separately to the Notes of each Series and, in these presents, the expressions “ Notes ”, Noteholders ”, Receipts ”, Receiptholders ”, “ Coupons ”, and “ Couponholders ” and, in each case, kindred expressions shall be construed accordingly.

 

4 Issue and constitution of Notes

 

  (A) By not later than the close of business (London time) on the second day (excluding Saturdays, Sundays and bank holidays) on which banks are open for business in the City of London preceding each proposed Issue Date, the relevant Issuer shall:

 

  (i) procure that the Trustee receives a copy of the relevant Final Terms; and

 

  (ii) deliver to the Trustee a certificate signed (where either N.V. or PLC is the Issuer) by a director of N.V. or PLC, as the case may be, or some other person duly authorised in that behalf or (where UJH is the Issuer) by a Representative Director of UJH or some other person duly authorised in that behalf certifying to the best of the knowledge and belief of the giver of the certificate having made all reasonable enquiries the absence of any event listed in Condition 10 (whether or not applicable to the Notes of such Tranche) or any event which, with the lapse of time and/or the giving of notice and/or the issue of a certificate would constitute an Event of Default and compliance with the Programme Limit. The relevant Issuer shall also procure that there is delivered to the Trustee an executed copy of the relevant Final Terms prior to the Issue Date in the case where the copy of such Final Terms referred to in (i) above was unexecuted.

 

    

 

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Forthwith upon the issue of, and full payment for, the relevant Temporary Global Note(s), the Notes of the Tranche to which it or they relate(s) shall become constituted by these presents without further formality.

 

  (B) None of the Issuers shall be entitled to, and each Issuer hereby covenants with the Trustee that it will not, issue any Notes pursuant to these presents unless the appropriate Guarantee applies to such Notes.

 

  (C) Each of the Issuers and the Guarantors shall procure that legal opinions shall be delivered to the Trustee in any of the following circumstances:

 

  (i) on such occasions as the Trustee so requests after consultation with the relevant Issuers and the relevant Guarantors, on the occurrence of either a change or a proposed change in any applicable law or regulation (or interpretation thereof) affecting any of the Issuers, the Guarantors, the Notes, or these presents or on the Trustee having any other reasonable grounds; and

 

  (ii) on any occasion on which the Dealers receive any legal opinion in accordance with the Dealer Agreement.

If, notwithstanding the preceding provisions of this Clause 4, the Trustee is not satisfied with any legal opinion delivered to it pursuant to this Clause 4(C) (not being a legal opinion substantially in the form of the legal opinion delivered to the Trustee on the date hereof) the Trustee shall thereafter be entitled not to approve any new Final Terms in respect of which such legal opinion may, at any time, relate or be connected in any way whatsoever.

 

5 Forms and issue of the Notes

 

  (A)

The Notes of each Tranche will be represented on issue by a Temporary Global Note and, if so specified in the Final Terms, such Temporary Global Note shall be a NGN. Each Temporary Global Note shall be exchangeable, in accordance with its terms, for a Permanent Global Note or Definitive Notes having, if so specified in the relevant Final Terms, Receipts or (as the case may be) Coupons attached all as set out in such Temporary Global Note. Each Permanent Global Note shall be exchangeable, in accordance with its terms, for Definitive Notes having, if so specified in the relevant Final Terms, Receipts or (as the case may be) Coupons attached all as set out in such Permanent Global Note. All Notes in global form shall be signed manually on behalf of the relevant Issuer (where N.V. or PLC is the Issuer) by a director of N.V. or PLC or, as the case may be, some other person duly authorised in that behalf or (where UJH is the Issuer) by a Representative Director of UJH, any duly authorised attorney or some other person duly authorised in that behalf and may be a master Note in global form supplied by the relevant Issuer under the provisions of the Paying Agency Agreement, authenticated by the Principal Paying Agent and, in the case of each Eurosystem-eligible NGN or Non-eligible NGN in respect of which the Issuer has notified the Principal Paying Agent that effectuation is to be applicable, effectuated by or on behalf of the specified Common Safekeeper. Each Note in global form which is a CGN, shall be delivered to a bank depositary common to the ICSDs or any other relevant clearing system or, in the case of a Note in global form which is a NGN, shall be delivered to the specified Common Safekeeper in accordance with the provisions of the Paying

 

    

 

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  Agency Agreement. All Definitive Notes shall, unless otherwise specified in the relevant Final Terms, be security printed in accordance with any applicable regulatory requirements from time to time (and Notes shall be security printed in accordance with the requirements of the applicable stock exchange and any other applicable regulatory requirements from time to time), shall be serially numbered and shall, if interest bearing, have attached thereto Coupons or, if so specified in the relevant Final Terms, have endorsed thereon a grid for recording the payment of interest and shall, in the case of Instalment Notes, have attached thereto Receipts. The Notes in global form, the Definitive Notes and the relative Receipts, and Coupons (if any) shall be in bearer form and shall have the Conditions endorsed thereon, attached thereto or incorporated by reference therein. Title to the Notes in global form, the Definitive Notes and the relative Receipts and Coupons shall pass by delivery.

 

  (B) The Definitive Notes, the Receipts and the Coupons shall be signed manually or in facsimile on behalf of the relevant Issuer (where N.V. or PLC is the Issuer) by a director of N.V. or PLC, as the case may be, or some other person duly authorised in that behalf or (where UJH is the Issuer) by a Representative Director of UJH, any duly authorised attorney or some other person duly authorised in that behalf. Any Issuer may use on any Definitive Note or any Receipt or Coupon facsimile signatures of each of the authorised signatories of the relevant Issuer set out in this sub-clause notwithstanding the fact that when such Definitive Note, Receipt or Coupon shall be issued any such person shall have ceased to hold such office. The Definitive Notes, Receipts or Coupons so executed (and, in the case of the Definitive Notes, authenticated) and issued shall be valid and binding obligations of the relevant Issuer. The master Temporary Global Note and the master Permanent Global Note for an Issuer shall be signed manually by or on behalf of such Issuer in accordance with Clause 5(A). Any Issuer may adopt and use the signature of any person who, at the date of signing a master Temporary Global Note or master Permanent Global Note, is authorised to sign on behalf of the relevant Issuer for such purpose notwithstanding that such person may have ceased to hold such office at the time of the creation and issue of the relevant Tranche or the issue and delivery of the relevant Notes.

 

  (C) The relevant Issuer shall procure that, prior to their issue and delivery, the Notes in global form and the Definitive Notes shall be authenticated manually by an authorised signatory on behalf of the Principal Paying Agent and, in the case of each Eurosystem-eligible NGN or Non-eligible NGN in respect of which the Issuer has notified the Principal Paying Agent that effectuation is to be applicable, effectuated by or on behalf of the specified Common Safekeeper. Notes in global form and Definitive Notes, as the case may be, shall not be valid for any purpose unless and until so authenticated and, in the case of Eurosystem-eligible NGNs or Non-eligible NGNs in respect of which the Issuer has notified the Principal Paying Agent that effectuation is to be applicable, so effectuated and any Receipts or Coupons appertaining to the relevant Definitive Notes shall not be valid for any purpose unless and until the Definitive Notes to which they appertain shall have been authenticated but, subject thereto, Notes in global form, Definitive Notes and, as the case may be, Receipts or Coupons so executed shall be binding and valid obligations of the relevant Issuer.

 

    

 

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  (D) The Trustee shall be entitled to rely on the records of the ICSDs in relation to any determination of the principal amount outstanding of each NGN. For this purpose, “records” means the records that each ICSD holds for its customers which reflect the amount of such customers’ interest in the Notes.

 

6 Stamp Duties

 

  (A) The relevant Issuer will pay all stamp duties and other similar duties or taxes (if any) payable in The Netherlands, the United States, Japan or the United Kingdom on (i) the constitution and issue of the Notes, the Receipts and/or the Coupons and (ii) the initial delivery of the Notes. The Issuers will pay all stamp duties and other similar duties or taxes (if any) payable in the aforesaid countries on the execution of these presents. If in consequence of an Event of Default the Trustee (or any Noteholder, Receiptholder or Couponholder where permitted under these presents so to do) shall take any proceedings against the relevant Issuer or the relevant Guarantors and/or any proceedings to wind up the relevant Issuer or the relevant Guarantors in The Netherlands and/or the United Kingdom and/or the United States and/or Japan and if for the purposes of any such proceedings these presents or any Notes, Receipts or Coupons are taken into such jurisdiction and any stamp duties or other similar duties or taxes become payable thereon in any such jurisdiction, the relevant Issuer will pay (or reimburse the person making payment of) such stamp duties or other similar duties or taxes.

 

  (B) Covenant to give substitute tax undertaking

If the relevant Issuer or the relevant Guarantors shall become subject generally to the taxing jurisdiction of any territory other than or in addition to The Netherlands, in the case of N.V., the United Kingdom, in the case of PLC, Japan in the case of UJH or the United States or any political sub-division thereof, in the case of UNUS, or any authority in such other territory having power to tax, then the relevant Issuer or the relevant Guarantors (as the case may be) shall (unless the Trustee shall otherwise agree), but only if by virtue of becoming so subject it shall be necessary in order that the net amounts received by the Holder of any Note or, as the case may be, Receipt or Coupon after withholding or deduction for or on account of taxes or duties imposed or levied by or on behalf of such territory or authority, shall equal the respective amounts of principal and/or redemption amount and/or interest as would have been receivable in respect of the Notes or, as the case may be, Receipts or Coupons in the absence of such withholding or deduction, give to the Trustee an undertaking or covenant in form and manner reasonably satisfactory to the Trustee in terms corresponding to the terms of Condition 9 with the substitution for, or (as the case may require) the addition to, the references therein to The Netherlands, the United Kingdom, Japan or the United States or any authority in The Netherlands, the United Kingdom, Japan or the United States having power to tax of references to that other or additional territory or any authority therein having power to tax to whose taxing jurisdiction the relevant Issuer or, as the case may be, the relevant Guarantors shall have become subject as aforesaid and in such event the provisions of these presents shall be read accordingly and the provisions of parts (i) to (iv) of Condition 7(c) shall be amended accordingly.

 

    

 

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7 Covenant to observe provisions of the Trust Deed and Schedules

 

  (A) Each of the Issuers and each of the Guarantors hereby covenants with the Trustee to comply with those provisions of these presents which are expressed to be binding on each of them and to perform and observe the same. The Notes, the Receipts and the Coupons shall be held subject to the provisions contained in these presents, all of which shall be binding upon each of the Issuers, the Guarantors, the Noteholders, the Receiptholders and the Couponholders and all persons claiming through or under them respectively. The issue of any Series of Notes shall constitute confirmation of the fact that the Notes of such Series carry the benefit of the Guarantee.

 

  (B) The provisions contained in the Schedules shall have full effect in the like manner as if the same had been incorporated herein.

 

8 Guarantee

 

  (A)   

 

  (i) N.V. and UNUS, jointly and severally, in respect of any Notes issued by PLC;

 

  (ii) PLC and UNUS, jointly and severally, in respect of any Notes issued by N.V.; and

 

  (iii) N.V. and PLC, jointly and severally, in respect of any Notes issued by UJH,

hereby irrevocably and unconditionally guarantee to the Trustee the due and punctual payment by the relevant Issuer of any moneys payable from time to time by the relevant Issuer in respect of the Notes, the Receipts and the Coupons and under or pursuant to these presents, as the case may be, in the manner hereinafter provided, namely:

 

  (i) if and whenever the relevant Issuer shall make default in the payment of any moneys payable by the relevant Issuer in respect of the Notes, the Receipts or the Coupons or under or pursuant to these presents, as the case may be, the relevant Guarantors shall forthwith upon written demand therefor made by the Trustee unconditionally pay to or to the order of the Trustee in the relevant currency the amount in respect of which such default has been made and any payment so made shall pro tanto cure such default by the relevant Issuer provided that every payment of such moneys as aforesaid made by the relevant Guarantors to the Noteholders, the Receiptholders and/or the Couponholders, as the case may be, or to, or to the order of, the Principal Paying Agent in the manner provided in the Paying Agency Agreement shall be satisfaction pro tanto of the covenants by the Guarantors in this Clause contained (and shall be deemed for the purposes of this Clause to have been paid to or to the order of the Trustee) except, in the case of payment to or to the order of the Principal Paying Agent as aforesaid, to the extent that there is default in the subsequent payment thereof to the Noteholders, the Receiptholders or the Couponholders, as the case may be, in accordance with the Conditions. The provisions of Condition 9 shall apply with respect to payments by any of the Guarantors made hereunder;

 

    

 

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  (ii) without prejudice to the provisions of paragraph (i) of this sub-clause (A), each of the Guarantors shall, as between the Trustee and itself, be liable as if it were the principal debtor and not merely a surety and none of the Guarantors shall be exonerated or discharged from liability under the Guarantee by time being given to the relevant Issuer or the relevant Guarantors or any of them by the Trustee or by the Noteholders, Receiptholders or Couponholders or any of them, by any other indulgence or concession to the relevant Issuer granted by the Trustee or by the Noteholders, Receiptholders or Couponholders or any of them or by anything done by the Trustee in exercise of any of the trusts, powers, authorities or discretions vested in it by these presents or by anything which the Noteholders, Receiptholders or Couponholders or the Trustee or any of them may omit or neglect to do or by any other dealing or thing which, but for this provision, might operate to exonerate or discharge any of the relevant Guarantors from their covenants herein contained or by the illegality, invalidity or unenforceability of or any defect in the provisions of any Note, Receipt or Coupon or these presents or any of the relevant Issuer’s obligations thereunder or hereunder;

 

  (iii) the Guarantee is to be a continuing guarantee and accordingly shall remain in operation until all moneys owing in respect of the Notes, the Receipts and the Coupons and under these presents have been paid or satisfied and is in addition to and not in substitution for any other rights which the Trustee or the Noteholders, Receiptholders or Couponholders or any of them may have under or by virtue of these presents and may be enforced without first having recourse to any such rights and without taking any steps or proceedings against the relevant Issuer. In particular, the Guarantee may be enforced on each and every occasion on which default is made by the relevant Issuer in payment notwithstanding that any call under this Guarantee may have been made previously by the Trustee or that any proceedings may have been commenced against any of the relevant Guarantors in respect of sums already due under the Guarantee;

 

  (iv) the Trustee may from time to time make any arrangement or compromise with the relevant Guarantors or any of them in relation to the Guarantee which the Trustee may think fit;

 

  (v) the relevant Guarantors or any of them shall not, without the consent of the Trustee, at any time after default has been made by the relevant Issuer in the payment of any moneys payable by the relevant Issuer in respect of the Notes, the Receipts or the Coupons or under or pursuant to these presents and so long as any moneys payable by the relevant Guarantors in respect of such defaulted moneys remain unpaid, exercise in respect of any amounts paid under the Guarantee any right of subrogation or any other right or remedy which may accrue to the relevant Guarantors in respect of or as a result of such payment; and

 

  (vi)

if any payment received by the Trustee or any Noteholder, Receiptholder or Couponholder pursuant to the provisions of these presents shall, on the subsequent bankruptcy or insolvency of the relevant Issuer or the relevant Guarantors or any of them, be avoided under any laws relating to

 

    

 

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  bankruptcy or insolvency, such payment shall not be considered as having discharged or diminished the liability of the relevant Guarantors or any of them, and the Guarantee shall continue to apply as if such payment had at all times remained owing by the relevant Issuer and the relevant Guarantors shall indemnify the Trustee and the Noteholders, Receiptholders and Couponholders, as the case may be, in respect thereof.

 

  (B) If any moneys shall become payable by any of the Guarantors under the Guarantee, the relevant Issuer shall not, without the consent of the Trustee, so long as such moneys remain unpaid, pay any moneys for the time being due by the relevant Issuer to any of the Guarantors.

 

  (C) In this Clause 8, the expression “ relevant Issuer ” shall mean the Issuer in respect of which the relevant Guarantors have given their Guarantee.

 

9 Application of moneys received by the Trustee

 

  (A) The Trustee shall apply all moneys received by it under these presents in respect of the Notes of any Series:

 

  (i) first, in payment or satisfaction of the reasonable costs, charges, expenses and liabilities incurred by the Trustee in or about the preparation and execution of, or in carrying out the terms of, or enforcing the trusts of these presents (including remuneration of the Trustee);

 

  (ii) secondly, in or towards payment pari passu and rateably of all arrears of interest remaining unpaid in respect of the Notes of the relevant Series and all principal moneys, redemption amounts and premium (if any) due on or in respect of such Notes; provided that where Notes of more than one Series have become so due and payable, such moneys shall be applied as between the amounts outstanding in respect of the different Series pari passu and rateably (except where such moneys are paid in respect of a specific Series or several specific Series, in which event such moneys shall be applied solely to the amounts outstanding in respect of that Series or those Series respectively); and

 

  (iii) thirdly, in payment of the balance (if any) to the relevant Issuer or, in the event that any moneys were received from the relevant Guarantors, to the extent of such moneys, to the relevant Guarantors (provided that the Trustee shall not have regard as to how any such moneys are apportioned between the Guarantors).

Without prejudice to the provisions of this Clause, if the Trustee shall hold any moneys which represent principal, redemption amount, premium or interest in respect of Notes, Receipts or Coupons which have become void under Condition 12, the Trustee shall (subject to no sums being then overdue to the Trustee in respect of any Notes, Receipts or Coupons of any Series and to the payment or provision for the payment or satisfaction of the said costs, charges, expenses and liabilities, including the remuneration of the Trustee) pay the same forthwith to the relevant Issuer (without prejudice to any question as to how such surplus should be dealt with as between the relevant Issuer and any other person for the time being entitled thereto in priority to the relevant Issuer).

 

    

 

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  (B) If more than one Series of Notes has become due and payable, the Trustee shall apportion between the relevant Noteholders the payment of the costs, charges, expenses and liabilities referred to in paragraph (i) of sub-clause (A) of this Clause out of moneys received and held upon trust by the Trustee as aforesaid, in such manner and in such amounts as it shall, in its absolute discretion, consider appropriate.

 

  (C) The Trustee shall give not less than 14 days’ notice to Noteholders in accordance with the Conditions of the day fixed for any payment to the Noteholders under this Clause 9.

 

10 Power to retain and invest less than 10 per cent.

If the amount of the moneys at any time available for payment in respect of the Notes of any Series under Clause 9 shall be less than one-tenth of the principal amount of the Notes of such Series then repayable, the Trustee may, at its discretion, invest such moneys on behalf of the persons entitled thereto under Clause 9 upon some or one of the investments hereinafter authorised with power from time to time, at the like discretion, to vary such investments. The income resulting from such investments shall be applied in accordance with Clause 9. However, upon such income reaching an amount such that, if that amount were added to the investment and any other funds for the time being under the control of the Trustee and applicable for the purpose, the total sum would be sufficient to pay at least one tenth of the principal amount of the Notes of such Series then repayable, then such investment and funds shall also be applied under Clause 9.

 

11 Authorised investments

Any moneys which under the trusts herein contained ought to, or may be, invested by the Trustee may be invested in the name or under the control of the Trustee in any of the investments for the time being authorised by English law for the investment by trustees of trust moneys or in any other investments, whether similar to those aforesaid or not, which may be selected by the Trustee or by placing the same on deposit in the name or under the control of the Trustee with such bank or other financial institution as the Trustee may think fit and in such currency as the Trustee may think fit (in the case of any currency other than the Requisite Currency), with the approval of the relevant Issuer (such approval not to be unreasonably withheld) and the Trustee may at any time vary or transfer any of such investments for or into other such investments, subject to the proviso in Clause 22, neither it nor the relevant Issuer nor the relevant Guarantors shall be responsible for any loss occasioned by reason of any such investments or such deposit whether by depreciation in value, fluctuation in exchange rates or otherwise.

 

12 Indemnification of the Trustee upon enforcement

 

  (A) The Trustee shall not be bound to take any steps to enforce the performance of any of the provisions of these presents, the Notes, the Receipts or the Coupons unless (i) it shall have been directed to do so by an Extraordinary Resolution or so requested in writing by the Holders of at least one-fourth in principal amount of the Notes of the relevant Series then outstanding and (ii) it shall have been indemnified and/or secured and/or prefunded to its satisfaction against all liabilities, proceedings, claims and demands to which it may thereby become liable and all costs, charges and expenses which may be incurred by it in connection therewith.

 

    

 

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  (B) Should the Trustee take any proceedings against any Issuer and/or any Guarantor:

 

  (i) proof therein that as regards any specified Note of a particular Series, default has been made in paying any principal, redemption amount, premium and/or, where the same is not paid against presentation of a Note in global form or, as the case may be, a Coupon, interest due in respect of such Note shall (unless the contrary be proved) be sufficient evidence that like default has been made as regards all other Notes of such Series in respect of which a corresponding payment is then due; and

 

  (ii) proof therein that as regards any specified Coupon appertaining to a Note of a particular Series, default has been made in paying any interest due to the relevant Couponholders shall (unless the contrary be proved) be sufficient evidence that like default has been made as regards all other Coupons appertaining to the Notes of such Series in respect of which a corresponding payment is then due.

 

13 Payment to Noteholders, Receiptholders and Couponholders

Any payment to be made in respect of the Notes of any Series or the Receipts or the Coupons appertaining thereto by the relevant Issuer or relevant Guarantors or the Trustee may be made in the manner provided in the Conditions and any payment so made shall be a good discharge, pro tanto , to such Issuer, or, as the case may be, such Guarantor or the Trustee. Any payment in full of interest made in respect of a Coupon shall extinguish any claim of a Noteholder which may arise directly or indirectly in respect of such interest.

 

14 Production of Notes, Receipts and Coupons

Upon any payment to Noteholders, Receiptholders or Couponholders under Condition 8 the Note, Receipt or Coupon in respect of which such payment is made shall, if the Trustee so requires, be produced to the Trustee, or the Paying Agent by or through whom such payment is made and the Trustee shall, in the case of part payment, enface or cause such Paying Agent to enface (other than in the case of a Temporary Global Note or Permanent Global Note in NGN form) a memorandum of the amount and date of payment on such Note, Receipt or Coupon or, in the case of payment in full, shall cancel or procure the same to be cancelled and shall certify or procure the certification of such cancellation but such Paying Agent may, in any particular case, dispense with the production and enfacement of a Note, Receipt or Coupon upon such indemnity being given as it shall reasonably think sufficient.

 

15 Covenants by the Issuers and the Guarantors

Each of the Issuers and the Guarantors (provided that UNUS shall have no liability or obligation under this Clause 15 in respect of any of sub-clauses (B), (C), (E), (R) and (S) below) hereby covenants with the Trustee that, so long as any of the Notes issued or guaranteed by it remains outstanding, it shall:

 

  (A) at all times maintain, while any Notes are outstanding, a Paying Agent (in accordance with the Conditions) and at all times maintain any other agents (including but not limited to any Calculation Agent) required by the Conditions relating to any outstanding Notes all in accordance with the Conditions;

 

    

 

22

    


  (B) maintain a paying agent in a European Union member state that is not obliged to withhold or deduct tax pursuant to any law implementing or complying with, or introduced in order to conform to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26th to 27th November, 2000, provided that under no circumstances shall any Issuer or any Guarantor be obliged to maintain a paying agent in such a European Union member state unless at least one European Union member state does not require a paying agent making payments in that European Union member state to withhold or deduct tax pursuant to such law;

 

  (C) upon becoming aware of the same, give notice in writing to the Trustee of the occurrence of any Event of Default in relation to it or any event which, with the lapse of time and/or the giving of notice and/or the issue of a certificate would constitute an Event of Default in relation to it;

 

  (D) within 14 days of any written request by the Trustee and at least once in every year (if practicable at the same time as copies of the balance sheet and accounts mentioned under paragraph (f) below are sent) deliver to the Trustee (i) (in the case of N.V. and PLC) a certificate signed by a director of N.V. or PLC, as the case may be, or some other person duly authorised in that behalf and (ii) (in the case of UJH) a certificate signed by a Representative Director of UJH or some other person duly authorised in that behalf to the effect that to the best of the knowledge, information and belief of such person having made all reasonable enquiries:

 

  (i) there did not exist as at a date not more than five days prior to the date of the certificate nor had there existed at any other time prior thereto since the date hereof or since the date as of which the last such certificate was given any Event of Default or any event which, with the lapse of time and/or the giving of notice and/or the issue of a certificate would constitute an Event of Default or, if such an Event of Default or event did then exist or had existed, specifying the same; and

 

  (ii) during the preceding financial year (or during such period as the Trustee may specify in such request) and since the completion thereof up to the date mentioned in (i) above each of the Issuers and the Guarantors complied in all material respects with its obligations contained in these presents or, if such is not the case, specifying the respects in which it has not so complied;

 

  (E) so far as permitted by law, at all times give to the Trustee such other information as it shall reasonably require for the purpose of the discharge of the duties and discretions vested in it hereunder or by operation of law;

 

  (F) send to the Trustee four copies in the English language of every publicly available balance sheet, profit and loss account, report or other notice, statement or circular which is (in each case) issued to its members or stockholders, or as soon as practicable after, the time of the issue thereof;

 

  (G) so far as permitted by law, at all times execute all such further documents and do all such further acts and things as may be necessary at any time or times to give effect to the terms and conditions of these presents;

 

    

 

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  (H) oblige the Principal Paying Agent to notify the Trustee forthwith if it does not on or before the due date for repayment of the Notes of any Series or any of them or the due date for payment of the relevant Receipts and/or the Coupons (if any), receive unconditionally the full amount in the relevant currency of the moneys payable on such due date in respect of all such Notes, Receipts or Coupons, as the case may be;

 

  (I) as soon as reasonably practicable and before the time of publication send, or procure to be sent, to the Trustee four copies of the form of all notices to be given to Noteholders;

 

  (J) at all times use their reasonable endeavours to maintain a listing of the Notes on such stock exchange as the Notes are, for the time being, quoted or listed or, if it is unable to do so having used such reasonable endeavours or if the maintenance of such listing is agreed by the Trustee to be unduly onerous, use its reasonable endeavours to obtain and maintain a quotation or listing of the Notes on such other stock exchange or exchanges as they may (with the written approval of the Trustee) decide and shall also use its reasonable endeavours to procure that there will at all times be furnished to any stock exchange on which the Notes are for the time being quoted or listed on the application of the relevant Issuer such information as such stock exchange may require in accordance with its normal requirements or in accordance with any arrangements for the time being made with any such stock exchange;

 

  (K) not less than 45 days prior to the redemption date in respect of the Notes of any Series give the Trustee notice of the proposed redemption of the Notes pursuant to Condition 7(c) or 7(d);

 

  (L) comply with its obligations under the Paying Agency Agreement and any other agreement (including but not limited to any Calculation Agency Agreement) appointing other agents for the purpose of the Programme and the Dealer Agreement, and use its reasonable endeavours to procure that (i) the Principal Paying Agent and the relevant Calculation Agent comply with all their respective obligations thereunder; and (ii) in respect of each Temporary Global Note which is a NGN or Permanent Global Note which is a NGN, the ICSDs maintain their records in accordance with the relevant ICSD Direct Agreement;

 

  (M) if, in accordance with the provisions of Condition 8, interest, principal, premium or other redemption amount in respect of Notes becomes payable at the specified office in the United States of any Paying Agent, promptly give notice thereof to the Noteholders in accordance with Condition 14;

 

  (N) in the event of the existence of a serious threat as referred to in Clause 5(c) of the Paying Agency Agreement, when satisfactory arrangements pursuant to Clause 5(c) of the Paying Agency Agreement have been put in place, forthwith, unless the Trustee otherwise agrees, give notice to the relevant Noteholders in accordance with Condition 14 of such arrangements;

 

  (O) furnish a copy of the Procedures from time to time in effect to the Trustee;

 

  (P)

ensure that each Note to be issued or other transaction to be effected hereunder shall comply with all applicable laws and regulations of any governmental or other regulatory authority of the country of any relevant currency for the purposes of any

 

    

 

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  relevant Note and that all necessary consents and approvals of, and registrations and filings with, any such authority in connection therewith are obtained and maintained in full force and effect and copies thereof are supplied promptly to the Trustee;

 

  (Q) forthwith give notice to the Trustee of the appointment of any new Dealer pursuant to the Dealer Agreement or of any modification to the Dealer Agreement;

 

  (R) forthwith give notice to the Trustee of the Issuer’s intention to redenominate Notes in accordance with Condition 8C or exchange Notes in accordance with Condition 8D; and

 

  (S) in the event of any Issuer giving any notice to redenominate the Notes of any Series pursuant to Condition 8C(1) or for the exchange of any Notes of any Series for Notes denominated in euro pursuant to Condition 8D, such Issuer shall (unless the Trustee otherwise agrees in writing), not later than the date on which the redenomination will become effective or, as the case may be, the Notes become exchangeable enter into a deed with the Trustee supplemental to these presents in a form satisfactory to the Trustee which records the terms of any amendments to the Conditions which will arise from such redenomination or exchange and effect any other consequential amendments to these presents which, in the opinion of the Trustee, require to be made to give effect to such redenomination or exchange.

 

16 Remuneration of the Trustee

 

  (A) The relevant Issuer, failing whom the relevant Guarantors, shall (subject as hereinafter provided) pay to the Trustee such remuneration as shall be agreed from time to time between the Issuers and the Trustee as remuneration for its services as Trustee under these presents. Such remuneration shall, unless otherwise agreed, be deemed to accrue from day to day and shall be paid annually in arrear. At any time after the occurrence of an Event of Default or in the event of the Trustee finding it necessary or being required to undertake any exceptional duties (or duties otherwise outside the scope of the normal duties of the Trustee under these presents) in the performance of its trusteeship under these presents the relevant Issuer, failing whom the relevant Guarantors, shall pay such additional remuneration as shall be agreed between the Trustee and the relevant Issuer (and which may be calculated by reference to the Trustee’s normal hourly rates in force from time to time). In the event of the Trustee and the relevant Issuer failing to agree upon whether such duties are of an exceptional nature or otherwise outside the scope of the normal duties of the Trustee under these presents, or failing to agree upon such increased or additional remuneration, such matters shall be determined by an investment bank (acting as an expert and not as an arbitrator) selected by the Trustee and approved by the relevant Issuer or, failing such approval, nominated by the President for the time being of The Law Society of England and Wales (the expenses involved in such nomination and the fee of such investment bank being shared equally between the Trustee and the relevant Issuer), and the decision of any such investment bank shall be conclusive and binding on the relevant Issuer, the relevant Guarantors and the Trustee.

 

  (B)

The Trustee shall not be entitled to remuneration in respect of any period after the date on which, all the Notes of any Series having become due for redemption, the redemption moneys (including accrued interest thereon) have been paid to the

 

    

 

25

    


Trustee, the Principal Paying Agent or otherwise duly provided for to the satisfaction of the Trustee unless, upon due presentation of any Note, Receipt or Coupon, payment of the moneys due in respect thereof is improperly withheld or refused, in which event remuneration will commence again to accrue.

 

  (C) In addition to remuneration hereunder the relevant Issuer, failing whom the relevant Guarantors, shall, on written request, pay all other reasonable costs, charges and expenses including travelling expenses which the Trustee may properly incur in relation to the preparation and execution of these presents and the exercise of the powers or the execution of the trusts vested in it by or pursuant to these presents and in any other manner in relation to these presents, including but not limited to legal and travelling expenses and any stamp, issue, registration, documentary and other taxes or duties paid or payable by the Trustee in connection with any action taken or contemplated by or on behalf of the Trustee for enforcing, or resolving any doubt concerning, or for any other purpose in relation to, these presents.

 

  (D) The relevant Issuer, failing whom the relevant Guarantors, shall indemnify the Trustee (i) in respect of all liabilities and expenses properly incurred by it or any liability or expense properly incurred by any person appointed by it to whom any trust, power, authority or discretion may be delegated by it in the execution or purported execution of the trusts, powers, authorities or discretions vested in it by these presents, provided that in the case of any such delegate the Trustee shall have exercised reasonable care in the selection of such delegate and (ii) against all liabilities, actions, proceedings, costs, claims and demands in respect of any matter or thing properly done or omitted in relation to these presents but shall not be liable to indemnify the Trustee or the Noteholders, Receiptholders or Couponholders, as the case may be, against any income tax (or similar taxes) which the Trustee pays or for which the Trustee is liable to account by reason of fees payable in respect of its acting as Trustee pursuance to these presents.

 

  (E) All sums payable under sub-clauses (C) and (D) of this Clause shall be payable within 30 days of demand. All sums payable by the relevant Issuer, failing whom the relevant Guarantors, under this Clause shall carry interest at a rate equal to two per cent. per annum over the base rate of National Westminster Bank PLC from time to time from the date 30 days after the date of the same being demanded to the day of payment or (where a demand by the Trustee specifies that payment by the Trustee will be made on an earlier date) from 30 days after such earlier date. If practicable, the Trustee will notify the relevant Issuer, failing which the relevant Guarantors, of any expenditure prior to incurring the same but the absence of such notice shall not deprive the Trustee of the right to be reimbursed by the relevant Issuer or the relevant Guarantors to the same extent as the Trustee would be entitled to if prior notification had been given.

 

  (F) The relevant Issuer, failing whom the relevant Guarantors, shall in addition pay to the Trustee (if so required) an amount equal to the amount of any value added tax or similar tax properly charged in respect of its remuneration hereunder.

 

  (G) The Trustee shall be entitled in its absolute discretion to determine in respect of which Series of Notes any costs, charges, expenses or liabilities incurred under these presents have been incurred or to allocate any such costs, charges, expenses or liabilities between the different Series of Notes.

 

    

 

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  (H) Unless otherwise specifically stated in any discharge of these presents the provisions of this Clause 16 shall continue in full force and effect notwithstanding such discharge.

 

  (I) All payments to be made by the relevant Issuer, failing whom the relevant Guarantors, to the Trustee under these presents shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within any relevant jurisdiction or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event, the Obligor shall pay such additional amount as will, after such deduction or withholding has been made, leave the Trustee with the full amount which would have been received by it had no such withholding or deduction been required.

 

17 Modifications and Substitution

 

  (A) The Trustee may from time to time and at any time without any consent of the Noteholders, the Receiptholders or the Couponholders (or, as the case may be, the Holders of the Notes, Receipts or Coupons of any one or more Series) agree with the relevant Issuer (a) to any modification (other than of the provisos to paragraphs 5 and 6 of the Eighth Schedule hereto or any provision of these presents referred to in those provisos) of these presents which in the opinion of the Trustee is not materially prejudicial to the interests of the Holders of the Notes or, as the case may be, the Holders of the Notes of the relevant Series or (b) to any modification of these presents which is of a formal, minor or technical nature or made to correct a manifest error. Any such modification or any substitution pursuant to sub-clause (B) of this Clause shall be binding on the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee otherwise agrees, the relevant Issuer shall cause any such modification or substitution to be notified to the Noteholders as soon as practicable thereafter in accordance with Condition 14.

 

  (B) The Trustee may, without the consent of the Noteholders, the Receiptholders or the Couponholders (or, as the case may be, the Holders of Notes, Receipts or Coupons of any one or more Series), agree to the substitution (i) in place of the relevant Issuer (or of any previous substitute under this sub-clause (B)) as the principal debtor in respect of the Notes, the Receipts, the Coupons and these presents of any Group Company (incorporated in any such case in any country in the world) or (ii) in place of the relevant Issuer as principal debtor or of any of the relevant Guarantors (or any of the previous substitute under this sub-clause (B)) of any successor in business of the relevant Issuer or, as the case may be, any such relevant Guarantors or of any previous substitute hereunder (any substitute under this sub-clause being hereinafter in this sub-clause (B) referred to as the “ Substituted Company ”) provided that:

 

  (i)   

a trust deed is executed or some other form of undertaking is given by the Substituted Company to the Trustee, in form and manner reasonably satisfactory to the Trustee, agreeing to be bound by the terms of these presents, the Notes, the Receipts and the Coupons, with any consequential amendments which the Trustee may deem appropriate, as fully as if the Substituted Company had been named in these presents and on the Notes, the Receipts and the Coupons as the principal

 

    

 

27

    


debtor in place of any such relevant Issuer (or of any such previous Substituted Company) or, as the case may be, as a guarantor in place of the relevant Guarantor (or of any such previous Substituted Company);

the Trustee shall be satisfied that the Substituted Company has obtained all necessary governmental and regulatory approvals and consents necessary for its assumption of the obligations and liability as the principal debtor or, as the case may be, a guarantor under these presents and in respect of the Notes, the Receipts and the Coupons in place of the relevant Issuer or any such relevant Guarantor (or of any such previous Substituted Company);

in the case of a substitution of a new principal debtor an unconditional and irrevocable guarantee of (a) N.V. and PLC or, (b) where N.V. or PLC becomes the principal debtor, PLC or, as the case may be, N.V. and UNUS (in each case), shall have been given in form and substance satisfactory to the Trustee of the payment of all moneys payable by the Substituted Company under these presents, the Notes, the Receipts and the Coupons;

the relevant Issuer and the relevant Guarantors (or, where appropriate, any such previous Substituted Company) and the Substituted Company comply with such other requirements as the Trustee may reasonably direct in the interests of the Holders of the Notes of the relevant Series;

if the directors of the Substituted Company (or other officers acceptable to the Trustee) shall certify to the Trustee that it is solvent at the time at which the said substitution is proposed to be effected, the Trustee may rely absolutely on such certificate and shall not be bound to have regard to its financial condition, profits or prospects or to compare the same with those of the relevant Issuer or such relevant Guarantor (or of any previous Substituted Company); and

(without prejudice to the generality of sub-paragraphs (a) to (e) inclusive of this paragraph (i)), where the Substituted Company is incorporated, domiciled or resident in, or is otherwise subject generally to the taxing jurisdiction of, or of any authority in, a territory or territories other than The Netherlands, the United Kingdom, Japan, the United States or the territory applicable in respect of any previous Substituted Company, undertakings or covenants are given in terms corresponding to the provisions of Condition 9 containing, in substitution for or in addition to (as the case may require) the references to The Netherlands, the United Kingdom, Japan, the United States or such territory, as the case may be, references to the territory or territories in which the Substituted Company is incorporated, domiciled or resident or the taxing jurisdiction of which, or of any authority of or in which, the Substituted Company is otherwise subject generally and in the event of any such undertaking or covenant being given the provisions of these presents shall be read and construed accordingly and the provisions of parts (i) to (iv) of Condition 7(c) shall be amended accordingly.

 

  (ii) Upon the execution of such documents and compliance with the said requirements:

 

  (a) the Substituted Company shall be deemed to be named in these presents and on the Notes, the Receipts and the Coupons as principal debtor or, as the case may be, as a guarantor in place of the relevant Issuer or such relevant Guarantor (or of any previous Substituted Company) and these presents and the Notes, the Receipts and the Coupons shall thereupon be deemed to be amended in such manner as expressly specified in any supplement to these presents or, failing which, as shall be necessary to give effect to the substitution and the giving of any guarantee; and

 

    

 

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in the case of a valid substitution of any of the Issuers (or any such previous Substituted Company), the relevant Issuer (or any such previous Substituted Company) shall be released from any or all of its obligations under these presents and the Notes, the Receipts and the Coupons, but without prejudice to the obligations of the relevant Guarantors (or the successor company of any such Guarantors) under the Guarantee or their guarantee; and (y) in the case of the valid substitution of any of the Guarantors (or any such previous Substituted Company), the relevant Guarantor (or any such previous Substituted Company) shall be released from all of its obligations under the Guarantee or such guarantee but without prejudice to the obligations of the remaining Guarantors (or the successor company of any such Guarantors) under the Guarantee or their guarantee. Not later than 15 days after the execution of any such undertaking and guarantee and such other deeds, documents and instruments as aforesaid and compliance with the said requirements of the Trustee, the relevant Issuer or the relevant Guarantor or the previous Substituted Company shall, unless the Trustee agrees otherwise, give notice thereof to the Noteholders in accordance with Condition 14.

 

  (iii) In connection with any proposed substitution the Trustee may agree, without consent of the Noteholders (or, as the case may be, the Holders of Notes of the relevant Series) to a change of the law governing the Notes (or, as the case may be, the Notes of the relevant Series) and/or these presents Provided that such change would not in the opinion of the Trustee be materially prejudicial to the interests of the Holders of the Notes (or, as the case may be, the Holders of the Notes of the relevant Series).

 

  (C) The relevant Issuer, N.V. and PLC each hereby covenants with the Trustee that, so long as any of the Notes, the Receipts or the Coupons is outstanding, it will not, except where the relevant Issuer, N.V. or PLC, as the case may be, is the continuing company, merge into, or transfer all or substantially all of its assets or undertaking to, another company (“ New Company ”) unless, inter alia , a trust deed is executed or some other form of undertaking is given by the New Company in form and manner reasonably satisfactory to the Trustee, agreeing to be bound by the terms of these presents, the Notes, the Receipts and the Coupons, with any consequential amendments which the Trustee may deem appropriate as fully as if the New Company had been named in these presents and on the Notes, the Receipts and the Coupons in place of the relevant Issuer, N.V. or PLC, as the case may be (or of any previous substitute under this Clause), and the following further conditions apply:

 

  (i) the relevant Issuer, N.V. or PLC, as the case may be (or any previous substitute under this Clause), and the New Company shall comply with such other requirements as the Trustee may reasonably direct in the interests of the Notes of the relevant Series;

 

  (ii)

where the New Company is incorporated, domiciled or resident in, or is otherwise subject generally to the taxing jurisdiction of, or of any authority in, a territory or territories other than, in the case of N.V., The Netherlands, in the case of PLC, the United Kingdom, in the case of UJH, Japan or, in the case of any previous substitute under this Clause, the applicable territory, undertakings or covenants shall be given by the New Company in terms corresponding to the provisions of Condition 9 with the substitution for the references to The Netherlands, the United Kingdom, Japan or such territory, as the case may be, of references to the territory or territories in

 

    

 

29

    


  which the New Company is incorporated, domiciled or resident or to whose taxing jurisdiction it is subject generally and in the event of any such undertaking or covenant being given the provisions of these presents shall be read and construed accordingly and the provisions of parts (i) to (iv) of Condition 7(c) shall be amended accordingly;

 

  (iii) in the case of the merger of, or transfer by, the relevant Issuer or any previous substitute under this Clause, an unconditional and irrevocable guarantee is given by the relevant Guarantors in form and substance satisfactory to the Trustee of the payment of all moneys payable by the New Company under these presents and the Notes of the relevant Series; and

 

  (iv) if the directors of the New Company (or other officers acceptable to the Trustee) shall certify to the Trustee that it is solvent at the time at which the said merger or transfer is proposed to be effected, the Trustee may rely absolutely on such certificate and shall not be bound to have regard to the financial condition, profits or prospects of the New Company or to compare the same with those of the relevant Issuer, N.V. or PLC, as the case may be (or of any previous substitute under this Clause).

Any such trust deed or undertaking shall, if so expressed, operate to release the relevant Issuer, N.V. or PLC, as the case may be, or any such previous substitute as aforesaid, from all of its obligations under the Notes, the Receipts, the Coupons and these presents. Not later than 15 days after the execution of any such documents as aforesaid and after compliance with the said requirements of the Trustee, the relevant Issuer, N.V. or PLC, as the case may be, or such previous substitute shall give notice thereof to the Noteholders in accordance with Condition 14. Upon the execution of such documents and compliance with the said requirements the New Company shall be deemed to be named in these presents and on the Notes, the Receipts and the Coupons in place of the relevant Issuer, N.V. or PLC, as the case may be (or of any previous substitute under this sub-clause), under these presents, the Notes, the Receipts and the Coupons, and these presents, the Notes, the Receipts and the Coupons shall be deemed to be amended in such manner as shall be necessary to give effect to the above provisions and without prejudice to the generality of the foregoing references in these presents, in the Notes, the Receipts or in the Coupons to the relevant Issuer, N.V. or PLC, as the case may be, or such previous substitute shall, where the context so requires, be deemed to be references to the New Company.

 

  (D) In connection with any proposed substitution, merger or transfer as aforesaid, the Trustee shall, without prejudice to the generality of the foregoing, not have regard to the consequences of such substitution, merger or transfer for individual Noteholders of the relevant Series resulting from their being for any purpose domiciled or resident in, otherwise connected with, or subject to the jurisdiction of, any particular territory or any political subdivision thereof.

 

  (E)

N.V. and PLC may, at any time, appoint any Group Company to become an Issuer of Notes in accordance with the following provisions of this sub-clause without the consent of the Noteholders, the Receiptholders or the Couponholders. Any Group Company that is to become an Issuer shall do so under the terms of a supplemental deed in or substantially in the form set out in the Sixth Schedule or in

 

    

 

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  such other form as may be approved in writing by the Trustee (which shall take effect in accordance with its terms), whereby such Group Company agrees to be bound as an Issuer under these presents and the Paying Agency Agreement. Each of N.V. and PLC undertakes to use all reasonable efforts to procure that all such acts and things are done as may be necessary or desirable to ensure the due execution and delivery of such supplemental deed by each such Group Company and that each such Group Company becomes bound by such provisions of these presents and the Paying Agency Agreement as are expressed to be assumed by it in such supplemental deed. The Trustee shall be entitled to rely on the legal opinions referred to in such supplemental deed but otherwise shall not be bound to enquire into the financial condition of any such Group Company or to make any investigation into, or to satisfy itself in any way in relation to the valid existence of, any such Group Company, its power or capacity to enter into such supplemental deed or to perform its obligations under these presents or the Paying Agency Agreement, the due authorisation, execution or delivery of such supplemental deed or performance of any such obligations by such Group Company, the obtaining of any necessary consents or authorisations for such execution, delivery or performance, the taking of any action (including any necessary registration or filing) required to ensure the enforceability as against such Group Company of any obligations expressed to be assumed by it under these presents or the Paying Agency Agreement.

 

  (F) If (i) the Trustee does not have actual knowledge or express notice that any Event of Default or any event which, with the lapse of time and/or the giving of notice and/or the issue of a certificate, would constitute an Event of Default has occurred and is continuing and (ii) the relevant Issuer has outstanding Notes issued by it, the Substituted Company (which if not an Issuer shall have become an Issuer pursuant to sub-clause (B) of this Clause) shall have assumed the obligations of such Issuer pursuant to sub-clause (B) of this Clause, the Trustee shall forthwith execute and deliver a supplemental deed in or substantially in the form set out in the Seventh Schedule or in such other form as may be approved by the Trustee whereby such Issuer is released from its covenants and other obligations under these presents.

 

18 Redemption, Purchase and Cancellation

 

  (A)

All Notes redeemed or purchased by or on behalf of any of the Issuers, the Guarantors or any Group Company together with all unmatured Coupons attached thereto or surrendered therewith (and, in the case of Instalment Notes, with all unmatured Receipts attached thereto or surrendered therewith), and all Coupons paid in accordance with and in the manner provided in the Conditions, shall be cancelled forthwith by or on behalf of the relevant Issuer save that the purchaser may elect in the case of Notes so purchased to hold or resell such Notes, together with all unmatured Coupons (or, as the case may be, Receipts) attached thereto. The relevant Issuer shall, within seven days after being so requested in writing by the Trustee, procure that a certificate stating (i) the amounts paid in respect of Notes, Receipts and Coupons so redeemed or paid and cancelled, (ii) the certificate numbers of Notes so redeemed, purchased and cancelled and (iii) the total number and maturity dates of such cancelled Coupons shall, within such seven day period, be given to the Trustee by the Principal Paying Agent provided, other than where such Notes are represented by a NGN, delivery thereof to the

 

    

 

31

    


  Principal Paying Agent has been made by any such purchaser as soon as reasonably practicable after the date of such redemption, purchase and cancellation or payment (as the case may be). In the case of purchase and/or cancellation of a Temporary Global Note which is a NGN or a Permanent Global Note which is a NGN, the relevant Issuer shall procure, in accordance with the terms of the Paying Agency Agreement, that the Principal Paying Agent instructs the ICSDs to make appropriate entries in their respective records to reflect such purchase and/or cancellation. N.V. or PLC shall, within seven days after being so requested in writing by the Trustee, deliver a certificate in writing signed by a duly authorised signatory thereof setting out the total numbers and aggregate nominal amount of Notes of each Series which up to and including the date of such certificate are held beneficially at such date by the Issuers, the Guarantors or any Group Company, but which have not been cancelled. Such certificates may be accepted by the Trustee as conclusive evidence of:

repayment or discharge pro tanto of the Notes and of payment of Receipts or Coupons respectively; or

beneficial ownership of the relevant Notes by the Issuers, the Guarantors or any Group Company.

 

  (B) The relevant Issuer shall procure that there shall be kept a full and complete record of all Notes, Receipts and Coupons (other than certificate numbers of Coupons) and their redemption, payment, purchase and cancellation and of all replacement Notes, Receipts or Coupons issued in substitution for mutilated, lost, stolen or destroyed Notes, Receipts or Coupons and the relevant Issuer shall further procure that such record shall be made available to the Trustee, within seven days after being so requested in writing by the Trustee.

 

19 Noteholders to be treated as holding all Receipts and Coupons

 

  (A) Wherever in these presents the Trustee is required or entitled to exercise a trust, power, authority or discretion by reference to the interests of the Noteholders or any of the same (or, as the case may be, the Holders of the Notes of the relevant Series or any of the same), the Trustee shall assume that each Noteholder is the Holder of all Receipts (or, as the case may be, Coupons) appertaining to each Note of such Series of which he is the Holder.

 

  (B) Each of the Trustee, the Paying Agents, the relevant Issuer and the relevant Guarantors (whether or not it is overdue and regardless of any notice of ownership or writing thereon, or notice of any previous theft or loss thereof) shall for the purpose of making payments and for all other purposes (save as provided in (ii) below) be entitled to deem and treat:

 

  (i) the bearer of any Note in global form or Definitive Note or the relative Receipt or Coupon; and

 

  (ii) in the case of any Notes in global form, for the purpose only of the exercise by the Trustee of all rights, duties, discretions, powers and authorities imposed or conferred on the Trustee which are to be exercised or performed by reference to or in favour of Noteholders but not for any other purpose, each person for the time being shown in the records of an ICSD or any other relevant clearing system as having a particular nominal amount of any Notes in global form credited to his securities account,

 

    

 

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  as the absolute owner thereof and of all rights thereunder free from encumbrances and shall not be required to obtain proof of such ownership (other than, in the case of any person for the time being so shown in the records of an ICSD or any other relevant clearing system, a certificate or letter of confirmation signed on behalf of an ICSD or the relevant clearing system, or any such certificate or document which may comprise a statement or print-out of electronic records provided by Euroclear’s EUCLID or Clearstream, Luxembourg’s Cedrom System or any other relevant clearing system) as to the identity of the bearer of any Definitive Notes or Coupon.

 

20 No notice to Receiptholders or Couponholders

None of the relevant Issuer, the relevant Guarantors, nor the Trustee shall be required to give any notice to the Receiptholders or, as the case may be, the Couponholders for any purpose under these presents and the Receiptholders or, as the case may be, the Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Noteholders in accordance with Condition 14.

 

21 Trustee may enter into other transactions with N.V., PLC or any of their group companies

No Trustee and no director or officer of any corporation being a trustee of these presents shall by reason of the fiduciary position of such trustee be in any way precluded from making any contracts or entering into any transactions in the ordinary course of business with N.V. or PLC or any of their respective group companies, whether directly or through any other Group Company or associated company, or from accepting the trusteeship of any other debenture stock, debentures or securities of N.V. or PLC or any of their respective group companies or any company in which N.V., PLC, UJH or UNUS, as the case may be, is interested and without prejudice to the generality of these provisions it is expressly declared that such contracts and transactions may include any contract or transaction in relation to the placing, underwriting, purchasing, subscribing for or dealing with or lending money upon or making payments in respect of the Notes or any other stock, shares, debenture stock, debentures or other securities of N.V. or PLC or any of their respective group companies or any company in which N.V., PLC, UJH or UNUS, as the case may be, is interested or any contract or banking or insurance with N.V. or PLC or any of their respective group companies and neither the Trustee nor any such director or officer shall be accountable to the Noteholders, the Receiptholders or Couponholders or N.V. or PLC or any of their respective group companies for any profit, fees, commissions, interest, discounts or share of brokerage earned, arising or resulting from any such contracts or transactions and the Trustee and any such director or officer shall also be at liberty to retain the same for its or his own benefit.

 

22 Provisions supplemental to the Trustee Act 1925 and the Trustee Act 2000 in favour of the Trustee

By way of supplement to the Trustee Act 1925 and the Trustee Act 2000 (the “ Trustee Acts ”) it is expressly declared as follows:

 

  (A)

the Trustee may in relation to these presents act on the opinion or advice of or a certificate or any information obtained from any lawyer, banker, valuer, surveyor, broker, auctioneer, accountant or other expert in The Netherlands, the United

 

    

 

33

    


  Kingdom, Japan, the United States or elsewhere (whether obtained by the Trustee, N.V., PLC, UJH, UNUS, any Group Company of N.V. or PLC or any Paying Agent) and shall not be responsible for any loss occasioned by so acting; any such opinion, advice, certificate or information may be sent or obtained by letter or facsimile copy and the Trustee shall not be liable for acting on any opinion, advice, certificate or information purporting to be so conveyed although the same shall contain some error or shall not be authentic;

 

  (B) the Trustee shall be at liberty to accept a certificate signed by (i) any Director or other person duly authorised of N.V. or PLC (as the case may be) (ii) a Representative Director or other person duly authorised of UJH or (iii) the President, any Vice President or the Treasurer or other person duly authorised of UNUS as to any fact or matter prima facie within the knowledge of N.V., PLC, UJH or, as the case may be, UNUS as sufficient evidence thereof and a like certificate to the effect that any particular dealing or transaction or step or thing is, in the opinion of the person so certifying, expedient as sufficient evidence that it is expedient and the Trustee shall not be bound in any such case to call for further evidence or be responsible for any loss that may be occasioned by its failing so to do;

 

  (C) the Trustee shall (save as expressly otherwise provided herein) as regards all the trusts, powers, authorities and discretions vested in it by these presents or by operation of law have absolute and uncontrolled discretion as to the exercise or non-exercise thereof and, provided it shall not have acted fraudulently, the Trustee shall not be responsible for any loss, costs, damages, expenses or inconvenience that may result from the exercise or non-exercise thereof;

 

  (D) the Trustee may appoint and pay any person to act as a custodian or nominee on any terms in relation to such assets of the trust as the Trustee may determine, including for the purpose of depositing with a custodian these presents and all deeds and other documents relating to these presents or the notes of any series, and the Trustee shall not be responsible for any loss, liability, expense, demand, cost, claim or proceedings incurred by reason of the misconduct, omission or default on the part of any person appointed by it hereunder, or be bound to supervise the proceedings or acts of any such person; the Trustee is not obliged to appoint a custodian if the Trustee invests in securities payable to bearer;

 

  (E) the Trustee as between itself, the Noteholders, the Receiptholders and the Couponholders shall have full power to determine all questions and doubts arising in relation to any of the provisions of these presents and every such determination, whether made upon a question actually raised or implied in the acts or proceedings of the Trustee, shall be conclusive and shall bind the Trustee, the Noteholders, the Receiptholders and the Couponholders;

 

  (F) the Trustee shall not be responsible for acting upon any resolution purporting to have been passed at any meeting of the Noteholders (or, as the case may be, the Noteholders of any Series) in respect whereof minutes have been made and signed even though it may subsequently be found that there was some defect in the constitution of the meeting or the passing of the resolution or that for any reason the resolution was not valid or binding upon the Noteholders, the Receiptholders and/or the relative Couponholders (or, as the case may be, the Noteholders of any Series, the Receiptholders and the Couponholders (if any));

 

    

 

34

    


  (G) the Trustee may, in the conduct of the trust business, instead of acting personally, employ and pay an agent on any terms, whether or not a lawyer or other professional person, to transact or conduct, or concur in transacting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and payment of money) and the Trustee shall not be responsible for any misconduct on the part of any person appointed by it hereunder or be bound to supervise the proceedings or acts of any such person;

 

  (H) any trustee being a banker, lawyer, broker or other person engaged in any profession or business shall be entitled to charge and be paid all usual professional and other charges for business transacted and acts done by him or his partner or firm on matters arising in connection with the trusts of these presents and also his reasonable and properly incurred charges in addition to disbursements for all other work and business done and all time spent by him or his partner or firm on matters arising in connection with these presents, including matters which might or should have been attended to in person by a trustee not being a banker, lawyer, broker or other professional person;

 

  (I) the Trustee shall not be responsible for the receipt or application by the relevant Issuer of the proceeds of the issue of the Notes of any Series, the exchange of any Temporary Global Note for a Permanent Global Note or, as the case may be, Definitive Notes or the exchange of any Permanent Global Note for Definitive Notes or for the delivery of the Definitive Notes to the persons entitled thereto;

 

  (J) the Trustee shall not be liable to the relevant Issuer or the relevant Guarantors or any Noteholder, Receiptholder or Couponholder by reason of having accepted as valid or not having rejected any Note, Receipt or Coupon purporting to be such and subsequently found to be forged or not authentic;

 

  (K) the Trustee shall not (unless ordered so to do by a court of competent jurisdiction) be required to disclose to any Noteholder, Receiptholder or Couponholder confidential, financial or other information made available to the Trustee by any Issuer and/or any Guarantor in connection with these presents and no Noteholder, the Receiptholder or Couponholder shall be entitled to take any action to obtain from the Trustee any such information;

 

  (L) where it is necessary or desirable for any purpose in connection with these presents to convert any sum from one currency to another it shall (unless otherwise provided by these presents or required by law) be converted at such rate or rates, in accordance with such method and as at such date for the determination of such rate of exchange, as may be specified by the Trustee in its absolute discretion but having regard to current rates of exchange, if available, and any rate, method and date so specified shall be binding on the relevant Issuer, the relevant Guarantors, the Noteholders, the Receiptholders and the Couponholders;

 

  (M) any consent given by the Trustee for the purposes of these presents may be given on such terms and subject to such conditions (if any) as the Trustee thinks fit;

 

  (N)

whenever in these presents the Trustee is required in connection with any exercise of its powers, trusts, authorities or discretions to have regard to the interests of the Noteholders, (or, as the case may be, the Holders of the Notes of any one or more Series) it shall have regard to the interests of such Noteholders as a class and in particular, but without prejudice to the generality of the foregoing, shall not be

 

    

 

35

    


  obliged to have regard to the consequences of such exercise for any individual Noteholder resulting from his or its being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim from the relevant Issuer or the relevant Guarantors any indemnification or payment in respect of any tax consequence of any such exercise upon any individual Noteholder, Receiptholder or Couponholder;

 

  (O) the Trustee may call for and shall be at liberty to accept and place full reliance on as sufficient evidence thereof and shall not be liable to any Issuer, any Guarantor or any Noteholder, Receiptholder or Couponholder by reason only of either having accepted as valid or not having rejected an original certificate or letter of confirmation purporting to be signed on behalf of an ICSD or any other relevant clearing system or any form of record made and verified by either of them to the effect that at any particular time or throughout any particular period any particular person is, was or will be shown in its records as having a particular nominal amount of Notes of a particular Series credited to his securities account; and

 

  (P) no provision of the Trust Deed or the Conditions shall require the Trustee to do anything which may in its opinion be illegal or contrary to applicable law or regulation.

Provided nevertheless that none of the provisions of these presents shall in any case in which the Trustee has failed to show the degree of care and diligence required of it, having regard to the provisions of these presents conferring on the Trustee any powers, authorities or discretions, relieve or indemnify the Trustee against any liabilities which by virtue of any rule of law would otherwise attach to it in respect of any negligence, default, breach of duty or breach of trust of which it or any of its employees, agents or delegates may be guilty in relation to its duties under these presents.

 

23 Disapplication

Section 1 of the Trustee Act 2000 shall not apply to the duties of the Trustee in relation to the trusts constituted by these presents. Where there are any inconsistencies between the Trustee Acts and the provisions of these presents, the provisions of these presents shall, to the extent allowed by law, prevail and, in the case of any such inconsistency with the Trustee Act 2000, the provisions of this Trust Deed shall constitute a restriction or exclusion for the purposes of that Act.

 

24 Trustee entitled to assume due performance

Except as herein otherwise expressly provided the Trustee shall be and is hereby authorised to assume without enquiry, in the absence of knowledge or express notice to the contrary, that each of the Issuers and the Guarantors is duly performing and observing all the covenants and provisions contained in these presents relating to the Issuers and/or the Guarantors (as the case may be) and on their respective parts to be performed and observed and that no event has happened upon the happening of which any of the Notes of any Series may become repayable.

 

    

 

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25 Waiver

The Trustee may, without prejudice to its rights in respect of any subsequent breach, condition, event or act, from time to time and at any time, but only if and in so far as in its opinion the interests of the Noteholders (or, as the case may be, the Holders of Notes of the relevant Series) shall not be materially prejudiced thereby, authorise or waive, on such terms and conditions (if any) as shall seem expedient to it, any proposed breach or breach of any of the covenants or provisions contained in these presents or the Notes, the Receipts or Coupons (or, as the case may be, the Notes of such Series and the relative Receipts and/or Coupons) or determine, in relation to any Series, that any condition, event or act which constitutes, or which with the giving of notice and/or the lapse of time and/or the issue of a certificate would constitute, but for such determination, an Event of Default for the purposes of these presents shall not do so provided always that the Trustee shall not exercise any powers conferred upon it by this Clause in respect of the Notes of any Series in contravention of any express direction by an Extraordinary Resolution of the Notes of such Series then outstanding (but so that no such direction or request shall affect any authorisation, waiver or determination previously given or made). Any such waiver, authorisation or determination shall be binding on the Noteholders, the Receiptholders and the Couponholders (or, as the case may be, the Holders of the Notes, Receipts and Coupons of such Series) and if, but only if, the Trustee shall so require, shall be notified by the relevant Issuer to the Noteholders (or, as the case may be, the Holders of Notes of such Series) in accordance with Condition 14 as soon as practicable thereafter.

 

26 Power to delegate

The Trustee may, in the execution and exercise of all or any of the trusts, powers, authorities and discretions vested in it by these presents, act by responsible officers or a responsible officer for the time being of the Trustee and the Trustee may also whenever it thinks fit, whether by power of attorney or otherwise, delegate to any person or persons all or any of the trusts, powers, authorities and discretions vested in it by these presents and any such delegation may be made upon such terms and conditions and subject to such regulations (including power to sub-delegate) as the Trustee may think fit in the interests of the Noteholders (or, as the case may be, the Holders of Notes of any one or more Series) and provided that the Trustee shall have exercised reasonable care in the selection of such delegate and subject to the proviso in Clause 22, it shall not be bound to supervise the proceedings and shall not in any way or to any extent be responsible for any loss incurred by any misconduct or default on the part of such delegate or sub-delegate. The Trustee shall give prompt notice to the relevant Issuer of the appointment of any delegate as aforesaid and shall procure that any delegate shall also give prompt notice to the relevant Issuer or any sub-delegate.

 

27 Competence of a majority of Trustees

Whenever there shall be more than two trustees hereof the majority of such trustees shall (provided such majority includes a trust corporation) be competent to execute and exercise all the trusts, powers, authorities and discretions vested by these presents in the Trustee generally.

 

    

 

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28 Appointment of New Trustees

 

  (A) The power of appointing new trustees shall be vested in the Issuers but, subject to sub-clause (B) of this Clause, no person shall be appointed as Trustee in relation to any Series who shall not previously have been approved by an Extraordinary Resolution of the Holders of Notes of that Series. A trust corporation may be appointed sole trustee of the presents but subject thereto there shall be at least two trustees of these presents one at least of which shall be a trust corporation. Any appointment of a new trustee hereof shall as soon as practicable thereafter be notified by the Issuers to the Paying Agents and to the Noteholders. The Noteholders shall together have the power, exercisable by Extraordinary Resolution, to remove any trustee or trustees for the time being of these presents. The removal of any trustee shall not become effective unless there remains a trustee of these presents (being a trust corporation) in office after such removal.

 

  (B) Notwithstanding the provisions of sub-clause (A) of this Clause, the Trustee may, upon giving prior notice to but without the consent of the Issuers or the Guarantors or the Noteholders, Receiptholders or Couponholders (or, as the case may be, the Holders of Notes, Receipts or Coupons of any one or more Series), appoint any person established or resident in any jurisdiction (whether a trust corporation or not) to act either as a separate trustee or as a co-trustee jointly with the Trustee (i) if the Trustee considers such appointment to be in the interests of the Holders of the Notes of the relevant Series or (ii) for the purposes of conforming to any legal requirements, restrictions or conditions in any jurisdiction in which any particular act or acts are to be performed. The Issuers hereby irrevocably appoint the Trustee to be their attorney in their name and on their behalf to execute any such instrument of appointment. Such person shall (subject always to the provisions of these presents) have such trusts, powers, authorities and discretions (not exceeding those conferred on the Trustee by these presents) and such duties and obligations as shall be conferred on or imposed by the instrument of appointment (which shall include all relevant obligations which are imposed on the Trustee). The Trustee shall have power in like manner to remove any such person. Such reasonable remuneration as the Trustee may pay to any such person, together with any attributable costs, charges and expenses incurred by it in performing its function as such separate trustee or co-trustee, shall for the purposes of these presents be treated as costs, charges and expenses incurred by the Trustee.

 

29 Retirement of Trustees

 

  (A) Any Trustee for the time being of these presents may retire at any time upon giving not less than three months’ notice in writing to each Issuer and each Guarantor without assigning any reason and without being responsible for any costs occasioned by such retirement. The retirement of any Trustee shall not become effective unless there remains a trustee of the presents (being a trust corporation) in office after such retirement. Each of the Issuers covenants that in the event of a trustee giving such notice under this Clause it shall use its best endeavours to procure a new trustee to be appointed.

 

  (B)

Where there are outstanding separate Series of Notes constituted by this Deed the powers conferred upon the Issuers and the Guarantors, the Noteholders and the Trustee by Clause 28 and sub-clause (A) of this Clause 29 shall, at the discretion

 

    

 

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  of the person exercising such power, be capable of being exercised, and shall be effective where so expressed to be exercised, to enable a new trustee to be appointed, a trustee to be removed, a trustee to retire and a separate trustee or co-trustee to be appointed separately in relation to each such separate Series of Notes as aforesaid, and “ Trustee ” as used in this Deed shall be construed accordingly. In the event of the foregoing provisions of this sub-clause (B) resulting in there being more than one Trustee at any one time, executed originals of this Deed and all other original documentation shall be held by or to the order of The Law Debenture Trust Corporation p.l.c. if still trustee of any of the said separate Series of the Notes, or by such one of the trustees as the Issuers or Guarantors may, subject to any contrary direction of the Noteholders of the relevant Series by Extraordinary Resolution, from time to time designate.

 

30 Powers of the Trustee are additional

The powers conferred by these presents upon the Trustee shall be in addition to any powers which may from time to time be vested in it by general law or as the Holder of any of the Notes, Receipts or Coupons.

 

31 Currency Indemnity

 

  (A) If a judgment or order is rendered by a court of any particular jurisdiction for the payment of any amounts owing to the Trustee or any of the Noteholders, Receiptholders or, as the case may be, Couponholders under these presents or any of the Notes, Receipts or Coupons or under a judgment or order of a court of any other jurisdiction in respect thereof or for the payment of damages in respect of either thereof and any such judgment or order is expressed in a currency (in this Clause referred to as the “ Judgment Currency ”) other than the currency in which such amounts are so owing (the “ relevant currency ”) and the Trustee or the Noteholders, Receiptholders or, as the case may be, Couponholders do not have an option to have such judgment or order of such court expressed in the relevant currency, the relevant Issuer (failing which the relevant Guarantors) shall be liable, as a separate and independent obligation, to indemnify and hold the Trustee and the Noteholders, Receiptholders and Couponholders harmless against any deficiency arising or resulting from any variation between (1) the rate of exchange applied in converting any amount expressed in the relevant currency into the Judgment Currency for the purposes of such judgment or order and (2) the rate of exchange of the Judgment Currency for the relevant currency as at the date or dates of discharge of the said judgment or order.

 

  (B) If as a result of any judgment expressed in a Judgment Currency as is referred to in sub-clause (A) of this Clause and a variation in rates of exchange as therein mentioned the amount received by the Trustee, if converted on the date of payment into the relevant currency, would yield a sum in excess of the sum (expressed in the relevant currency) due to the Trustee, the Trustee shall hold such excess to the order of the relevant Issuer.

 

32 Notices

Any notice or demand to any Issuer, or any Guarantor or the Trustee or any approval or certificate of the Trustee required to be given, made or served for any purpose of these

 

    

 

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presents shall be given, made or served by sending the same by pre-paid post (first-class if inland, airmail if overseas), telex or by facsimile copy or by delivering the same by hand as follows:

if to Unilever N.V.:

 

   Address:   

Weena 455

3013 AL Rotterdam

The Netherlands

   Fax:    +31 10 217 4287
   Attention:    Group Secretary

if to Unilever PLC:

 

   Address:   

Unilever House

100 Victoria Embankment

London EC4Y 0DY

   Fax:    +44 20 7822 6108
   Attention:    Group Secretary

if to Unilever Japan Holdings K.K.

 

   Address:   

Nakameguro GT Tower

1-1, Kamimeguro 2-chome

Meguro-ku

Tokyo 153-8578

Japan

   Fax:    +81 3 3719 4462
   Attention:    Treasury

if to Unilever United States, Inc.

 

   Address:    700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632
      United States of America
   Fax:    +1 (201) 894 2775
   Attention:    General Counsel

if to the Trustee to:

 

   Address:   

Fifth Floor

100 Wood Street

London EC2V 7EX

   Fax:    +44 20 7606 0643

 

    

 

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   Attention:    The Manager, Commercial Trusts

or at such other address as shall have been notified (in accordance with this Clause) by the party in question to the other parties hereto for the purposes of this Clause and any notice sent by post as provided in this Clause shall be deemed to have been given, made or served 48 hours (in the case of inland post) or 14 days (in the case of overseas post) after despatch, any notice sent by telex as provided in this Clause shall be deemed to have been given, made or served at the time the answerback is received and any notice sent by facsimile copy as provided in this Clause shall be deemed to have been given, made or served upon receipt in complete and legible form. A notice given under this Trust Deed but received on a day which is not a Business Day (as defined in the Fourth Schedule to this Trust Deed) or after business hours in the place of receipt will only be deemed to be given on the next Business Day in that place. In the case of a notice or demand to any Issuer, a copy of such notice or demand shall, in addition, be given, made or served hereunder to each of the Guarantors.

 

33 Contracts (Rights of Third Parties) Act 1999

The parties to this Trust Deed do not intend that any term of this Trust Deed should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Trust Deed.

 

34 Governing Law

These presents, the Notes, the Receipts and the Coupons, and any non-contractual obligations arising out of or in connection with them, shall be governed by, and construed in accordance with, English law and, in relation to all claims arising hereunder, whether contractual or non-contractual, N.V., UJH and UNUS severally agree that the courts of England are to have jurisdiction to settle any such claim and that accordingly any suit, action or proceedings arising hereunder (together referred to as “ Proceedings ”) may be brought in such courts save that, in respect of Notes, Receipts and Coupons issued under this Trust Deed which are denominated in the lawful currency of Switzerland and in respect of which it is specified in the relevant Final Terms that such Notes are to be listed on the SIX Swiss Exchange, each of the parties hereto irrevocably agrees, for the benefit only of the Trustee and the holders of such Notes, Receipts or Coupons that the ordinary courts of the Canton of Zurich, place of jurisdiction being Zurich 1, Switzerland, shall have non-exclusive jurisdiction to hear and determine Proceedings. Nothing contained in this Clause shall limit any right to take Proceedings against N.V., UJH, UNUS or PLC in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. Each of N.V., UJH and UNUS irrevocably agrees that any Proceedings in England or any demand or any notice in respect of Notes may be made or served on it by the same being posted in a prepaid registered or recorded delivery letter addressed to it at the address set out in Clause 32 for the time being of PLC (or at such other office as it may have notified in writing to the Trustee and as the Trustee shall from time to time have approved) and marked for the attention of the Group Secretary of PLC or such other official of PLC as N.V., UJH or, as the case may be UNUS may have notified in writing to the Trustee and the Trustee shall from time to time have approved.

 

    

 

41

    


In witness whereof this Trust Deed has been executed as a deed by the parties hereto and is intended to be and is hereby delivered on the date first above written.

 

    

 

42

    


The First Schedule

Form of Temporary Global Note

 

Series Number: [•]    Serial Number: [•]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.] 1

THIS GLOBAL NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED HEREIN HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[PAYMENT OF INTEREST ON THE NOTES TO AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION (EXCEPT FOR (I) A FINANCIAL INSTITUTION DESIGNATED BY THE CABINET ORDER RELATING TO THE SPECIAL TAXATION MEASURES LAW OF JAPAN (CABINET ORDER NO. 43 OF 1957) (AS AMENDED) (THE “ CABINET ORDER ”) WHICH HAS COMPLIED WITH THE REQUIREMENTS UNDER ARTICLE 6 OF THE SPECIAL TAXATION MEASURES LAW OF JAPAN AND (II) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION OR A FINANCIAL INSTRUMENTS FIRM AS PROVIDED IN ARTICLE 3-3, PARAGRAPH 6 OF THE SPECIAL TAXATION MEASURES LAW WHICH RECEIVES THE INTEREST PAYMENTS THROUGH ITS PAYMENT HANDLING AGENT IN JAPAN AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER THAT PARAGRAPH), OR TO AN INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION FOR JAPANESE TAX PURPOSES WHO OR WHICH IS A PERSON HAVING A SPECIAL RELATIONSHIP (AS DESCRIBED IN ARTICLE 3-2-2, PARAGRAPHS 5 THROUGH 7 OF THE CABINET ORDER) WITH THE ISSUER WILL BE SUBJECT TO JAPANESE INCOME TAX ON THE AMOUNT OF SUCH INTEREST.] 2

[NAME OF ISSUER]

(incorporated in 3 [•] with limited liability)

TEMPORARY GLOBAL NOTE

representing up to

[ Aggregate principal amount of Series ]

[ Title of Notes ]

irrevocably and unconditionally guaranteed by

4 [•]

 

1   Include bracketed language on all Notes with maturities of more than 365 days.
2   Include bracketed language on all Notes issued by (a) UJH or (b) N.V. or PLC, in circumstances where any interest on the Notes is attributable to a business in Japan conducted by such Issuer of the Notes in the manner provided for in the Special Taxation Measures Law of Japan.
3   Insert jurisdiction of incorporation of Issuer and, if Unilever N.V. is Issuer, include “and having its corporate seat in Rotterdam, The Netherlands”.
4   Insert name of Guarantors.

 

    

 

43

    


This Temporary Global Note is issued in respect of [ principal amount of Temporary Global Note ] in principal amount of an issue of [ aggregate principal amount of Series ] in aggregate principal amount of [ title of Notes ] (the “ Notes ”) by [ name of Issuer ] (the “ Issuer ”) and has the benefit of the guarantee of [•] ( the Guarantors ”) contained in the Trust Deed as defined below. The Notes are constituted by a trust deed dated 22 July 1994 (the “ Trust Deed ”, which expression shall include any amendments or supplements thereto) made between the Issuer and the other parties named therein as issuers, the Guarantors and the other parties named therein as guarantors and The Law Debenture Trust Corporation p.l.c. (the “ Trustee ”, which expression shall include any successor to The Law Debenture Trust Corporation p.l.c. in its capacity as such for the holders of Notes from time to time).

The Issuer for value received promises, all in accordance with the Conditions (as defined in the Trust Deed) and the final terms or the pricing supplement (as applicable) (the “ Final Terms ”) prepared in relation to the Notes to pay to the bearer upon surrender hereof on [ maturity date ] [by [•] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Conditions] 5 or on such earlier date as the same may become payable in accordance therewith the principal sum of [ denomination in words and numerals ] [(as reduced from time to time in accordance with the Conditions)] or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount at the rate or rates specified therein] all subject to and in accordance with the Conditions.

If the relevant Final Terms indicates that this Temporary Global Note is intended to be a New Global Note, the nominal amount of Notes represented by this Temporary Global Note shall be aggregate amount from time to time entered in the records of both Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme (together, the “ ICSDs ”). The records of the ICSDs (which expression in this Temporary Global Note means the records that each ICSD holds for its customers which reflect the amount of such customers’ interests in the Notes represented by this Temporary Global Note) shall be conclusive evidence of the nominal amount of Notes represented by this Temporary Global Note and, for these purposes, a statement issued by an ICSD stating the nominal amount of Notes represented by this Temporary Global Note at any time shall be conclusive evidence of the records of such ICSD at that time.

If the relevant Final Terms indicates that this Temporary Global Note is not intended to be a New Global Note, the nominal amount of the Notes represented by this Temporary Global Note shall be the amount stated in the applicable Final Terms or, if lower, the nominal amount most recently entered by or on behalf of the Issuer in the relevant column in the Schedule hereto.

Except as specified herein, the bearer of this Temporary Global Note is entitled to the benefit of the same obligations on the part of the Issuer as if such bearer were the bearer of the Notes represented hereby, and all payments under and to the bearer of this Temporary Global Note shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Notes.

On or after the date (the “ Exchange Date ”) which is 40 days after the original issue date of the Notes, upon notice being given to the Principal Paying Agent, not earlier than the Exchange Date in substantially the form set out in Annex 1 hereto, by an ICSD acting on the instructions of any holder of an interest in this Temporary Global Note, this Temporary Global Note is exchangeable in whole or in part for, as specified in the relevant Final Terms, either (a) either, if the relevant Final Terms indicates that this Temporary Global Note is intended to be a New Global Note, interests recorded in the records of the ICSDs in a Permanent Global Note or, if the relevant Final Terms

 

5  

Insert only where Notes are Instalment Notes.

 

    

 

44

    


indicated this Temporary Global Note is not intended to be a New Global Note, a permanent global note (the “ Permanent Global Note ”) representing the Notes and in substantially the form (subject to completion) set out in the Second Schedule to the Trust Deed or (b) definitive notes (“ Definitive Notes ”) in substantially the form (subject to completion) set out in the Third Schedule to the Trust Deed.

On an exchange of the whole of this Temporary Global Note, this Temporary Global Note shall be surrendered to or to the order of Deutsche Bank AG, London Branch as principal paying agent (the “ Principal Paying Agent ”, which expression shall include any successor to Deutsche Bank AG, London Branch in its capacity as such at its specified office in relation to the Notes). The Issuer shall procure that:

 

(a) if the relevant Final Terms indicates that this Temporary Global Note is intended to be a New Global Note and this Temporary Global Note is to be exchanged for a Permanent Global Note, on an exchange of the whole or part only of this Temporary Global Note, details of such exchange shall be entered pro rata in the records of the ICSDs such that the nominal amount of Notes represented by this Temporary Global Note shall be reduced by the nominal amount of this Temporary Global Note so exchanged; or

 

(b) if the relevant Final Terms indicates that this Temporary Global Note is not intended to be a New Global Note or if the relevant Final Terms indicate that this Temporary Global Note is intended to be a New Global Note and this Temporary Global Note is to be exchanged for Definitive Notes, on an exchange of part only of this Temporary Global Note details of such exchange shall be entered by or on behalf of the Issuer in the Schedule hereto, whereupon the nominal amount of this Temporary Global Note and the Notes represented by this Temporary Global Note shall be reduced by the nominal amount of this Temporary Global Note so exchanged. On any exchange of this Temporary Global Note for a Permanent Global Note, details of such exchange shall be entered by or on behalf of the Issuer in the Schedule to the Permanent Global Note.

If interests in a Temporary Global Note are exchanged for a Permanent Global Note as provided above, interests in such Permanent Global Note may thereafter be exchanged for Definitive Notes, as provided above.

[Payments of interest otherwise falling due before the Exchange Date will be made only:

 

(a) upon presentation of the Temporary Global Note to the Principal Paying Agent at its specified office in relation to the Notes provided that no such presentation shall be required if the relevant Final Terms indicates that this Temporary Global Note is intended to be a New Global Note; and

 

(b) upon or to the extent of delivery to the Principal Paying Agent of a certificate or certificates issued by Euroclear Bank S.A./N.V. or Clearstream Banking, société anonyme or the operator of any other relevant clearing system and dated not earlier than the relevant interest payment date in substantially the form set out in Annex II hereto.]

[On any occasion on which a payment of interest is made in respect of this Temporary Global Note, the Issuer shall procure that either:

 

(a) if the relevant Final Terms indicates that this Temporary Global Note is intended to be a New Global Note, details of such payment shall be entered in the records of the ICSDs; or

 

(b) if the relevant Final Terms indicate that this Temporary Global Note is not intended to be a New Global Note, the same is noted on the Schedule hereto.]

 

    

 

45

    


On any occasion on which a payment of principal or redemption amount is made in respect of this Temporary Global Note or on which Notes represented by this Temporary Global Note are to be cancelled, the Issuer shall procure that:

 

(a) if the relevant Final Terms indicates that this Temporary Global Note is intended to be a New Global Note, details of such payment, redemption or cancellation (as the case may be) shall be entered pro rata in the records of the ICSDs and, upon any such entry being made, the nominal amount of the Notes recorded in the records of the ICSDs and represented by this Temporary Global Note shall be reduced by the aggregate nominal amount of the Notes so redeemed and cancelled or by the aggregate amount of the Notes in respect of which such payment is made (or, in the case of partial payment, the corresponding part thereof); and

 

(b) if the relevant Final Terms indicates that this Temporary Global Note is not intended to be a New Global Note, (i) the aggregate principal amount of the Notes in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive form or which are to be cancelled and (ii) the remaining principal amount of this Temporary Global Note (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Temporary Global Note shall for all purposes be as most recently so noted.

Payments due in respect of Notes for the time being represented by this Temporary Global Note shall be made to the bearer of this Temporary Global Note and each payment so made will discharge the Issuer’s obligations in respect thereof. Any failure to make the entries referred to above shall not affect such discharge.

This Temporary Global Note, and any non-contractual obligations arising out of or in connection with it, is governed by, and will be construed in accordance with, English law.

[The Issuer has, in the Trust Deed, agreed, for the benefit of the Trustee and the Holders of the Notes that the courts of England shall have jurisdiction to hear and determine any suit, action or proceedings which may arise out of or in connection with the Trust Deed or the Notes (including a claim or dispute relating to any non-contractual obligations arising out of or in connection with the Trust Deed or the Notes) (“ Proceedings ”) and, for such purposes, irrevocably submitted to the jurisdiction of such courts. The Issuer has, in the Trust Deed, agreed that the process by which any Proceedings in England are begun may be served on it by being posted in a prepaid registered or recorded delivery letter addressed to it at the address set out in Clause 32 of the Trust Deed of Unilever PLC. Nothing contained herein or in the Trust Deed shall affect the right to serve process in any other manner permitted by law. The submission to the jurisdiction of the courts of England shall not (and shall not be construed so as to) limit the right of the Trustee or Holders of the Notes or any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law preclude the taking of proceedings in any other jurisdiction.] 6

[The Issuer has, in the Trust Deed, agreed, for the benefit of the Trustee and the Holders of the Notes that the courts of England shall have jurisdiction to hear and determine any suit, action or proceedings which may arise out of or in connection with the Trust Deed or the Notes (including a claim or dispute relating to any non-contractual obligations arising out of or in connection with the Trust Deed or the Notes) (“ Proceedings ”) and, for such purposes, irrevocably submitted to the

 

6  

Insert where Issuer is not incorporated in England and Wales.

 

    

 

46

    


jurisdiction of such courts, save that in respect of Notes issued under the Trust Deed which are denominated in the lawful currency of Switzerland and in respect of which it is specified in the relevant Final Terms that such Notes are to be listed on the SIX Swiss Exchange, each of the parties hereto irrevocably agrees, for the benefit only of the Trustee and the holders of such Notes that the ordinary courts of the Canton of Zurich, place of jurisdiction being Zurich 1, Switzerland, shall have non-exclusive jurisdiction to hear and determine Proceedings. The Issuer has, in the Trust Deed, agreed that the process by which any Proceedings in England are begun may be served on it by being posted in a prepaid registered or recorded delivery letter addressed to it at the address set out in Clause 32 of the Trust Deed of Unilever PLC. Nothing contained herein or in the Trust Deed shall affect the right to serve process in any other manner permitted by law. The submission to the jurisdiction of the courts of England shall not (and shall not be construed so as to) limit the right of the Trustee or Holders of the Notes or any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law.] 7

This Temporary Global Note shall not be valid for any purpose until authenticated for and on behalf of Deutsche Bank AG, London Branch as Principal Paying Agent and, if the relevant Final Terms indicate that this Temporary Global Note is intended to be a New Global Note (i) which is intended to be held in a manner which would allow Eurosystem eligibility or (ii) in respect of which the Issuer has notified the Principal Paying Agent that effectuation is to be applicable, effectuated by the entity appointed as common safekeeper by the ICSDs.

As witness the manual signature of a duly authorised officer on behalf of the Issuer.

[ Name of Issuer ]

 

By  

 

  [manual signature]
  ( duly authorised )
  Name:
  Title:

ISSUED in London as of [•] [•]

AUTHENTICATED for and on

behalf of

DEUTSCHE BANK AG,

LONDON BRANCH

as Principal Paying Agent

without recourse, warranty or

liability

 

7   Insert where Notes are denominated in Swiss Francs and are to be listed on the SIX Swiss Exchange.

 

    

 

47

    


By  

 

  [manual signature]
  ( duly authorised )
  Name:
  Title:

[ EFFECTUATED without

recourse, warranty or liability by

 

By  

 

  as common safekeeper [manual signature] 8
  Name:
  Title:

 

8   Effectuation is only required if this Temporary Global Note is a New Global Note (i) which is intended to be a Eurosystem-eligible New Global Note, as specified in the relevant Final Terms or (ii) in respect of which the Issuer has instructed the Principal Paying Agent that effectuation is to be applicable.

 

    

 

48

    


The Schedule 9

Payments, Delivery of Definitive Notes,

Exchange for Permanent Global Note and Cancellation of Notes

 

Date of
payment,
delivery or
cancellation
  Amount of
interest
then paid
  Amount of
principal or,
as the case
may be,
redemption
amount
then paid
  Aggregate
principal
amount of
Definitive
then
delivered
  Aggregate
principal
amount of
this
Temporary
Global Note
then
exchanged
for the
Permanent
Global Note
  Aggregate
principal
amount of
Note then
cancelled
  Remaining
principal
amount of
this
Temporary
Global Note
  Authorised
Signatory
               
                             

 

 

9   This Schedule should only be completed where the relevant Final Terms indicates that this Temporary Global Note is not intended to be a New Global Note.

 

    

 

49

    


Annex I

[Form of certificate to be given in relation to exchanges of this Temporary Global Note for the Permanent Global Note or Definitive Notes:]

[ Name of Issuer ]

[ Aggregate principal amount and title of Notes ]

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “ Member Organisations ”) substantially to the effect set forth in the Trust Deed dated 22 July 1994 as amended, restated or supplemented from time to time, as of the date hereof [•] principal amount of the above-captioned Securities (i) is owned by persons that are not (a) citizens or residents of the United States, (b) domestic partnerships, (c) domestic corporations or other entities taxable as corporations, (d) estates, the income of which is subject to United States federal income taxation regardless of its source, or (e) trusts if they (x) are subject to the primary supervision of a court within the United States and one or more “United States persons” within the meaning of the Internal Revenue Code of 1986, as amended, have the authority to control all of each such trust’s substantial decisions or (y) have made a valid election under applicable Treasury Regulations to be treated as domestic trusts (“ United States persons ”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“ financial institutions ”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof (as such terms “ acquired through ” and “ holding through ” are described in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(6)) foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the issuer or the issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), or (iv) is beneficially owned either by non-U.S. persons or U.S. persons who purchased such securities in a transaction that did not require registration under the U.S. Securities Act of 1933 (the “ Securities Act ”) (terms used in this clause (iv) shall have the meanings assigned to them in Regulation S under the Securities Act) or state securities laws, and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i), (ii) or (iv)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

As used herein, “ United States ” means the United States of America (including the States and the District of Columbia); and its “ possessions ” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

 

    

 

50

    


We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Dated: 10 [•]

[Euroclear Bank S.A./N.V./ Clearstream Banking, société anonyme ]

 

By  

 

  [authorised signature]
  Name:
  Title:

 

10   To be dated not earlier than the Exchange Date.

 

    

 

51

    


Annex II

[Form of certificate to be given in relation to payments of interest

falling due before the Exchange Date:]

[ Name of Issuer ]

[ Aggregate principal amount and title of Notes ]

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “ Member Organisations ”) substantially to the effect set forth in the Trust Deed dated 22 July 1994, as of the date hereof [•] principal amount of the above-captioned Securities (i) is owned by persons that are not (a) citizens or residents of the United States, (b) domestic partnerships, (c) domestic corporations or other entities taxable as corporations, (d) estates, the income of which is subject to United States federal income taxation regardless of its source, or (e) trusts if they (x) are subject to the primary supervision of a court within the United States and one or more “United States persons” within the meaning of the Internal Revenue Code of 1986, as amended, have the authority to control all of each such trust’s substantial decisions or (y) have made a valid election under applicable Treasury Regulations to be treated as domestic trust (“ United States persons ”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“ financial institutions ”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof (as such terms “ acquired through ” and “ holding through ” and described in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(6)) foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the issuer or the issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

As used herein, “ United States ” means the United States of America (including the States and the District of Columbia); and its “ possessions ” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

 

    

 

52

    


Dated: 11 [•]

[Euroclear Bank S.A./N.V./ Clearstream Banking, société anonyme ]

 

By  

 

  [authorised signature]
  Name:
  Title:

 

11   To be dated not earlier than the relevant interest payment date.

 

    

 

53

    


Annex III

[Form of account-holder’s certification referred to in preceding certificates:]

[ Name of Issuer ]

[ Aggregate principal amount and title of Notes ]

This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by persons that are not (a) citizens or residents of the United States, (b) domestic partnerships, (c) domestic corporations or other entities taxable as corporations, (d) estates, the income of which is subject to United States federal income taxation regardless of its source, or (e) trusts if they (x) are subject to the primary supervision of a court within the United States and one or more “United States persons” within the meaning of the Internal Revenue Code of 1986, as amended, have the authority to control all of each such trust’s substantial decisions or (y) have made a valid election under applicable Treasury Regulations to be treated as domestic trust (“ United States persons ”), (ii) are owned by United States person(s) that (a) are foreign branches of a United States financial institution (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“ financial institutions ”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof (as such terms “ acquired through ” and “ holding through ” are described in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(6)) foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the issuer or the issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Securities is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) this is further to certify that such financial institution has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

As used herein, “ United States ” means the United States of America (including the States and the District of Columbia); and its “ possessions ” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

This certification excepts and does not relate to [•] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

 

    

 

54

    


Dated: 12 [•]

[Account-holder] as or as agent for the beneficial owner of the Notes.

 

By  

 

  [authorised signature]
  Name:
  Title:

 

12   To be dated not earlier than 15 days before the Exchange Date or, as the case may be, the relevant interest payment date.

 

    

 

55

    


The Second Schedule

Form of Permanent Global Note

 

Series Number: [•]    Serial Number: [•]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.] 1

THIS GLOBAL NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED HEREIN HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[PAYMENT OF INTEREST ON THE NOTES TO AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION (EXCEPT FOR (I) A FINANCIAL INSTITUTION DESIGNATED BY THE CABINET ORDER RELATING TO THE SPECIAL TAXATION MEASURES LAW OF JAPAN (CABINET ORDER NO. 43 OF 1957) (AS AMENDED) (THE “ CABINET ORDER ”)WHICH HAS COMPLIED WITH THE REQUIREMENTS UNDER ARTICLE 6 OF THE SPECIAL TAXATION MEASURES LAW OF JAPAN AND (II) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION OR A FINANCIAL INSTRUMENTS FIRM AS PROVIDED IN ARTICLE 3-3, PARAGRAPH 6 OF THE SPECIAL TAXATION MEASURES LAW WHICH RECEIVES THE INTEREST PAYMENTS THROUGH ITS PAYMENT HANDLING AGENT IN JAPAN AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER THAT PARAGRAPH), OR TO AN INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION FOR JAPANESE TAX PURPOSES WHO OR WHICH IS A PERSON HAVING A SPECIAL RELATIONSHIP (AS DESCRIBED IN ARTICLE 3-2-2, PARAGRAPHS 5 THROUGH 7 OF THE CABINET ORDER) WITH THE ISSUER WILL BE SUBJECT TO JAPANESE INCOME TAX ON THE AMOUNT OF SUCH INTEREST.] 2

 

1   Include bracketed language on all Notes will maturities of more than 365 days.
2   Include bracketed language on all Notes issued by (a) UJH or (b) N.V. or PLC, in circumstances where any interest on the Notes is attributable to a business in Japan conducted by such Issuer of the Notes in the manner provided for in the Special Taxation Measures Law of Japan.

 

    

 

56

    


[NAME OF ISSUER]

( incorporated in 3 [ ] with limited liability )

PERMANENT GLOBAL NOTE

in respect of

[ principal amount of Global Note ]

representing up to

[Aggregate principal amount of Series]

[Title of Notes]

unconditionally and irrevocably guaranteed by

4 [•]

This Permanent Global Note is issued in respect of [ principal amount of Permanent Global Note ] in principal amount of an issue of [ aggregate principal amount of Series ] in aggregate principal amount of [ title of Notes ] (the “ Notes ”) by [ NAME OF ISSUER ] (the “ Issuer ”) and has the benefit of the guarantee (the “ Guarantee ”) of [•] (the “ Guarantors ”) contained in the Trust Deed as defined below. The Notes are constituted by a trust deed dated 22 July 1994 (the “ Trust Deed ”, which expression shall include any amendments or supplements thereto) made between the Issuer and the other parties named therein as issuers, the Guarantor[s] and the other parties named therein as guarantors and The Law Debenture Trust Corporation p.l.c. as trustee (the Trustee ”, which expression shall include any successor to The Law Debenture Trust Corporation p.l.c. in its capacity as such for the holders of the Notes from time to time).

The Issuer for value received promises, all in accordance with the Conditions (as defined in the Trust Deed) of the Notes and the final terms or the pricing supplement (as applicable) (the “ Final Terms ”) prepared in relation to the Notes, to pay to the bearer upon surrender hereof on [ maturity date ] [by [•] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Conditions] 5 or on such earlier date as the same may become payable in accordance therewith the principal sum of [ denomination in words and numeral ] [(as reduced from time to time in accordance with the Conditions)] or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount at the rate or rates specified therein], all subject to and in accordance with the Conditions.

If the relevant Final Terms indicates that this Permanent Global Note is intended to be a New Global Note, the nominal amount of Notes represented by this New Global Note shall be aggregate amount from time to time entered in the records of both Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme (together, the “ ICSDs ”). The records of the ICSDs (which expression in this Permanent Global Note means the records that each ICSD holds for its customers which reflect the amount of such customers’ interests in the Notes represented by this Permanent Global Note) shall be conclusive evidence of the nominal amount of Notes represented by this Permanent Global Note and, for these purposes, a statement issued by an ICSD stating the nominal amount of Notes represented by this Permanent Global Note at any time shall be conclusive evidence of the records of such ICSD at that time.

 

3   Insert jurisdiction of incorporation of Issuer and, if Unilever N.V. is Issuer, include “and having its corporate seat in Rotterdam, The Netherlands”.
4   Insert name of Guarantors.
5   Insert only where Notes are Instalment Notes.

 

    

 

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If the relevant Final Terms indicates that this Permanent Global Note is not intended to be a New Global Note, the nominal amount of the Notes represented by this Permanent Global Note shall be the amount stated in the applicable Final Terms or, if lower, the nominal amount most recently entered by or on behalf of the Issuer in the relevant column in the Schedule hereto.

The bearer of this Permanent Global Note is entitled to the benefit of the same obligations on the part of the Issuer as if such bearer were the bearer of the Notes represented hereby, and all payments under and to the bearer of this Permanent Global Note shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Notes.

If so specified in the relevant Final Terms, this Permanent Global Note is exchangeable in whole (but not in part only) for definitive Notes (“ Definitive Notes ”) in substantially the form (subject to completion) set out in the Third Schedule to the Trust Deed upon the exercise of the relevant option by the bearer hereof and, unless otherwise specified in the relevant Final Terms, at the cost of the Issuer. In order to exercise such option, the bearer hereof must, not less than forty-five days before the date upon which the delivery of such Definitive Notes is required, deposit this Permanent Global Note with Deutsche Bank AG, London Branch as principal paying agent (the “ Principal Paying Agent ”), which expression shall include any successor to Deutsche Bank AG, London Branch in its capacity as such) at its specified office with the form of exchange endorsed hereon duly completed. This Permanent Global Note will, in any event, be exchangeable in whole, but not in part, (at the cost of the Issuer) for Definitive Notes if any Note becomes due and repayable following an Event of Default (as defined in Condition 10A) and is not duly redeemed (and the funds required for such redemption are not available to the Principal Paying Agent for the purposes of affecting such redemption) by 6.00 p.m. (London time) on the thirtieth day after the time at which such Notes become immediately redeemable, or if either Euroclear Bank S.A./N.V. or Clearstream Banking société anonyme or the operator of any other relevant clearing system should cease to operate as a clearing system (other than by reason of public holidays) or should announce an intention permanently to cease business, and it shall not be practicable to transfer the Notes to another clearing system within 90 days.

[On any occasion on which a payment of interest is made in respect of this Permanent Global Note, the Issuer shall procure that either:

 

(a) if the relevant Final Terms indicates that this Permanent Global Note is intended to be a New Global Note, details of such payment shall be entered in the records of the ICSDs; or

 

(b) if the relevant Final Terms indicates that this Permanent Global Note is not intended to be a New Global Note, the same is noted on the Schedule hereto.]

On any occasion on which a payment of principal or redemption amount is made in respect of this Permanent Global Note or on which this Permanent Global Note is exchanged as aforesaid or on which any Notes represented by this Permanent Global Note are to be cancelled, the Issuer shall procure that:

 

(a) if the relevant Final Terms indicates that this Permanent Global Note is intended to be a New Global Note, details of such payment, redemption, exchange or cancellation (as the case may be) shall be entered pro rata in the records of the ICSDs and, upon any such entry being made, the nominal amount of the Notes recorded in the records of the ICSDs and represented by this Permanent Global Note shall be reduced by the aggregate nominal amount of the Notes so redeemed and cancelled or by the aggregate amount of the Notes in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof); and

 

    

 

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(b) if the relevant Final Terms indicates that this Permanent Global Note is not intended to be a New Global Note, (i) the aggregate principal amount of the Notes in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive form or which are to be cancelled and (ii) the remaining principal amount of this Permanent Global Note (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Note shall for all purposes be as most recently so noted.

Payments due in respect of Notes for the time being represented by this Permanent Global Note shall be made to the bearer of this Permanent Global Note and each payment so made will discharge the Issuer’s obligations in respect thereof. Any failure to make the entries referred to above shall not affect such discharge.

Insofar as the Temporary Global Note by which the Notes were initially represented has been exchanged in part only for this Permanent Global Note and is then to be further exchanged as to the remaining principal amount or part thereof for this Permanent Global Note, then upon presentation of this Permanent Global Note to the Principal Paying Agent at its specified office in relation to the Notes and to the extent that the aggregate principal amount of such Temporary Global Note is then reduced by reason of such further exchange, the Issuer shall procure that:

 

(a) if the applicable Final Terms indicates that this Permanent Global Note is intended to be a New Global Note, details of such exchange shall be entered in the records of the ICSDs; or

 

(b) if the applicable Final Terms indicates that this Permanent Global Note is not intended to be a New Global Note, details of such exchange shall be entered by or on behalf of the Issuer in the Schedule hereto. Upon any such exchange, the nominal amount of the Notes represented by this Permanent Global Note shall be increased by the nominal amount of the Notes so exchanged.

This Permanent Global Note, and any non-contractual obligations arising out of or in connection with it, is governed by, and will be construed in accordance with, English law.

[The Issuer has, in the Trust Deed, agreed for the benefit of the Trustee and the Holders of the Notes that the courts of England shall have jurisdiction to hear and determine any suit, action, proceedings which may arise out of or in connection with the Trust Deed or the Notes (including a claim or dispute relating to any non-contractual obligations arising out of or in connection with the Trust Deed or the Notes) (“ Proceedings ”) and, for such purposes, irrevocably submitted to the jurisdiction of such courts. The Issuer has, in the Trust Deed, agreed that the process by which any Proceedings in England are begun may be served on it by being posted in a prepaid registered or recorded delivery letter addressed to it at the address set out in Clause 32 of the Trust Deed for the time being of Unilever PLC. Nothing contained herein or in the Trust Deed shall affect the right to serve process in any other manner permitted by law. The submission to the jurisdiction of the courts of England shall not (and shall not be construed so as to) limit the right of the Trustee or the holders of the Notes or any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law.] 6

[The Issuer has, in the Trust Deed, agreed for the benefit of the Trustee and the Holders of the Notes that the courts of England shall have jurisdiction to hear and determine any suit, action,

 

6  

Insert where Issuer is not incorporated in England or Wales.

 

    

 

59

    


proceedings which may arise out of or in connection with the Trust Deed or the Notes (including a claim or dispute relating to any non-contractual obligations arising out of or in connection with the Trust Deed or the Notes) (“ Proceedings ”) and, for such purposes, irrevocably submitted to the jurisdiction of such courts, save that, in respect of Notes issued under the Trust Deed which are denominated in the lawful currency of Switzerland and in respect of which it is specified in the relevant Final Terms that such Notes are to be listed on the SIX Swiss Exchange, each of the parties hereto irrevocably agrees, for the benefit only of the Trustee and the holders of such Notes that the ordinary courts of the Canton of Zurich, place of jurisdiction being Zurich 1, Switzerland, shall have non-exclusive jurisdiction to hear and determine Proceedings. The Issuer has, in the Trust Deed, agreed that the process by which any Proceedings in England are begun may be served on it by being posted in a prepaid registered or recorded delivery letter addressed to it at the address set out in Clause 32 of the Trust Deed of Unilever PLC. Nothing contained herein or in the Trust Deed shall affect the right to serve process in any other manner permitted by law. The submission to the jurisdiction of the courts of England shall not (and shall not be construed so as to) limit the right of the Trustee or the Holders of the Notes or any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law.] 7

This Permanent Global Note shall not be valid for any purpose until authenticated for and on behalf of Deutsche Bank AG, London Branch as Principal Paying Agent and, if the relevant Final Terms indicate that this Permanent Global Note is intended to be a New Global Note (i) which is intended to be held in a manner which would allow Eurosystem eligibility or (ii) in respect of which the Issuer has notified the Principal Paying Agent that effectuation is to be applicable, effectuated by the entity appointed as common safekeeper by the ICSDs.

AS WITNESS the manual signature of a duly authorised officer on behalf of the Issuer.

[ NAME OF ISSUER ]

 

By  

 

  [manual signature]
  ( duly authorised )
  Name:
  Title:

ISSUED in London as of [•] [•]

AUTHENTICATED for and on

behalf of

DEUTSCHE BANK AG,

LONDON BRANCH

as Principal Paying Agent

without recourse, warranty or

 

7   Insert where Notes are denominated in Swiss Francs and are to be listed on the SIX Swiss Exchange.

 

    

 

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liability

 

By  

 

  [manual signature]
  ( duly authorised )
  Name:
  Title:

[ EFFECTUATED without

recourse, warranty or liability by

 

By  

 

  as common safekeeper [manual signature] 8
  Name:
  Title:

 

8   Effectuation is only required if this Permanent Global Note is a New Global Note (i) which is intended to be a Eurosystem-eligible New Global Note, as specified in the relevant Final Terms or (ii) in respect of which the Issuer has instructed the Principal Paying Agent that effectuation is to be applicable.

 

    

 

61

    


Exchange Notice

....................., being the bearer of this Permanent Global Note at the time of its deposit with the Principal Paying Agent at its specified office for the purposes of the Notes, hereby exercises the option to have this Permanent Global Note exchanged in whole for Notes in definitive form and directs that such Notes in definitive form be made available for collection by it from the Principal Paying Agent’s specified office.

 

By  

 

  ( duly authorised )
  Name:
  Title:

 

    

 

62

    


The Schedule 9

Payments, Delivery of Definitive Notes, further exchanges

of the Temporary Global Note and Cancellation of Notes

 

Date of
payment,
delivery,
further
exchange of
Temporary
Global Note
or
cancellation
  Amount of
interest then
paid
  Amount of
principal or,
as the case
may be,
redemption
amount then
paid
  Aggregate
principal
amount of
Definitive
then
delivered
  Aggregate
principal
amount of
further
exchanges
of
Temporary
Global Note
  Current
principal
amount of
this
Permanent
Global Note
  Authorised
Signatures
             
                         

 

 

9   The Schedule should only be completed where the relevant Final Terms indicates that this Global Note is not intended to be a New Global Note.

 

    

 

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The Third Schedule

Form of Definitive Note

Part A

[On the face of the Notes:]

[Denomination]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.] 1

THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED HEREIN HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[PAYMENT OF INTEREST ON THE NOTES TO AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION (EXCEPT FOR (I) A FINANCIAL INSTITUTION DESIGNATED BY THE CABINET ORDER RELATING TO THE SPECIAL TAXATION MEASURES LAW OF JAPAN (CABINET ORDER NO. 43 OF 1957) (AS AMENDED) (THE “ CABINET ORDER ”) WHICH HAS COMPLIED WITH THE REQUIREMENTS UNDER ARTICLE 6 OF THE SPECIAL TAXATION MEASURES LAW OF JAPAN AND (II) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION OR A FINANCIAL INSTRUMENTS FIRM AS PROVIDED IN ARTICLE 3-3, PARAGRAPH 6 OF THE SPECIAL TAXATION MEASURES LAW WHICH RECEIVES THE INTEREST PAYMENTS THROUGH ITS PAYMENT HANDLING AGENT IN JAPAN AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER THAT PARAGRAPH), OR TO AN INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION FOR JAPANESE TAX PURPOSES WHO OR WHICH IS A PERSON HAVING A SPECIAL RELATIONSHIP (AS DESCRIBED IN ARTICLE 3-2-2, PARAGRAPHS 5 THROUGH 7 OF THE CABINET ORDER) WITH THE ISSUER WILL BE SUBJECT TO JAPANESE INCOME TAX ON THE AMOUNT OF SUCH INTEREST.] 2

[UNILEVER N.V., a company having its corporate seat in Rotterdam, The

Netherlands/UNILEVER PLC/UNILEVER JAPAN HOLDINGS K.K.] 3

[ Aggregate principal amount of Series ]

[ Title of Notes ]

unconditionally and irrevocably guaranteed by

[UNILEVER PLC AND UNILEVER UNITED STATES, INC. on a joint and several basis

/UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND

 

1   Include bracketed language on all Notes with maturities of more than 365 days.
2   2 Include bracketed language on all Notes issued by (a) UJH or (b) N.V. or PLC, in circumstances where any interest on the Notes is attributable to a business in Japan conducted by such Issuer of the Notes in the manner provided for in the Special Taxation Measures Law of Japan.
3  

Amend as appropriate.

 

    

 

64

    


UNILEVER UNITED STATES, INC. on a joint and several basis/UNILEVER N.V., a company

having its corporate seat in Rotterdam, The Netherlands AND UNILEVER PLC on a joint and

several basis] 3

This [ title of Notes ] forms one of a series of [ title of Notes ] (the “ Notes ”) in an aggregate principal amount of [insert aggregate principal amount of series] issued by [Unilever N.V./Unilever PLC/Unilever Japan Holdings K.K.] 3 as issuer (the “ Issuer ”) and has the benefit of the guarantee of [Unilever PLC and Unilever United States, Inc./ Unilever N.V. and Unilever United States, Inc./Unilever N.V. and Unilever PLC] 3 (the “ Guarantors ” contained in the trust deed defined below) on a joint and several basis and is issued pursuant to a trust deed (the “ Trust Deed ” which expression shall include any amendments or supplements thereto) dated 22 July 1994 and made between, inter alios , the Issuer and the other companies named therein as issuers, the Guarantors and The Law Debenture Trust Corporation p.l.c., as trustee.

The Issuer for value received promises, all in accordance with the terms and conditions [endorsed hereon/attached hereto/incorporated by reference herein] and the Final Terms referred to therein and prepared in relation to the Notes and the Trust Deed, to pay to the bearer upon surrender hereof on [maturity date] [by [•] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Final Terms] 4 or on such earlier date as the same may become payable in accordance therewith the principal amount of:

[denomination in words and numerals]

[(as reduced from time to time in accordance with such terms and conditions)] 3 or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof [(as reduced from time to time in accordance with such terms and conditions)] 5 at the rate or rates specified therein] 6 .

[Pursuant to the Dutch Saving Certificates Act ( Wet inzake spaarbewijzen ), each transfer and acceptance of this Note (other than between individuals who do not act in the conduct of a profession or trade):

 

(a) must be made through the mediation of either the Issuer or a Member of Euronext Amsterdam N.V.; and

 

(b) if it involves its physical delivery, must be recorded in a transaction note which includes the name and address of each party, the nature of the transaction and the number and serial numbers of the Notes transferred.] 7

[Pursuant to the Dutch Saving Certificates Act ( Wet inzake spaarbewijzen ), each transfer and acceptance of this Note (other than between individuals who do not act in the conduct of a profession or trade):

 

(a) must be made through the mediation of either the Issuer or a Member of Euronext Amsterdam N.V.; and

 

(b) it if involves its physical delivery and unless it is made between a professional borrower and a professional lender, must be recorded in a transaction note which includes the name

 

4   Insert only where Notes are Instalment Notes.
5   Amend as appropriate.
6   Insert only where Notes are interest bearing.
7  

Include if the Notes (i) are Zero Coupon Notes or other Notes which qualify as savings certificates as defined in the Dutch Savings Certificates Act ( Wet inzake spaarbewijzen ), (ii) are physically issued in the Netherlands or distributed in the Netherlands in the course of primary trading or immediately thereafter, (iii) are not listed on the stock exchange of Euronext Amsterdam N.V. and (iv) do not qualify as commercial paper or certificates of deposit.

 

    

 

65

    


  and address of each party, the nature of the transaction and the number and serial numbers of the Notes transferred.] 8  

[This Note shall not] 9 [Neither this Note nor any of the interest coupons appertaining hereto shall 10 be valid for any purpose until this Note has been authenticated for and on behalf of as principal paying agent.

This Note, and any non-contractual obligations arising out of or in connection with it, is governed by, and shall be construed in accordance with, English law.

As witness the facsimile signature of a duly authorised officer on behalf of the Issuer.

[UNILEVER N.V./UNILEVER PLC/UNILEVER JAPAN HOLDINGS K.K.] 11

[ Name of Issuer ]

 

By  

 

  [manual or facsimile signature]
  ( duly authorised )
  Name:
  Title:

ISSUED in London as of [•] [•]

AUTHENTICATED for and on

behalf of DEUTSCHE BANK

AG, LONDON BRANCH

as Principal Paying Agent

without recourse, warranty or

liability

 

By  

 

  [manual signature]
  ( duly authorised )
  Name:
  Title:

[Where no provision is made for separate coupons for the payment of interest the appropriate grid to record payments of principal and/or interest, as the case may be, should be included.]

 

8   Include if the Notes (i) are Zero Coupon Notes or other Notes which qualify as saving certificates as defined in the Dutch Savings Certificates Act ( Wet inzake spaarbewijzen ), (ii) are physically issued in the Netherlands or distributed in the Netherlands in the course of primary trading or immediately thereafter, (iii) are not listed on the stock exchange of Euronext Amsterdam N.V. and (iv) qualify as commercial paper or certificates of deposit.
9   Insert only where Notes are not interest bearing.
10   Insert only where Notes are interest bearing.
11   Amend as appropriate.

 

    

 

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[On the reverse of the Notes:]

TERMS AND CONDITIONS

[As set out in the Fourth Schedule and as supplemented by the relevant Final Terms]

[At the foot of the Terms and Conditions:]

PRINCIPAL PAYING AGENT

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester Street

London EC2N 2DB

PAYING AGENT

ABN AMRO Bank N.V.

Gustav Mahlerlaan 10

P.O. Box 283 (HQ7050)

1000 EA Amsterdam

The Netherlands

 

    

 

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Part B

Forms of Coupon

[Attached to the Notes (interest-bearing, fixed rate and having Coupons):]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.] 12

[PAYMENT OF INTEREST ON THE NOTES TO AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION (EXCEPT FOR (I) A FINANCIAL INSTITUTION DESIGNATED BY THE CABINET ORDER RELATING TO THE SPECIAL TAXATION MEASURES LAW OF JAPAN (CABINET ORDER NO. 43 OF 1957) (AS AMENDED) (THE “ CABINET ORDER ”) WHICH HAS COMPLIED WITH THE REQUIREMENTS UNDER ARTICLE 6 OF THE SPECIAL TAXATION MEASURES LAW OF JAPAN AND (II) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION OR A FINANCIAL INSTRUMENTS FIRM AS PROVIDED IN ARTICLE 3-3, PARAGRAPH 6 OF THE SPECIAL TAXATION MEASURES LAW WHICH RECEIVES THE INTEREST PAYMENTS THROUGH ITS PAYMENT HANDLING AGENT IN JAPAN AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER THAT PARAGRAPH), OR TO AN INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION FOR JAPANESE TAX PURPOSES WHO OR WHICH IS A PERSON HAVING A SPECIAL RELATIONSHIP (AS DESCRIBED IN ARTICLE 3-2-2, PARAGRAPHS 5 THROUGH 7 OF THE CABINET ORDER) WITH THE ISSUER WILL BE SUBJECT TO JAPANESE INCOME TAX ON THE AMOUNT OF SUCH INTEREST.] 13

 

12   Include bracketed language on all Notes with maturities of more than 365 days.
13   Include bracketed language on all Notes issued by (a) UJH or (b) N.V. or PLC, in circumstances where any interest on the Notes is attributable to a business in Japan conducted by such Issuer of the Notes in the manner provided for in the Special Taxation Measures Law of Japan.

 

    

 

68

    


[UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands/UNILEVER PLC/ UNILEVER JAPAN HOLDINGS K.K.] 14

Unconditionally and irrevocably guaranteed by

[UNILEVER PLC AND UNILEVER UNITED STATES, INC. on a joint and several basis /UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER UNITED STATES, INC. on a joint and several basis/UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER PLC on a joint and several basis] 15

[ Amount and title of Notes ]

[ Serial Number: [ ] ]

Coupon for [•] due on [•]

This Coupon is payable to bearer (subject to the terms and conditions [endorsed on/attached to/incorporated by reference to] the [title of Notes] (the “ Note ”) to which this Coupon appertains and the Final Terms referred to therein, which shall be binding on the Holder of this Coupon whether or not it is for the time being attached to such Note) at the office of the Principal Paying Agent or any of the Paying Agents set out on the reverse hereof (or any other or further paying agents and/or specified offices from time to time duly appointed and notified to the Noteholders).

[The Note to which this Coupon appertains may, in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon. In such event, this Coupon will become void and no payment will be made in respect hereof.] 16

[•]

[UNILEVER N.V./UNILEVER PLC/UNILEVER JAPAN HOLDINGS K.K.] 16

 

By  

 

  [manual or facsimile signature] 17
  ( duly authorised )
  Name:
  Title:

[On the reverse of each Coupon]

 

14   Amend as appropriate.
15   Amend as appropriate
16   Delete if the Coupons are not to become void upon early redemption of the Note(s).
17   In the case of Unilever N.V., include the name and the title of the signatory.

 

    

 

69

    


PRINCIPAL PAYING AGENT

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester Street

London EC2N 2DB

PAYING AGENT

ABN AMRO Bank N.V.

Gustav Mahlerlaan 10

P.O. Box 283 (HQ7050)

1000 EA Amsterdam

The Netherlands

 

    

 

70

    


Part C

[Attached to the Notes (interest-bearing, floating rate and having Coupons):]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.] 18

[PAYMENT OF INTEREST ON THE NOTES TO AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION (EXCEPT FOR (I) A FINANCIAL INSTITUTION DESIGNATED BY THE CABINET ORDER RELATING TO THE SPECIAL TAXATION MEASURES LAW OF JAPAN (CABINET ORDER NO. 43 OF 1957) (AS AMENDED) (THE “ CABINET ORDER ”)WHICH HAS COMPLIED WITH THE REQUIREMENTS UNDER ARTICLE 6 OF THE SPECIAL TAXATION MEASURES LAW OF JAPAN AND (II) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION OR A FINANCIAL INSTRUMENTS FIRM AS PROVIDED IN ARTICLE 3-3, PARAGRAPH 6 OF THE SPECIAL TAXATION MEASURES LAW WHICH RECEIVES THE INTEREST PAYMENTS THROUGH ITS PAYMENT HANDLING AGENT IN JAPAN AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER THAT PARAGRAPH), OR TO AN INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION FOR JAPANESE TAX WHO OR WHICH IS A PERSON HAVING A SPECIAL RELATIONSHIP (AS DESCRIBED IN ARTICLE 3-2-2, PARAGRAPHS 5 THROUGH 7 OF THE CABINET ORDER) WITH THE ISSUER WILL BE SUBJECT TO JAPANESE INCOME TAX ON THE AMOUNT OF SUCH INTEREST.] 19

[UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands/UNILEVER PLC/ UNILEVER JAPAN HOLDINGS K.K.] 20

Unconditionally and irrevocably guaranteed by

[UNILEVER PLC AND UNILEVER UNITED STATES, INC. on a joint and several basis /UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER UNITED STATES, INC. on a joint and several basis/UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER PLC on a joint and several basis] 21

[ Amount and title of Notes ]

Coupon for the amount of interest due on [•]

Such amount is payable (subject to the terms and conditions [endorsed on/attached to/incorporated by reference to] the [ title of Notes ] (the “ Notes ”) to which this Coupon appertains and the Final Terms referred to therein, which shall be binding on the Holder of this Coupon whether or not it is for the time being attached to such Note) at the office of the Principal Paying Agent or any of the Paying Agents set out on the reverse hereof (or any other or further paying agents and/or specified offices from time to time duly appointed and notified to the Noteholders).

 

18   Include bracketed language on all Notes with maturities of more than 365 days.
19   Include bracketed language on all Notes issued by (a) UJH or (b) N.V. or PLC, in circumstances where any interest on the Notes is attributable to a business in Japan conducted by such Issuer of the Notes in the manner provided for in the Special Taxation Measures Law of Japan.
20   Amend as appropriate.
21   Amend as appropriate.

 

    

 

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[The Note to which this Coupon appertains may, in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon. In such event, this Coupon will become void and no payment will be made in respect hereof.] 22

[•]

[UNILEVER N.V./UNILEVER PLC/ UNILEVER JAPAN HOLDINGS K.K.] 23

 

By  

 

  [manual or facsimile signature] 24
  ( duly authorised )
  Name:
  Title:

 

22   Delete if the Coupons are not to become void upon early redemption of the Notes.
23   Amend as appropriate.
24   In the case of Unilever N.V., include the name and the title of the signatory.

 

    

 

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[On the reverse of each Coupon:]

PRINCIPAL PAYING AGENT

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester Street

London EC2N 2DB

PAYING AGENT

ABN AMRO Bank N.V.

Gustav Mahlerlaan 10

P.O. Box 283 (HQ7050)

1000 EA Amsterdam

The Netherlands

 

    

 

73

    


Part D

Form of Talon

[Attached to the Notes (interest-bearing and having Coupons or, as the case may be, being Instalment Notes):]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.] 25

[PAYMENT OF INTEREST ON THE NOTES TO AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION (EXCEPT FOR (I) A FINANCIAL INSTITUTION DESIGNATED BY THE CABINET ORDER RELATING TO THE SPECIAL TAXATION MEASURES LAW OF JAPAN (CABINET ORDER NO. 43 OF 1957) (AS AMENDED) (THE “ CABINET ORDER ”) WHICH HAS COMPLIED WITH THE REQUIREMENTS UNDER ARTICLE 6 OF THE SPECIAL TAXATION MEASURES LAW OF JAPAN AND (II) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION OR A FINANCIAL INSTRUMENTS FIRM AS PROVIDED IN ARTICLE 3-3, PARAGRAPH 6 OF THE SPECIAL TAXATION MEASURES LAW WHICH RECEIVES THE INTEREST PAYMENTS THROUGH ITS PAYMENT HANDLING AGENT IN JAPAN AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER THAT PARAGRAPH), OR TO AN INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION FOR JAPANESE TAX PURPOSES WHO OR WHICH IS A PERSON HAVING A SPECIAL RELATIONSHIP (AS DESCRIBED IN ARTICLE 3-2-2, PARAGRAPHS 5 THROUGH 7 OF THE CABINET ORDER) WITH THE ISSUER WILL BE SUBJECT TO JAPANESE INCOME TAX ON THE AMOUNT OF SUCH INTEREST.] 26

[UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands/UNILEVER PLC/UNILEVER JAPAN HOLDINGS K.K.] 27

Unconditionally and irrevocably guaranteed by

[UNILEVER PLC AND UNILEVER UNITED STATES, INC. on a joint and several basis /UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER UNITED STATES, INC. on a joint and several basis/UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER PLC on a joint and several basis] 29

[ Amount and title of Notes ]

Talon for further [Coupons/Receipts] 28

After all the [Coupons/Receipts] appertaining to the Note to which this Talon appertains have matured, further [Coupons/Receipts] [(including a Talon for further [Coupons/Receipts])] will be issued at the specified office of the Principal Paying Agent or any of the Paying Agents set out on the reverse hereof (or any other or further paying agents and/or specified offices from time to time duly given in accordance with the terms and conditions [endorsed on/attached to/incorporated by

 

25   Include bracketed language on all Notes with maturities of more than 365 days.
26   Include bracketed language on all Notes issued by (a) UJH or (b) N.V. or PLC, in circumstances where any interest on the Notes is attributable to a business in Japan conducted by such Issuer of the Notes in the manner provided for in the Special Taxation Measures Law of Japan.
27   Amend as appropriate.
28  

Amend as appropriate.

 

    

 

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reference to] the [ title of Notes ] (the “ Notes ”) to which this Talon appertains and the Final Terms referred to therein (which shall be binding on the Holder of this Talon whether or not it is for the time being attached to such Note) upon production and surrender of this Talon. The initial Paying Agents and their specified offices are set out on the reverse hereof.

Under the said terms and conditions, such Notes may, in certain circumstances, fall due for redemption before the original due date for exchange of this Talon and in any such event this Talon shall become void and no exchange shall be made in respect hereof.

[•]

[UNILEVER N.V./UNILEVER PLC/UNILEVER JAPAN HOLDINGS K.K.] 29

 

By  

 

  [manual or facsimile signature] 30
  ( duly authorised )
  Name:
  Title:

 

29   Amend as appropriate.
30   In the case of Unilever N.V., include the name and the title of the signatory.

 

    

 

75

    


[On the reverse of each Talon:]

PRINCIPAL PAYING AGENT

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester Street

London EC2N 2DB

PAYING AGENT

ABN AMRO Bank N.V.

Gustav Mahlerlaan 10

P.O. Box 283 (HQ7050)

1000 EA Amsterdam

The Netherlands

 

    

 

76

    


Part E

Form of Receipt

[Attached to Instalment Notes:]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.] 31

[PAYMENT OF INTEREST ON THE NOTES TO AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION (EXCEPT FOR (I) A FINANCIAL INSTITUTION DESIGNATED BY THE CABINET ORDER RELATING TO THE SPECIAL TAXATION MEASURES LAW OF JAPAN (CABINET ORDER NO. 43 OF 1957) (AS AMENDED) (THE “ CABINET ORDER ”) WHICH HAS COMPLIED WITH THE REQUIREMENTS UNDER ARTICLE 6 OF THE SPECIAL TAXATION MEASURES LAW OF JAPAN AND (II) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION OR A FINANCIAL INSTRUMENTS FIRM AS PROVIDED IN ARTICLE 3-3, PARAGRAPH 6 OF THE SPECIAL TAXATION MEASURES LAW WHICH RECEIVES THE INTEREST PAYMENTS THROUGH ITS PAYMENT HANDLING AGENT IN JAPAN AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER THAT PARAGRAPH), OR TO AN INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION FOR JAPANESE TAX PURPOSES WHO OR WHICH IS A PERSON HAVING A SPECIAL RELATIONSHIP (AS DESCRIBED IN ARTICLE 3-2-2, PARAGRAPHS 5 THROUGH 7 OF THE CABINET ORDER) WITH THE ISSUER WILL BE SUBJECT TO JAPANESE INCOME TAX ON THE AMOUNT OF SUCH INTEREST.] 32

[UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands/UNILEVER PLC/UNILEVER JAPAN HOLDINGS K.K.] 33

Unconditionally and irrevocably guaranteed by

[UNILEVER PLC AND UNILEVER UNITED STATES, INC. on a joint and several basis /UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER UNITED STATES, INC. on a joint and several basis/UNILEVER N.V., a company having its corporate seat in Rotterdam, The Netherlands AND UNILEVER PLC on a joint and several basis] 34

Receipt of the sum of [•] being the instalment of principal payable in accordance with the terms and conditions [endorsed on/attached to/incorporated by reference to] the [ title of Notes ] (the “ Notes ”) to which this Receipt appertains and the Final Terms referred to therein (the Conditions ”).

This Receipt is issued subject to and in accordance with the Conditions which shall be binding upon the Holder of this Receipt (whether or not it is for the time being attached to such Note) and is payable against presentation and surrender of this Receipt, at the office of the Principal Paying Agent or any of the Paying Agents set out on the reverse of the Note to which this Receipt appertains (or any other or further paying agents and/or specified offices from time to time duly appointed and notified to the Noteholders).

 

31   Include bracketed language on all Notes with maturities of more than 365 days.
32   Include bracketed language on all Notes issued by (a) UJH or (b) N.V. or PLC, in circumstances where any interest on the Notes is attributable to a business in Japan conducted by such Issuer of the Notes in the manner provided for in the Special Taxation Measures Law of Japan.
33   Amend as appropriate.
34   Amend as appropriate.

 

    

 

77

    


This Receipt must be presented for payment together with the Note to which it appertains. If the Note to which this Receipt appertains shall have become due and payable on or before the maturity date of this Receipt, this Receipt shall become void and no payment shall be made in respect of it. The Issuer shall have no obligation in respect of this Receipt if it is presented without the Note to which it appertains.

[UNILEVER N.V./UNILEVER PLC/UNILEVER JAPAN HOLDINGS K.K.] 35

 

By  

 

  [facsimile signature] 36
  ( duly authorised )
  Name:
  Title:

 

35   Amend as appropriate.
36   In the case of Unilever N.V., include the name and the title of the signatory.

 

    

 

78

    


[On the reverse of each Receipt:]

PRINCIPAL PAYING AGENT

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester Street

London EC2N 2DB

PAYING AGENT

ABN AMRO Bank N.V.

Gustav Mahlerlaan 10

P.O. Box 283 (HQ7050)

1000 EA Amsterdam

The Netherlands

 

    

 

79

    


The Fourth Schedule

Terms and Conditions of the Notes

The Notes are constituted by a trust deed dated 22 July 1994 (the “ Trust Deed ”, which expression shall include any amendments or supplements thereto or any restatement thereof) made between Unilever N.V. (“ N.V. ”), Unilever PLC (“ PLC ”) and Unilever Japan Holdings K.K. (“ UJH ”) as issuers (the “ Issuers ” and each an “ Issuer ”, which expression shall include any Group Company (as defined below) which becomes an Issuer as contemplated by Condition 15), N.V., PLC and Unilever United States, Inc. (“ UNUS ”) as guarantors of the Notes as hereinafter described (the “Guarantors” and each a “Guarantor”) and The Law Debenture Trust Corporation p.l.c. (the “Trustee”, which expression shall include any successor to The Law Debenture Trust Corporation p.l.c. in its capacity as such) as trustee for the holders of each Series of the Notes (the “ Noteholders ”). Pursuant to the Trust Deed, the Notes issued by (i) N.V. are guaranteed unconditionally and irrevocably on a joint and several basis by PLC and UNUS, (ii) PLC are guaranteed unconditionally and irrevocably on a joint and several basis by N.V. and UNUS and (iii) UJH are guaranteed unconditionally and irrevocably on a joint and several basis by N.V. and PLC.

Certain statements herein are summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Notes and of the interest coupons, if any, appertaining to the Notes (the “ Coupons ”) and the receipts, if any, in respect of instalments of principal (the “ Receipts ”). The Notes, the Coupons and the Receipts also have the benefit of a paying agency agreement dated 22 July 1994 (the “ Paying Agency Agreement ”, which expression shall include any amendments or supplements thereto or any restatement thereof) made between N.V., PLC, UJH and UNUS in their capacities as Issuers and Guarantors (as applicable), Deutsche Bank AG, London Branch as principal paying agent (the “ Principal Paying Agent ”, which expression shall include any successor to Deutsche Bank AG, London Branch in its capacity as such and any substitute or additional principal paying agent appointed in accordance with the Paying Agency Agreement), the paying agents named therein (the “ Paying Agents ”, which expression shall, unless the context otherwise requires, include the Principal Paying Agent and any substitute or additional paying agents appointed in accordance with the Paying Agency Agreement) and the Trustee. Noteholders and the holders of the Coupons (the “ Couponholders ”) and the holders of Receipts (the “ Receiptholders ”) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Paying Agency Agreement. Copies of the Trust Deed and the Paying Agency Agreement are available for inspection during normal business hours at the registered office for the time being of the Trustee (being at the date of this Information Memorandum at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified office of each of the Paying Agents.

For the purposes of Notes denominated in Swiss Francs (“ Swiss Notes ”) only, the relevant Issuer will, together with the Principal Paying Agent and the Swiss paying agent specified in the Final Terms relating to the relevant issue of Swiss Notes as principal Swiss paying agent (the “ Principal Swiss Paying Agent ”), enter into a supplemental paying agency agreement and all references to the Paying Agency Agreement shall include such agreement as so supplemented from time to time. In addition, all references in the Terms and Conditions of the Notes to the “ Principal Paying Agent ” and the “ Paying Agents ” shall, so far as the context permits, be construed as references only to the relevant Swiss paying agents, as set out in the relevant Final Terms relating to the Swiss Notes. References in the Terms and Conditions of the Notes to “ Euroclear ” and/or “ Clearstream, Luxembourg ” shall, so far as the context permits, be construed as including references to SIX SIS AG in Olten, Switzerland (“ SIX SIS AG ”), or to any other Intermediary (as

 

    

 

80

    


defined below) clearing system through which the Swiss Notes are to be cleared, which shall be considered an additional or alternative clearing system for the purposes of the Swiss Notes.

The Notes are issued in series (each a “ Series ”), and each Series may comprise one or more tranches (“ Tranches ” and each a “ Tranche ”) of Notes. Each Tranche will be the subject of final terms or a pricing supplement (“ Final Terms ”) prepared by, or on behalf of, the Issuer, a copy of which will, in the case of a Tranche of Notes which is to be listed on the Official List (the “ Official List ”) of the United Kingdom Financial Conduct Authority acting under Part VI of the Financial Services and Markets Act 2000, as amended (the “ UK Listing Authority ”) and/or NYSE Euronext in Amsterdam (“ Euronext Amsterdam ”) and/or the SIX Swiss Exchange and/or the Stock Exchange of Hong Kong and/or the Singapore Exchange, be lodged with the UK Listing Authority and the London Stock Exchange plc and/or Euronext Amsterdam and/or the SIX Swiss Exchange and/or the Stock Exchange of Hong Kong and/or the Singapore Exchange and be available for inspection at the specified office of each of the Paying Agents appointed in respect of such Notes.

In these Terms and Conditions, unless otherwise expressly stated, references to Notes are to Notes of the relevant Series (and, where the context permits, shall be deemed to include Receipts appertaining to such Notes), references to Receipts are references to Receipts appertaining to Notes of the relevant Series, references to Coupons are to Coupons appertaining to Notes of the relevant Series, references to the Issuer are to the Issuer of such Notes, references to the Guarantors are references to the Guarantors of such Issuer’s obligations under such Notes and references to the Paying Agents are references to the Paying Agents appointed in respect of such Notes. Subject thereto, capitalised terms shall, unless defined herein, have the meanings ascribed thereto in the Trust Deed.

 

1 Form and Denomination

 

  (a) Notes are issued in bearer form. Each Note is a Fixed Rate Note, a Floating Rate Note or a Zero Coupon Note or a combination of any of the foregoing. All payments in respect of each Note shall be made in the currency shown on its face.

 

   Form of Notes

 

  (b) Each Tranche of Notes will be represented upon issue by a temporary global note (a “ Temporary Global Note ”) in substantially the form (subject to amendment and completion) scheduled to the Trust Deed and, if so specified in the Final Terms, such Temporary Global Note shall be a New Global Note. On or after the date (the “ Exchange Date ”) which is 40 days after the completion of distribution of the Notes of the relevant Tranche and provided certification as to the beneficial ownership thereof as required by U.S. Treasury regulations (in the form set out in the Temporary Global Note or such other form as may replace it) has been received, interests in the Temporary Global Note may be exchanged for:

 

  (i) interests in a permanent global note (a “ Permanent Global Note ”) representing the Notes of that Tranche and in substantially the form (subject to amendment and completion) scheduled to the Trust Deed; or

 

  (ii) definitive Notes in bearer form (“ Definitive Notes ”) which will be serially numbered and in substantially the form (subject to amendment and completion) scheduled to the Trust Deed.

If interests in the Temporary Global Note are exchanged for interests in a Permanent Global Note pursuant to clause (i) above, interests in such Permanent

 

    

 

81

    


Global Note may thereafter be exchanged for Definitive Notes described in clause (ii) above.

Each exchange of an interest in a Temporary Global Note for an interest in a Permanent Global Note or for a Definitive Note, and each exchange of an interest in a Permanent Global Note for a Definitive Note, shall be made outside the United States.

 

  (c) If any date on which a payment of interest is due on the Notes of a Tranche occurs while any of the Notes of that Tranche are represented by the Temporary Global Note, the related interest payment will be made on the Temporary Global Note only to the extent that certification as to the beneficial ownership thereof as required by U.S. Treasury regulations (in the form set out in the Temporary Global Note or such other form as may replace it) has been received by Euroclear Bank S.A./N.V. (“ Euroclear ”), Clearstream Banking, société anonyme (“ Clearstream, Luxembourg ”) or any other relevant clearing system. Payments of principal or interest (if any) on a Permanent Global Note will be made through Euroclear or Clearstream, Luxembourg without any requirement for certification.

 

  (d) If so specified in the relevant Final Terms, interests in a Permanent Global Note will be exchangeable in whole (but not in part only), at the option of the Holder of such Permanent Global Note and in accordance with the rules and procedures for the time being of Euroclear, Clearstream, Luxembourg and/or any other relevant clearing system and, unless otherwise specified in the relevant Final Terms, at the Issuer’s cost, for Definitive Notes. In order to exercise such option, the Holder must, not less than 45 days before the date on which delivery of Definitive Notes in global or definitive form is required, deposit the relevant Permanent Global Note with the Principal Paying Agent with the form of exchange notice endorsed thereon duly completed. Interests in a Permanent Global Note will, in any event, be exchangeable in whole (but not in part only) at the cost of the Issuer, for Definitive Notes (i) if any Note of the relevant Series becomes due and repayable following a Default (as defined in Condition 10A), or (ii) if either Euroclear or Clearstream, Luxembourg or any other relevant clearing system should cease to operate as a clearing system (other than by reason of public holiday) or should announce an intention permanently to cease business and it shall not be practicable to transfer the relevant Notes to another clearing system within 90 days.

 

  (e) Interest-bearing Definitive Notes will have attached thereto at the time of their initial delivery Coupons presentation of which will be a prerequisite to the payment of interest in certain circumstances specified below. Interest-bearing Definitive Notes will also, if applicable, have attached thereto, at the time of their initial delivery, a talon (a “ Talon ”) for further coupons and the expression “ Coupons ” shall, where the context so permits, include Talons. Definitive Notes, the principal amount of which is repayable by instalments (“ Instalment Notes ”), will have endorsed thereon a grid for recording the repayments of principal or have attached thereto at the time of their initial delivery Receipts presentation of which will be a prerequisite to the repayment of the relevant instalment in certain circumstances specified below.

 

  (f) The following legend will appear on all Notes with maturities of more than 365 days and (in the case of Definitive Notes) on Receipts, Coupons and Talons appertaining thereto:

 

    

 

82

    


“Any United States person who holds this obligation will be subject to the limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code”.

The Internal Revenue Code sections referred to above provide that United States Holders, with certain exceptions, will not be entitled to deduct any loss on Notes, Receipts or Coupons and will not be entitled to capital gains treatment in respect of any gain recognised on any sale, disposition, redemption or payment of principal in respect of Notes, Receipts or Coupons.

 

   Denomination of Notes

 

  (g) Subject to any then applicable legal and regulatory requirements, (i) Notes will be in the denomination or denominations (each of which denominations must be integrally divisible by either the smallest denomination or by the smallest increment between denominations, whichever is smaller) specified in the relevant Final Terms and (ii) Notes may not be issued under the Programme which have a minimum denomination of less than €100,000 (or its equivalent in another currency). Notes of one denomination will not be exchangeable, after their initial delivery, for Notes of any other denomination.

 

   Currency of Notes

 

  (h) Notes may be denominated in any currency (including, without limitation, euro (as defined in Condition 8C(3)) subject to compliance with all applicable legal or regulatory requirements.

 

   References to “Notes”

 

  (i) For the purposes of these Terms and Conditions, references to “Notes” shall, as the context may require, be deemed to be to Temporary Global Notes, Permanent Global Notes or Definitive Notes.

 

2 Status of the Notes

Subject to Condition 4, the Notes constitute direct, unconditional and unsecured obligations of the Issuer and (subject as aforesaid) rank and will rank pari passu without any preference among themselves with all other present and future unsecured and unsubordinated obligations of the Issuer (other than obligations preferred by law).

 

3 Status of the Guarantee

Subject to Condition 4, the obligations of each Guarantor under the guarantee constitute unsecured obligations of such Guarantor and (subject as aforesaid) rank and will rank (subject to any obligations preferred by law) pari passu with all other present and future unsecured and unsubordinated obligations of such Guarantor.

 

4 Negative Pledge

So long as any Notes remain outstanding (as defined in the Trust Deed), neither N.V. nor PLC will create or have outstanding any mortgage, charge, lien, pledge or other security interest upon the whole or any substantial part of its undertaking or assets (including any uncalled capital), present or future, to secure any Indebtedness of any person (or any guarantee or indemnity given in respect thereof) unless the Notes and the Coupons shall

 

    

 

83

    


be secured by such mortgage, charge, lien, pledge or other security interest equally and rateably therewith in the same manner or in a manner satisfactory to the Trustee or such other security for the Notes and Coupons shall be provided as the Trustee shall, in its absolute discretion, deem not less beneficial to the Noteholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of Noteholders provided that the restriction contained in this Condition shall not apply to:

 

  (i) any mortgage, charge, lien, pledge or other security interest arising solely by mandatory operation of law; and

 

  (ii) any security over assets of N.V. or, as the case may be, PLC arising pursuant to the Algemene Voorwaarden (general terms and conditions) of the Nederlandse Vereniging van Banken (Dutch Bankers’ Association) and/or similar terms applied by financial institutions, if and insofar as applicable.

For the purposes of this Condition:

Indebtedness ” means any loan or other indebtedness in the form of, or represented by, bonds, notes, debentures or other securities which at the time of issue thereof either is, or is intended to be, quoted, listed or ordinarily dealt in on any stock exchange, over-the-counter or other recognised securities market and which by its terms has an initial stated maturity of more than one year; and

substantial ” means, in relation to each of N.V. and PLC, an aggregate amount equal to or greater than 25 per cent. of the aggregate value of the fixed assets and current assets of N.V., PLC and their group companies (being those companies required to be consolidated in accordance with Netherlands and United Kingdom legislative requirements relating to consolidated accounts) (the “ Unilever Group ”, and any company within the Unilever Group being referred to herein as a “ Group Company ”), such value and such assets being determined by reference to the then most recently published audited consolidated balance sheet of the Unilever Group. A report by the Auditors (as defined in the Trust Deed) that, in their opinion, (1) the amounts shown in a certificate provided by N.V. and PLC (showing the fixed assets and current assets of the relevant part and those fixed assets and current assets expressed as a percentage of the fixed assets and current assets of the Unilever Group) have been accurately extracted from the accounting records of the Unilever Group, and (2) the percentage of the fixed assets and current assets of that part to the fixed assets and the current assets of the Unilever Group has been correctly calculated, shall, in the absence of manifest error, be conclusive evidence of the matters to which it relates.

 

5 Title

 

  (a) Title to Notes and Coupons will pass by delivery. References herein to the “ Holders ” of Notes, Receipts or Coupons signify the bearers of such Notes, Receipts or such Coupons.

 

  (b) The Issuer, the Guarantors, the Trustee and the Paying Agents may deem and treat the Holder of any Note, Receipt or Coupon as the absolute owner thereof (whether or not such Note, Receipt or Coupon shall be overdue and notwithstanding any notice of any previous loss or theft thereof or any express or constructive notice of any claim by any other person of any interest therein) for the purpose of making payments and for all other purposes.

 

    

 

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6 Interest

Notes may be interest-bearing or non-interest-bearing, as specified in the relevant Final Terms. The Final Terms in relation to each Tranche of interest-bearing Notes shall specify which one (and one only) of Conditions 6A, 6B or 6C shall be applicable and Condition 6D will be applicable to each Tranche of interest-bearing Notes as specified therein. Condition 6G shall be applicable to Zero Coupon Notes.

 

  (A) Interest – Fixed Rate

Notes, in relation to which this Condition 6A is specified in the relevant Final Terms as being applicable, shall bear interest from their date of issue (the “ Issue Date ”) (as specified in the relevant Final Terms) or from such other date as may be specified in the relevant Final Terms at the rate or rates per annum (or otherwise) (the “ Fixed Rate of Interest ”) specified in the relevant Final Terms. Such interest will be payable in arrear on such dates (the “ Fixed Interest Payment Dates ”) as are specified in the relevant Final Terms and on the date of final maturity thereof (the “ Maturity Date ”). The amount of interest payable in respect of any Note in relation to which this Condition 6A is specified in the relevant Final Terms as being applicable shall be calculated by multiplying the product of the Fixed Rate of Interest and:

 

  (i) in the case of any such Note in global form, the principal amount of such Note; or

 

  (ii) in the case of any such Note in definitive form, the Calculation Amount,

in each case, by the applicable Day Count Fraction (as defined in Condition 6E(6)) as specified in the relevant Final Terms and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Denomination of a Note in relation to which this Condition 6A is specified in the relevant Final Terms as being applicable and which is in definitive form comprises more than one Calculation Amount, the amount of interest payable in respect of such Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Denomination without any further rounding. If no Day Count Fraction is specified in the relevant Final Terms then, in the case of Notes denominated in any currency other than U.S. dollars, the applicable Day Count Fraction shall be Actual/Actual (ICMA) (as defined in Condition 6E(6)(ii)) and, in the case of Notes denominated in U.S. dollars, the applicable Day Count Fraction shall be 30/360 (as defined in Condition 6E(6)(v)).

 

  (B) Interest – Floating Rate (Screen Rate Determination)

 

  (1) Notes, in relation to which this Condition 6B is specified in the relevant Final Terms as being applicable, shall bear interest at the rates per annum (or otherwise) determined in accordance with this Condition 6B.

 

  (2) Such Notes shall bear interest from their Issue Date (as specified in the relevant Final Terms) or from such other date as may be specified in the relevant Final Terms. Such interest will be payable on each Interest Payment Date (as defined in Condition 6E(1)) and on the date of the final maturity thereof (the “ Maturity Date ”) (if any).

 

  (3)

The relevant Final Terms, in relation to Notes in relation to which this Condition 6B is specified as being applicable, shall specify which page (the “ Relevant Screen Page ”), on the Reuters Screen or any other information vending service, shall be

 

    

 

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  applicable. For these purposes, “ Reuters Screen ” means the Reuters Money Market Rates Service (or such other service as may be nominated as the information vendor for the purpose of displaying comparable rates in succession thereto). The reference rate for such Notes shall be the London interbank offered rate (“ LIBOR ”) or the Euro interbank offered rate (“ EURIBOR ”), in each case for the relevant period, as specified in the relevant Final Terms (the “ Reference Rate ”).

 

  (4) The rate of interest (the “ Rate of Interest ”) for each Interest Period (as defined in Condition 6E(1)) in relation to Notes in relation to which this Condition 6B is specified as being applicable shall be determined by the Determination Agent (being the Principal Paying Agent or any other party named in the applicable Final Terms) on the following basis:

 

  (i) the Determination Agent will determine the rate for deposits (or, as the case may require, the arithmetic mean of the rates for deposits rounded (if necessary) to the fourth decimal place, with 0.00005 being rounded upwards) in the relevant currency for a period of the duration of the relevant Interest Period according to the rate (or rates) appearing for the Reference Rate on the Relevant Screen Page as at the Relevant Time on the Interest Determination Date (as defined in Condition 6B(6)). If five or more rates for deposits appear for the Reference Rate on the Relevant Screen Page as at the Relevant Time on the Interest Determination Date, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Determination Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such rates for deposits;

 

  (ii) if, on any Interest Determination Date, no such rate for deposits so appears (or, as the case may require, if fewer than three such rates for deposits so appear) or if the Relevant Screen Page (or any replacement therefor) is unavailable or if the Reference Rate is unavailable on the Relevant Screen Page, the Determination Agent will request appropriate quotations and will determine the arithmetic mean of the rates at which deposits in the relevant currency are offered by four major banks in, in the case of Notes denominated in any currency other than euro, the London interbank market or, in the case of Notes denominated in euro, the Euro-zone interbank market, selected by the Determination Agent, at the Relevant Time on the Interest Determination Date to prime banks in, in the case of Notes denominated in any currency other than euro, the London interbank market or, in the case of Notes denominated in euro, the Euro-zone interbank market for a period of the duration of the relevant Interest Period and in an amount that is representative for a single transaction in the relevant market at the relevant time. If two or more of such banks provide the Determination Agent with such quotations, the Rate of Interest for such Interest Period shall be the arithmetic mean (rounded (if necessary) to the fourth decimal place, with 0.00005 being rounded upwards) of such quotations. “ Euro-zone ” means the zone comprising the member states of the European Union that from time to time have the euro as their currency;

 

    

 

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  (iii) if, on any Interest Determination Date, only three such rates for deposits are so quoted by such banks, the Determination Agent will determine the arithmetic mean (rounded as aforesaid) of the rates so quoted; or

 

  (iv) if fewer than three or no rates are so quoted by such banks, the Determination Agent will determine the arithmetic mean of the rates quoted by four major banks in the Relevant Financial Centre (as defined in Condition 8B(1)) (or, in the case of Notes denominated in euro, in such financial centre or centres as the Determination Agent may select), selected by the Determination Agent, at approximately 11.00 a.m. (Relevant Financial Centre time (or local time at such other financial centre or centres as aforesaid)) on the Interest Determination Date for loans in the relevant currency to leading European banks for a period of the duration of the relevant Interest Period and in an amount that is representative for a single transaction in the relevant market at the relevant time,

and the Rate of Interest applicable to such Notes during each Interest Period will be the sum of the relevant margin (the “ Relevant Margin ”) specified in the relevant Final Terms and the rate (or, as the case may be, the arithmetic mean) so determined; provided that, if the Determination Agent is unable to determine a rate (or, as the case may be, an arithmetic mean) in accordance with the above provisions in relation to any Interest Period, the Rate of Interest applicable to such Notes during such Interest Period will be the sum of the Relevant Margin and the rate (or, as the case may be, the arithmetic mean) last determined in relation to such Notes in respect of the preceding Interest Period; and provided always that, if there is specified in the relevant Final Terms a minimum interest rate or a maximum interest rate, then the Rate of Interest shall in no event be less than or, as the case may be, exceed such minimum or maximum interest rate.

 

  (5) The Determination Agent will, as soon as practicable after determining the Rate of Interest in relation to each Interest Period, calculate the amount of interest (the “ Interest Amount ”) payable in respect of the principal amount of each denomination of such Notes specified in the relevant Final Terms for the relevant Interest Period. The Interest Amount will be calculated by multiplying the product of the Rate of Interest for such Interest Period and:

 

  (i) in the case of such Notes in global form, the principal amount of such Notes; or

 

  (ii) in the case of such Notes in definitive form, the Calculation Amount,

in each case, by the applicable Day Count Fraction specified in the relevant Final Terms and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Denomination of a Note to which this Condition 6B is specified in the relevant Final Terms as being applicable and which is in definitive form comprises more than one Calculation Amount, the Interest Amount payable in respect of such Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Denomination without any further rounding. If no Day Count Fraction is specified in the relevant Final Terms then, in the case of Notes denominated in any currency other than sterling, the applicable Day Count

 

    

 

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Fraction shall be Actual/360 (as defined in Condition 6E(6)) and, in the case of Notes denominated in sterling, the applicable Day Count Fraction shall be Actual/Actual (ISDA) (as defined in Condition 6E(6)).

 

  (6) For the purposes of these Terms and Conditions:

 

  (i) Interest Determination Date ” means, in respect of any Interest Period, the date falling such number (if any) of London Banking Days or, as the case may be, TARGET Days as may be specified in the relevant Final Terms prior to the first day of such Interest Period or, if none is specified:

 

  (a) in the case of Notes denominated in sterling, the first day of such Interest Period; or

 

  (b) in the case of Notes denominated in euro, the date falling two TARGET Days prior to the first day of such Interest Period; or

 

  (c) in any other case, the date falling two London Banking Days prior to the first day of such Interest Period;

 

  (ii) London Banking Day ” means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London;

 

  (iii) Relevant Time ” means the time as of which any rate is to be determined as may be specified in the relevant Final Terms or, if none is specified:

 

  (a) in the case of Notes denominated in euro, approximately 11.00 a.m. (Brussels time); or

 

  (b) in any other case, approximately 11.00 a.m. (London time);

 

  (iv) TARGET Day ” means a day on which the TARGET System (as defined in Condition 8B(1)(iii)) is open; and

 

  (v) sub-unit ” means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means one cent.

 

  (C) Interest – Floating Rate (ISDA Determination)

 

  (1) Notes, in relation to which this Condition 6C is specified in the relevant Final Terms as being applicable, shall bear interest at the rates per annum (or otherwise) determined in accordance with this Condition 6C.

 

  (2) The Rate of Interest for such Notes for each Interest Period shall be determined by the Calculation Agent as a rate equal to the relevant ISDA Rate. For the purposes of this sub-paragraph, ISDA Rate ” for an Interest Period means a rate equal to the Floating Rate that would be determined by the Calculation Agent under a Swap Transaction under the terms of an agreement incorporating the ISDA Definitions and under which:

 

  (x) the Floating Rate Option is as specified in the relevant Final Terms

 

  (y) the Designated Maturity is a period specified in the relevant Final Terms and

 

    

 

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  (z) the relevant Reset Date is the first day of that Interest Period unless otherwise specified in the relevant Final Terms.

 

  (3) For the purposes of this sub-paragraph, Floating Rate ”, “ Calculation Agent ”, “ Floating Rate Option ”, “ Designated Maturity ”, “ Reset Date ” and “ Swap Transaction ” have the meanings given to those terms in the ISDA Definitions.

 

  (D) Interest - Supplemental Provision

Conditions 6E(1), 6E(2), 6E(3) and 6E(5) shall be applicable to all Notes which are interest-bearing in the manner specified therein and, as appropriate, in the relevant Final Terms.

 

  (E) Interest Payment Date Conventions

 

  (1) The Final Terms in relation to each Tranche of Notes to which Condition 6B is applicable shall specify which of the following conventions shall be applicable, namely:

 

  (i) the “ FRN Convention ”, in which case interest shall be payable in arrear on each date (each, an “Interest Payment Date”) which numerically corresponds to their Issue Date or such other date as may be specified in the relevant Final Terms or, as the case may be, the preceding Interest Payment Date in the calendar month which is the number of months specified in the relevant Final Terms after the calendar month in which such Issue Date or such other date as aforesaid or, as the case may be, the preceding Interest Payment Date occurred provided that:

 

  (a) if there is no such numerically corresponding day in the calendar month in which an Interest Payment Date should occur, then the relevant Interest Payment Date will be the last day which is a Business Day in that calendar month;

 

  (b) if an Interest Payment Date would otherwise fall on a day which is not a Business Day, then the relevant Interest Payment Date will be the first following day which is a Business Day unless that day falls in the next calendar month, in which case it will be the first preceding day which is a Business Day; and

 

  (c) if such Issue Date or such other date as aforesaid or the preceding Interest Payment Date occurred on the last day in a calendar month which was a Business Day, then all subsequent Interest Payment Dates will be the last day which is a Business Day in the calendar month which is the specified number of months after the calendar month in which such Issue Date or such other date as aforesaid or, as the case may be, the preceding Interest Payment Date occurred; or

 

  (ii)

the “ Modified Following Business Day Convention ”, in which case interest shall be payable in arrear on such dates (each, an “Interest Payment Date”) as are specified in the relevant Final Terms; provided that, if any Interest Payment Date would otherwise fall on a date which is not a Business Day, the relevant Interest Payment Date will be the first following day which is a Business Day unless that day falls in the next calendar

 

    

 

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  month, in which case the relevant Interest Payment Date will be the first preceding day which is a Business Day.

Each period beginning on (and including) such Issue Date or such other date as aforesaid and ending on (but excluding) the first Interest Payment Date and each period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next Interest Payment Date is herein called an “Interest Period”.

Notification of Rates of Interest, Interest Amounts and Interest Payment Dates

 

  (2) The Determination Agent will cause each Rate of Interest, floating rate, Interest Payment Date, final day of an interest calculation period, Interest Amount, floating amount or other item, as the case may be, determined or calculated by it to be notified to the Issuer, the Guarantors, the Trustee and the Principal Paying Agent (from whose respective specified offices such information will be available) and, in the case of Notes listed on the Official List and/or Euronext Amsterdam and/or the SIX Swiss Exchange and/or the Stock Exchange of Hong Kong and/or the Singapore Exchange (as specified in the relevant Final Terms), cause each such Rate of Interest, floating rate, Interest Payment Date, final day of an interest calculation period, Interest Amount, floating amount or other item, as the case may be, to be notified to the UK Listing Authority and/or Euronext Amsterdam and/or the SIX Swiss Exchange and/or the Stock Exchange of Hong Kong and/or the Singapore Exchange (as specified in the relevant Final Terms) as soon as practicable after such determination but in any event not later than the fourth London Banking Day thereafter. The Determination Agent will be entitled (with the prior written consent of the Trustee) to amend any Interest Amount, floating amount, Interest Payment Date or final day of an interest calculation period (or to make appropriate alternative arrangements by way of adjustment) without prior notice in the event of the extension or abbreviation of the relevant Interest Period or an interest calculation period and such amendment or adjustment will be notified in accordance with the first sentence of this Condition 6E(2).

 

  (3) The determination or calculation by the Determination Agent (or, failing such determination or calculation by the Determination Agent, the Trustee, pursuant to Condition 6E(4)) of all rates of interest and amounts of interest and other items falling to be determined or calculated by it for the purposes of this Condition 6 shall, in the absence of manifest error, be final and binding on all parties.

Determination or Calculation by Trustee

 

  (4) If the Determination Agent does not at any time for any reason determine the Rate of Interest or calculate any Interest Amount for an Interest Period, the Trustee shall do so and such determination or calculation shall be deemed to have been made by the Determination Agent. In doing so, the Trustee shall determine or calculate the relevant matter in such manner as, in its absolute discretion, it shall deem fair and reasonable in the circumstances (having such regard as it shall think fit to the procedures described above), but subject always to any maximum or minimum interest rate which may be specified in the relevant Final Terms, or, subject as aforesaid, apply the foregoing provisions of this Condition, with any necessary consequential amendments, to the extent that, in its sole opinion, it can do so and in all other respects it shall do so in such manner as it shall, in its absolute discretion, deem fair and reasonable in the circumstances.

 

    

 

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Accrual of Interest

 

  (5) Interest shall accrue on the principal amount of each Note or, in the case of an Instalment Note, on each instalment of principal or, in the case of a partly paid Note, on the paid-up principal amount of such Note or otherwise as indicated in the relevant Final Terms. Interest will cease to accrue as from the due date for redemption therefor (or, in the case of an Instalment Note, in respect of each instalment of principal, on the due date for payment thereof) unless (except in the case of any payment where presentation and/or surrender of the relevant Note is not required as a precondition of payment), upon due presentation or surrender thereof, payment in full of the principal amount or the relevant instalment or, as the case may be, redemption amount is improperly withheld or refused, in which case interest shall continue to accrue thereon as provided in the Trust Deed.

 

  (6) The applicable “ Day Count Fraction ” means, in respect of the calculation of an amount for any period of time (from and including the first day of such period to but excluding the last day of such period) whether or not constituting an Interest Period (a “ Calculation Period ”), such Day Count Fraction as may be specified in the relevant Final Terms or, if no Day Count Fraction is specified in the relevant Final Terms, such Day Count Fraction as is specified in Condition 6A or Condition 6B(5), as the case may be, and:

 

  (i) if “ Actual/Actual (ISDA) ” or “ Actual/Actual ” is so specified, means the actual number of days in such Calculation Period divided by 365 (or, if any portion of such Calculation Period falls in a leap year, the sum of (a) the actual number of days in such portion of such Calculation Period falling in a leap year divided by 366 and (b) the actual number of days in such portion of such Calculation Period falling in a non-leap year divided by 365);

 

  (ii) if “ Actual/Actual (ICMA) ” is so specified:

 

  (a) if such Calculation Period falls within a single Determination Period, means the actual number of days in such Calculation Period divided by the product of the number of days in the Determination Period in which it falls and the number of Determination Periods in any year; and

 

  (b) if such Calculation Period does not fall within a single Determination Period, means the sum of (x) the actual number of days in such Calculation Period falling in the Determination Period in which it begins divided by the product of the actual number of days in that Determination Period and the number of Determination Periods in any year and (y) the actual number of days in such Calculation Period falling in the subsequent Determination Period divided by the product of the actual number of days in the subsequent Determination Period and the number of Determination Periods in any year;

 

     Determination Period ” means, in the case of Notes in relation to which Condition 6A is specified in the relevant Final Terms, the period from, and including, a Fixed Interest Payment Date in any year to, and excluding, the next Fixed Interest Payment Date;

 

    

 

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  (iii) if “ Actual/365 (Fixed) ” is so specified, means the actual number of days in such Calculation Period divided by 365;

 

  (iv) if “ Actual/360 ” is so specified, means the actual number of days in such Calculation Period divided by 360;

 

  (v) if “ 30/360 ”, “ 360/360 ” or “ Bond Basis ” is so specified, means the number of days in such Calculation Period divided by 360, calculated on a formula basis as follows:

 

Day Count Fraction =   LOGO

where:

Y1 ” is the year, expressed as a number, in which the first day of such Calculation Period falls;

Y2 ” is the year, expressed as a number, in which the day immediately following the last day of such Calculation Period falls;

M1 ” is the calendar month, expressed as a number, in which the first day of such Calculation Period falls;

M2 ” is the calendar month, expressed as a number, in which the day immediately following the last day of such Calculation Period falls;

D1 ” is the first calendar day, expressed as a number, of such Calculation Period, unless such number is 31, in which case D1 will be 30; and

D2 ” is the calendar day, expressed as a number, immediately following the last day included in such Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;

 

  (vi) if “ 30E/360 ” or “ Eurobond Basis ” is so specified, means the number of days in such Calculation Period divided by 360, calculated on a formula basis as follows:

 

Day Count Fraction =   LOGO

where:

Y1 ” is the year, expressed as a number, in which the first day of such Calculation Period falls;

Y2 ” is the year, expressed as a number, in which the day immediately following the last day of such Calculation Period falls;

M1 ” is the calendar month, expressed as a number, in which the first day of such Calculation Period falls;

M2 ” is the calendar month, expressed as a number, in which the day immediately following the last day of such Calculation Period falls;

D1 ” is the first calendar day, expressed as a number, of such Calculation Period, unless such number would be 31, in which case D1 will be 30; and

 

    

 

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D2 ” is the calendar day, expressed as a number, immediately following the last day included in such Calculation Period, unless such number would be 31, in which case D2 will be 30; and

 

  (vii) if “ 30E/360 (ISDA) ” is so` specified, means the number of days in such Calculation Period divided by 360, calculated on a formula basis as follows:

 

Day Count Fraction =   LOGO

where:

Y1 ” is the year, expressed as a number, in which the first day of such Calculation Period falls;

Y2 ” is the year, expressed as a number, in which the day immediately following the last day of such Calculation Period falls;

M1 ” is the calendar month, expressed as a number, in which the first day of such Calculation Period falls;

M2 ” is the calendar month, expressed as a number, in which the day immediately following the last day of such Calculation Period falls;

D1 ” is the first calendar day, expressed as a number, of such Calculation Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and

D2 ” is the calendar day, expressed as a number, immediately following the last day included in such Calculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31 and in which case D2 will be 30.

 

  (F) Interest – Floating Rate – Linear Interpolation

Where Linear Interpolation is specified in the relevant final terms as applicable in respect of an Interest Period, the Rate of Interest for such Interest Period shall be calculated by the Determination Agent by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Condition 6B (Screen Rate Determination) is specified hereon as applicable) or the relevant Floating Rate Option (where Condition 6C (ISDA Determination) is specified hereon as applicable), one of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Period and the other of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Period provided however that if there is no rate available for the period of time next shorter or, as the case may be, next longer, then the Determination Agent shall determine such rate at such time and by reference to such sources as it determines appropriate.

Applicable Maturity ” means: (a) in relation to Screen Rate Determination, the period of time designated in the Reference Rate, and (b) in relation to ISDA Determination, the Designated Maturity.

 

  (G) Zero Coupon Notes

 

    

 

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Where a Note the interest basis of which is specified in the relevant final terms to be Zero Coupon is repayable prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shall be the early redemption amount of such Note. As from the Maturity Date, the Rate of Interest for any overdue principal of such a Note shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as described in Condition 7(j)).

 

7 Redemption and Purchase

 

  (a) Final Redemption

Unless previously redeemed, or purchased and cancelled, Notes shall be redeemed at their principal amount (or at such other redemption amount as may be specified in the relevant Final Terms) (or, in the case of Instalment Notes, in such amounts as may be specified in the relevant Final Terms) on the date or dates (or, in the case of Notes which bear interest at a floating rate, on the date or dates upon which interest is payable) specified in the relevant Final Terms. Notes may be redeemed before such date or dates in accordance with Condition 7(c). If stated as being applicable in the relevant Final Terms, Notes may also be redeemed before such date or dates in accordance with Condition 7(d) and/or Condition 7(g). The Issuer may also purchase Notes in accordance with Condition 7(h).

 

  (b) No Fixed Maturity

This Condition 7(b) is applicable to Notes with no specified maturity date (“ Undated Notes ”). There is no fixed date for redemption of Undated Notes and the Issuer shall (without prejudice to the provisions of Condition 10 and the Issuer’s right to purchase Notes in accordance with Condition 7(h)) only redeem Undated Notes in accordance with Condition 7(c) and/or, if stated as being applicable in the relevant Final Terms, in accordance with Condition 7(d) and/or Condition 7(g).

 

  (c) Redemption for taxation reasons

The Issuer may, at its option, redeem the Notes in whole, but not in part, upon not more than 60 days’ nor less than 30 days’ notice (specifying, in the case of Notes which bear interest at a floating rate, a date for such redemption which is an Interest Payment Date) to the Holders of such Notes at their principal amount (or such other redemption amount as may be specified in these Terms and Conditions) less, in the case of any Instalment Note, the aggregate amount of all instalments which shall have become due and payable prior to the date specified for such redemption in respect of such Note under any other Condition and which remain unpaid at such date, together with interest accrued (if any) thereon (calculated as provided in these Terms and Conditions and the Trust Deed) and, in the case of Undated Notes, arrears of interest (if any) in respect thereof to but excluding the date fixed for redemption, and, in any case, any additional amounts payable under Condition 9 or under any additional or substitute undertaking given pursuant to the Trust Deed (each a “ Tax Early Redemption Amount ”) provided that the Issuer or a Guarantor shall provide to the Trustee an opinion in writing of a reputable firm of lawyers of good standing (such opinion to be in a form, and such firm to be a firm, to which the Trustee shall have no reasonable objection) to the effect that there is a substantial likelihood that the Issuer or such Guarantor would be required to pay Additional Amounts in accordance with Condition 9 or under any additional or substitute undertaking given pursuant to the Trust Deed upon the next due date for a payment in respect of the Notes by reason of:

 

    

 

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  (i) any actual or proposed change in or amendment to the laws, regulations or rulings of The Netherlands, the United Kingdom, Japan or the United States or any political subdivision or taxing authority thereof or therein; or

 

  (ii) any actual or proposed change in the official application or interpretation of such laws, regulations or rulings; or

 

  (iii) any action which shall have been taken by any taxing authority or any court of competent jurisdiction of The Netherlands, the United Kingdom, Japan or the United States or any political subdivision or taxing authority thereof or therein, whether or not such action was taken or brought with respect to the relevant Issuer or Guarantor; or

 

  (iv) any actual or proposed change in the official application or interpretation of, or any actual or proposed execution of, or amendment to, any treaty or treaties affecting taxation to which The Netherlands, the United Kingdom, Japan or the United States is or is to be a party,

which change, amendment or execution becomes effective, taking of action occurs, or proposal is made, on or after the Issue Date of such Notes.

 

  (d) Optional Early Redemption (Call)

If this Condition 7(d) is specified in the relevant Final Terms as being applicable, then the Issuer may, upon the expiry of the appropriate notice (as specified in Condition 7(e)) redeem all (but not, unless and to the extent that the relevant Final Terms specifies otherwise, some only) of the Notes at their call early redemption amount (which shall be their principal amount or such other call early redemption amount as may be specified in the relevant Final Terms) less, in the case of any Instalment Note, the aggregate amount of all instalments which shall have become due and payable prior to the date specified for such redemption in respect of such Note under any other Condition and which remain unpaid at such date, together with accrued interest (if any) thereon (calculated as provided in these Terms and Conditions and the Trust Deed) and, in the case of Undated Notes, arrears of interest (if any) in respect thereof to but excluding the date fixed for redemption (each, a “ Call Early Redemption Amount ”).

 

  (e) The Appropriate Notice

The appropriate notice referred to in Condition 7(d) is a notice given by the Issuer to the Trustee and the Principal Paying Agent which notice shall be signed by an authorised signatory of the Issuer and shall specify:

 

    the Notes subject to redemption;

 

    (if the relevant Final Terms specifies that some only of the Notes may be redeemed) whether Notes are to be redeemed in whole or in part only and, if in part only, the aggregate principal amount of the Notes which are to be redeemed;

 

    the due date for such redemption, which shall be a Business Day (as defined in Condition 8B(1)) which shall be not less than 30 days after the date on which such notice is validly given, which shall be, in the case of Notes which bear interest at a floating rate, an Interest Payment Date; and

 

    

 

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    the Call Early Redemption Amount at which such Notes are to be redeemed.

Any such notice shall be given not more than 60 days and not less than 30 days prior to the date fixed for redemption, shall also be given to the Holders of the Notes in accordance with Condition 14, shall be irrevocable (unless the Trustee otherwise agrees), and the delivery thereof shall oblige the Issuer to make the redemption therein specified.

 

  (f) Partial Redemption

If the Notes are to be redeemed in part only on any date in accordance with Condition 7(d) the Notes to be redeemed shall be drawn by lot in such European city as the Issuer and the Trustee may agree, or identified in such other manner or in such other place as the Trustee may, in its absolute discretion, approve and deem appropriate and fair, subject always to compliance with all applicable laws and the requirements and procedures of any stock exchange on which the relevant Notes may be listed and of any clearing system in which the Notes are held and, in the case of such clearing system being Euroclear and Clearstream, Luxembourg, such redemption to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion.

 

  (g) Optional Early Redemption (Put)

If this Condition 7(g) is specified in the relevant Final Terms as being applicable, then the Issuer shall, upon the exercise of the relevant option by the Holder of any Note, redeem such Note on the date or the next of the dates specified in the relevant Final Terms at its principal amount (or such other redemption amount as may be specified in the relevant Final Terms) less, in the case of any Instalment Note, the aggregate amount of all instalments which shall have become due and payable prior to the date specified for such redemption in respect of such Note under any other Condition and which remain unpaid at such date, together with accrued interest (if any) thereon (calculated as provided in these Terms and Conditions and the Trust Deed) and, in the case of Undated Notes, arrears of interest (if any) in respect thereof to, but excluding, the date fixed for redemption (each, a “ Put Early Redemption Amount ”). In order to exercise such option, the Holder must, not less than 45 days before the date so specified, deposit the relevant Note (together, in the case of an interest-bearing Definitive Note, with any unmatured Coupons appertaining thereto) with any Paying Agent together with a duly completed redemption notice in the form which is available from the specified office of any of the Paying Agents.

 

  (h) Purchase of Notes

The Issuer, each Guarantor and any Group Company may at any time purchase Notes at any price in the open market or otherwise. If purchases are made by tender, tenders must be made available to all Noteholders alike.

 

  (i) Cancellation

All Notes (together, in the case of interest-bearing Definitive Notes, with unmatured Coupons attached thereto or surrendered therewith and, in the case of Instalment Notes, with all unmatured Receipts attached thereto or surrendered therewith) redeemed in accordance with this Condition 7 shall be cancelled forthwith and may not be reissued or resold, and Notes (together, in the case of interest-bearing Definitive Notes, with unmatured Coupons attached thereto or surrendered therewith and, in the case of Instalment Notes, with all unmatured Receipts attached thereto or surrendered therewith)

 

    

 

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purchased in accordance with this Condition 7 may, at the option of the purchaser, be cancelled, held or resold.

 

  (j) Zero Coupon Notes

 

  (a) The early redemption amount payable in respect of any Zero Coupon Note, upon redemption of such Note pursuant to Condition 7(c), Condition 7(d) or Condition 7(g) or upon it becoming due and payable as provided in Condition 10 shall be the Amortised Face Amount (calculated as provided below) of such Note unless otherwise specified in the relevant final terms.

 

  (b) Subject to the provisions of sub-paragraph (c) below, the Amortised Face Amount of any such Note shall be the scheduled Final Redemption Amount of such Note on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is shown hereon, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Notes if they were discounted back to their issue price on the Issue Date) compounded annually.

 

  (c) If the early redemption amount payable in respect of any such Note upon its redemption pursuant to Condition 7(c), Condition 7(d) or Condition 7(g) or upon it becoming due and payable as provided in Condition 10 is not paid when due, the early redemption amount due and payable in respect of such Note shall be the Amortised Face Amount of such Note as defined in sub-paragraph (B) above, except that such sub-paragraph shall have effect as though the date on which the Note becomes due and payable were the Relevant Date. The calculation of the Amortised Face Amount in accordance with this sub-paragraph shall continue to be made (both before and after judgment) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Final Redemption Amount of such Note on the Maturity Date together with any interest that may accrue in accordance with Condition 6(G).

Where such calculation is to be made for a period of less than one year, it shall be made on the basis of the Day Count Fraction shown in the final terms.

 

8 Payments

 

  (A) Payments

 

  (1) Payment of amounts (whether principal, redemption amount or otherwise and including accrued interest other than interest due against surrender of matured Coupons) due in respect of a Note will be made against presentation and (in the case of payments of instalments of principal other than on the due date for redemption) surrender of the relevant Receipts (provided that the Receipt is presented for payment together with its relative Note) or, in any other case, of the relevant Note at the specified office of any of the Paying Agents outside (unless Condition 8A(3) applies) the United States provided that such payment is not made into the United States or into an account maintained in the United States.

 

  (2) Payment of amounts due in respect of interest on Notes will be made:

 

    

 

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  (i) in the case of a Temporary Global Note or Permanent Global Note, against presentation of the relevant Temporary Global Note or Permanent Global Note at the specified office of any of the Paying Agents outside (unless Condition 8A(3) applies) the United States and, in the case of a Temporary Global Note, upon due certification as required therein;

 

  (ii) in the case of Definitive Notes without Coupons attached thereto at the time of their initial delivery, against presentation of the relevant Definitive Notes at the specified office of any of the Paying Agents outside (unless Condition 8A(3) applies) the United States; and

 

  (iii) in the case of Definitive Notes initially delivered with Coupons attached thereto, against surrender of the relevant Coupons at the specified office of any of the Paying Agents outside (unless Condition 8A(3) applies) the United States.

 

  (3) Payments of amounts due in respect of interest on Notes and exchanges of Talons for Coupon sheets in accordance with Condition 8A(6) will not be made at the specified office of any Paying Agent in the United States (as defined in the United States Internal Revenue Code of 1986, as amended, and U.S. Treasury regulations thereunder) unless:

 

  (i) payment in full of amounts due or, as the case may be, the exchange of Talons in respect of interest on such Notes when due at all the specified offices of the Paying Agents outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions;

 

  (ii) such payment or, as the case may be, exchange is permitted by applicable United States law; and

 

  (iii) the Notes are denominated in and payable in United States Dollars.

If paragraphs (i) to (iii) above apply, the Issuer and the Guarantors shall forthwith appoint a further Paying Agent with a specified office in New York City.

 

  (4)

If the due date for payment of any amount due in respect of any Note is not both a Relevant Financial Centre Day and a local banking day, then the Holder thereof will not be entitled to payment thereof until the next day which is such a day and, thereafter, will be entitled to receive payment by cheque on any local banking day, and will be entitled to payment by transfer to a designated account, on any day which is a local banking day, a Relevant Financial Centre Day and a day on which commercial banks and foreign exchange markets settle payments in the relevant currency in the place where the relevant designated account is located. No further payment on account of interest or otherwise shall be due in respect of such postponed payment unless there is subsequent failure to pay in accordance with these Terms and Conditions in which event interest shall continue to accrue as provided in Condition 6E(5). For the purpose of this Condition 8A(4), “ Relevant Financial Centre Day ” means, in the case of a currency other than euro, a day on which commercial banks and foreign exchange markets settle payments in the Relevant Financial Centre and any other place specified in the relevant Final Terms and, in the case of payment in euro, a TARGET Day and a “ local banking day ” means a day (other than a Saturday or Sunday) on which commercial banks are

 

    

 

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  open for business in the place of presentation of the relevant Note or, as the case may be, Coupon.

 

  (5) Each Definitive Note initially delivered with Coupons attached thereto shall be presented and, save in the case of partial redemption of such Note (including, in the case of an Instalment Note, payment of any instalment other than the final instalment), surrendered for final redemption together with all unmatured Coupons appertaining thereto, failing which:

 

  (i) in the case of Definitive Notes which bear interest at a fixed rate or rates, the amount of any missing unmatured Coupons (or, in the case of a payment not being made in full, that portion of the amount of such missing unmatured Coupon which that redemption amount paid bears to the total redemption amount due) (excluding for this purpose Talons) will be deducted from the amount otherwise payable on such final redemption, the principal amount so deducted being payable against surrender of the relevant Coupon at the specified office of any of the Paying Agents at any time within 10 years of the Relevant Date applicable to payment of such final redemption amount; and

 

  (ii) in the case of Definitive Notes which bear interest at, or at a margin above or below, a floating rate, all unmatured Coupons relating to such Notes (whether or not surrendered therewith) shall become void and no payment shall be made thereafter in respect of them.

The provisions of paragraph (i) of this Condition 8A(5) notwithstanding, if any Definitive Notes which bear interest at a fixed rate or rates should be issued with a maturity date and a fixed rate or fixed rates such that, on the presentation for payment of any such Definitive Note without any unmatured Coupons attached thereto or surrendered therewith, the amount required by paragraph (i) to be deducted would be greater than the amount otherwise due for payment, then, upon the due date for redemption of any such Definitive Note, such unmatured Coupons (whether or not attached) being Coupons representing an amount in excess of the relevant redemption amount shall become void (and no payment shall be made in respect thereof) as shall be required so that, upon application of the provisions of paragraph (i) in respect of such Coupons as have not so become void, the amount required by paragraph (i) to be deducted would not be greater than the amount otherwise due for payment. Where the application of the foregoing sentence requires some but not all of the unmatured Coupons relating to a Definitive Note to become void, the relevant Paying Agent shall determine which unmatured Coupons are to become void, and shall select for such purpose Coupons maturing on later dates in preference to Coupons maturing on earlier dates.

 

  (6) In relation to Definitive Notes initially delivered with Talons attached thereto, on or after the due date for the payment of interest on which the final Coupon comprised in any Coupon sheet matures, the Talon comprised in the Coupon sheet may be surrendered at the specified office of any Paying Agent outside (unless Condition 8A(3) applies) the United States in exchange for a further Coupon sheet (including any appropriate further Talon), subject to the provisions of Condition 12 below. Each Talon shall, for the purpose of these Terms and Conditions, be deemed to mature on the due date for the payment of interest on which the final Coupon comprised in the relative Coupon sheet matures.

 

    

 

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  (7) Payments of amounts due (whether principal, redemption amount, interest or otherwise) in respect of Notes will be made by (a) transfer to an account in the relevant currency specified by the payee or (b) cheque in the relevant currency drawn on a bank in the Relevant Financial Centre provided, however, that in the case of (a), payment shall not be made to an account within the United States unless permitted by applicable U.S. tax law requirements.

 

  (8) The receipt by the Principal Swiss Paying Agent of the due and punctual payment of funds in Swiss francs in Switzerland shall release the Issuer from its obligations under the Swiss Notes (and any Coupons appertaining to them) for the payment of principal and interest to the extent of such payment. Payment of principal and/or interest under Swiss Notes (and any Coupons appertaining to them) shall be payable in freely transferable Swiss francs without collection costs in Switzerland (at, in the case of definitive Swiss Notes, the specified offices located in Switzerland of the Principal Swiss Paying Agent upon their surrender) without any restrictions and whatever the circumstances may be, irrespective of nationality, domicile or residence of the holders of the Swiss Notes (and any Coupons) and without requiring any certification, affidavit or the fulfilment of any other formality.

 

  (B) Payments - General Provisions

 

  (1) Save as otherwise specified herein, for the purposes of these Terms and Conditions:

 

  (i) Business Day ” means:

 

    in relation to Notes payable in euro, a TARGET Day;

 

    in relation to Notes payable in any other currency, a day on which commercial banks are open for business and foreign exchange markets settle payments in the Relevant Financial Centre in respect of the relevant currency; and

 

    a day on which commercial banks are open for business and foreign exchange markets settle payments in any place specified in the relevant Final Terms;

 

  (ii) Relevant Financial Centre ” means, in relation to the Notes denominated in a currency other than euro, such financial centre or centres as may be specified in relation to the relevant currency for the purposes of the definition of “ Business Day ” in the ISDA Definitions and, in relation to Notes denominated in euro, the principal financial centre of any of the member states in the Euro-zone; and

 

  (iii) TARGET System ” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007, or any successor thereto.

 

  (2)

Payments will, without prejudice to the provisions of Condition 9, be subject in all cases to: (i) any applicable fiscal or other laws and regulations; and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended (the “ Code ”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any

 

    

 

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  regulations or agreements thereunder, any official interpretations thereof or any law implementing an intergovernmental approach with respect thereto (“ FATCA ”).

 

  (C) Redenomination

 

  (1) Unless disapplied in the relevant Final Terms, the Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Trustee, the Principal Paying Agent, Euroclear and Clearstream, Luxembourg and at least 30 days’ prior notice to the Noteholders in accordance with Condition 14, elect that, in the case of Notes denominated in the currency of a member state of the European Union that has not adopted the single currency in accordance with the Treaty, with effect from the Redenomination Date specified in the notice, Notes denominated in the currency of such member state of the European Union that adopts the single currency in accordance with the Treaty shall be redenominated in euro.

 

  (2) The election will have effect as follows:

 

  (i) each Specified Denomination and, in the case of Fixed Rate Notes, each amount of interest specified in the Coupons will be deemed to be such amount of euro as is equivalent to its denomination or the amount of interest so specified in the Specified Currency at the Established Rate, rounded down to the nearest €0.01 (any fraction arising therefrom shall be paid on the Redenomination Date to the Noteholder in addition to the payment of interest otherwise payable on such Redenomination Date);

 

  (ii) if definitive notes are required to be issued after the Redenomination Date they shall be issued at the expense of the Issuer in denominations of at least €100,000, or such higher denominations as the Agent shall determine and notify to the Noteholders;

 

  (iii) after the Redenomination Date, all payments in respect of the Notes, the Receipts and the Coupons, other than payments of interest in respect of periods commencing before the Redenomination Date, will be made solely in euro as though references in the Notes to the Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque;

 

  (iv) if the Notes are Fixed Rate Notes and interest for any period ending on or after the Redenomination Date is required to be calculated for a period ending other than on an Interest Payment Date it will be calculated:

 

  (A) in the case of the Notes in global form, by applying the Rate of Interest to the principal amount of such Notes; and

 

  (B) in the case of Notes in definitive form, by applying the Rate of Interest to the Calculation Amount,

and, in each case, multiplying such sum by the applicable Day Count Fraction, which, in this case, shall be Actual/Actual (ICMA) and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with the applicable market convention. Where the

 

    

 

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  Denomination of a Fixed Rate Note in definitive form comprises more than one Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Denomination without any further rounding;

 

  (v) if the Notes are Floating Rate Notes the relevant Final Terms will specify any relevant changes to the provisions relating to interest; and

 

  (vi) such other changes shall be made to these Terms and Conditions as the Issuer may decide, after consultation with the Principal Paying Agent, and as may be specified in the notice, to conform them to conventions then applicable to instruments denominated in euro to the satisfaction of the Trustee.

 

  (3) For the purposes of these Terms and Conditions:

 

  (i) Established Rate ” means the rate for the conversion of the Specified Currency (including compliance with rules relating to roundings in accordance with applicable European Community regulations) into euro established by the Council of the European Union pursuant to Article 123 of the Treaty;

 

  (ii) euro ” means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty;

 

  (iii) Redenomination Date ” means (in the case of interest-bearing Notes) any date for payment of interest under the Notes or (in the case of Zero Coupon Notes) any date, in each case specified by the Issuer in the notice given to the Noteholders pursuant to paragraph 8C(1) above and which falls on or after the date on which the relevant member state of the European Union that has not adopted the single currency in accordance with the Treaty, adopts the single currency in accordance with the Treaty;

 

  (iv) Specified Currency ” means the currency specified in the relevant Final Terms;

 

  (v) Specified Denomination ” means the denomination (of the relevant Notes in the Specified Currency) specified in the relevant Final Terms; and

 

  (vi) Treaty ” means the Treaty establishing the European Community as amended.

 

  (D) Exchange

The Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Trustee, the Principal Paying Agent, Euroclear and Clearstream, Luxembourg and not less than 30 days’ prior notice to the Noteholders in accordance with Condition 14, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be exchangeable for Notes expressed to be denominated in euro in accordance with such arrangements as the Issuer may decide, after consultation with the Principal Paying Agent, and as may be specified in the notice, including arrangements under which Receipts and Coupons unmatured at the date so specified become void.

 

    

 

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  (E) The Paying Agents

 

  (1) The Issuer and the Guarantors together reserve the right, in accordance with the provisions of the Paying Agency Agreement, to vary or terminate the appointment of any Paying Agent (including the Principal Paying Agent) and to appoint additional or other Paying Agents provided that they will at all times maintain (i) a Principal Paying Agent, (ii) so long as any Notes are listed on any stock exchange, a Paying Agent in such place as may be required by such relevant stock exchange, (iii) in the circumstances described in Condition 8A(3), a Paying Agent with a specified office in New York City and (iv) so long as any Notes are listed on the SIX Swiss Exchange (as specified in the relevant Final Terms), a Paying Agent in Switzerland, which agent shall have an office in Switzerland and be a duly licensed Swiss bank or securities dealer or otherwise be subject to supervision by the Swiss Financial Market Supervisory Authority FINMA, to perform the functions of a Swiss paying agent. The Paying Agents reserve the right at any time to change their respective offices to some other specified office in the same city. Notice of all changes in the identities or specified offices of the Paying Agents will be notified promptly by the Issuer to the Holders of the Notes in accordance with Condition 14.

 

  (2) The Paying Agents act solely as agents of the Issuer and the Guarantors or, following the occurrence of a Default (as defined in Condition 10), the Trustee and, save as provided in the Paying Agency Agreement, do not assume any obligations towards or relationship of agency or trust for any Holder of any Note, Receipt or Coupon and each of them shall only be responsible for the performance of the duties and obligations expressly imposed upon them in the Paying Agency Agreement or incidental thereto.

 

  (3) The initial Paying Agents and their respective initial specified offices are specified below.

 

9 Taxation

All payments of principal of, and interest on, Notes by the Issuer or, as the case may be, a Guarantor will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of The Netherlands (in the case of payment by N.V.), the United Kingdom (in the case of payment by PLC), Japan (in the case of payment by UJH) or the United States (in the case of payment by UNUS) or (in any such case) any political subdivision or taxing authority thereof or therein, unless such withholding or deduction is required by law. In such event, except to the extent that the withholding or deduction is made in respect of FATCA, the Issuer or, as the case may be, such Guarantor, will pay such additional amounts (“ Additional Amounts ”) as shall be necessary in order that the net amounts received by the holder of any Note, Receipt or, as the case may be, Coupon, after such withholding or deduction, shall equal the respective amounts of principal and interest which would have been receivable in respect of the Notes, Receipts or, as the case may be, Coupons in the absence of such withholding or deduction, provided however that no such Additional Amounts shall be payable:

 

  (A) by N.V. or PLC with respect to:

 

  (i)

any Note, Receipt or Coupon presented for payment by, or on behalf of, a Holder who is liable to such taxes or duties in respect of such Note, Receipt

 

    

 

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  or Coupon by reason of his having some connection with The Netherlands or, as the case may be, the United Kingdom other than the mere holding of such Note, Receipt or Coupon; or

 

  (ii) any payment in respect of a Note, Receipt or Coupon where the Holder thereof would be able to avoid such withholding or deduction by making a declaration of non-residence or other similar claim for exemption to the relevant tax authority; or

 

  (iii) if presentment is required, any Note, Receipt or Coupon presented for payment more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such Additional Amounts on presenting the same for payment on such thirtieth day; or

 

  (iv) any tax, assessment or other governmental charge required to be withheld or deducted by any Paying Agent from any payment by N.V. or, as the case may be, PLC if such payment can be made without such withholding or deduction by any other Paying Agent; or

 

  (v) any estate, inheritance, gift, sales, transfer, excise, personal property or any similar tax, assessment or other governmental charge; or

 

  (vi) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payment of principal, premium, if any, or interest, if any, with respect to such Note, Receipt or Coupon; or

 

  (vii) any payment in respect of a Note, Receipt or Coupon to any Holder who is not the sole beneficial owner of such Note, Receipt or Coupon to the extent that a beneficial owner thereof would not have been entitled to payment thereof had such beneficial owner been the Holder of such Note, Receipt or Coupon; or

 

  (viii) any such taxes, duties, assessments or other governmental charges imposed on a payment in respect of a Note required to be made pursuant to laws enacted by Switzerland providing for the taxation of payments according to principles similar to those laid down in the draft legislation of the Swiss Federal Council of December 17, 2014, or otherwise changing the Swiss federal withholding tax system from an issuer-based system to a paying-agent-based system pursuant to which a person other than the issuer is required to withhold tax on any interest payments; or

 

  (ix) any combination of (i) to (viii);

 

  (B) by UJH with respect to:

 

  (i) any Note, Receipt or Coupon presented for payment by, or on behalf of, a Holder who is liable to such taxes or duties in respect of such Note, Receipt or Coupon by reason of its being connected with Japan otherwise than merely by holding or ownership of the Note, Receipt or Coupon or by the receipt of principal or interest in respect of such Note, Receipt or Coupon; or

 

  (ii)

any payment in respect of a Note, Receipt or Coupon where the Holder thereof would otherwise be exempted from any such withholding or deduction but who fails to comply with any applicable requirement to

 

    

 

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  provide Exemption Information (as defined below) or to submit a Claim for Exemption (as defined below) to the Paying Agent to whom the relevant Note, Receipt or Coupon is presented, or whose Exemption Information is not duly communicated through the Participant (as defined below) and the relevant international clearing organisation to such Paying Agent; or

 

  (iii) any payment in respect of a Note, Receipt or Coupon where the Holder thereof is for Japanese tax purposes treated as a resident of Japan, a Japanese corporation or a person having a special relationship with the Issuer as described in the Law (as defined below) (except for (A) as a Designated Financial Institution (as defined below) who complies with the requirement to provide Exemption Information or to submit a Claim for Exemption to the Paying Agent to whom the relevant Note, Receipt or Coupon is presented or (B) a resident of Japan or a Japanese corporation who duly notifies (directly or through the Participant (as defined below) or otherwise) the relevant Paying Agent of its status as exempt from Japanese national or local taxes to be withheld or deducted by the Issuer by reason of such resident of Japan or Japanese corporation, as the case may be, receiving interest on the relevant Note, Receipt or Coupon through a paying handling agent in Japan appointed by it).

Where a Note, Receipt or Coupon is held through a participant of an international clearing organisation or a financial intermediary (each a “ Participant ”), in order to receive payments free of withholding or deduction by the Issuer for, or on account of, Japanese taxes, if the relevant Holder is (A) a non-resident of Japan or a non-Japanese corporation or (B) a Japanese financial institution falling under certain categories prescribed by the Special Taxation Measures Law (Law No. 26 of 1957) and the cabinet order (Cabinet Order No. 43 of 1957) thereunder as amended (together with the ministerial ordinance and other regulation thereunder, the “Law”) (a “ Designated Financial Institution ”), all in accordance with the Law, such Holder shall, at the time of entrusting a Participant with the custody of the relevant Note, Receipt or Coupon, provide certain information prescribed by the Law to enable the Participant to establish that such Holder is exempted from the requirement for Japanese taxes to be withheld or deducted ( Rishi Juryosha Joho ) (the “ Exemption Information ”) and advise the Participant if the Holder ceases to be so exempted.

Where a Note, Receipt or Coupon is not held through a Participant, in order to receive payments free of withholding or deduction by the Issuer for, or on account of, Japanese taxes, if the relevant Holder is (A) a non-resident of Japan or a non-Japanese corporation or (B) a Designated Financial Institution, all in accordance with the Law, such Holder shall, on or prior to each time on which it receives interest, submit to the relevant Paying Agent a claim for exemption from withholding tax ( Hikazei Tekiyo Shinkokusho ) (a “ Claim for Exemption ”) stating, inter alia , the name, address and any other required information of the Holder, the title of the Notes, the relevant Interest Payment Date, the amount of interest and the fact that the Holder is qualified to submit the Claim for Exemption, together with documentary evidence regarding its identity and residence; or

 

  (C) by UNUS with respect to:

 

    

 

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  (i) any Note, Receipt or Coupon presented for payment by, or on behalf of, a Holder who is liable for such taxes or duties in respect of such Note, Receipt or Coupon by reason of his having some connection with the United States other than the mere holding of such Note, Receipt or Coupon; or

 

  (ii) any payment in respect of a Note, Receipt or Coupon where the Holder thereof would be able to avoid such withholding or deduction by making a declaration of non-residence or other similar claim for exemption to the relevant tax authority; or

 

  (iii) if presentment is required, any Note, Receipt or Coupon presented for payment more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such Additional Amounts on presenting the same for payment on such thirtieth day; or

 

  (iv) any tax, assessment or other governmental charge required to be withheld or deducted by any Paying Agent from any payment by UNUS in its capacity as Guarantor if such payment can be made without such withholding or deduction by any other Paying Agent; or

 

  (v) any estate, inheritance, gift, sales, transfer, excise, personal property or any similar tax, assessment or other governmental charge; or

 

  (vi) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payment of principal, premium, if any, or interest, if any, with respect to such Note, Receipt or Coupon; or

 

  (vii) any payment in respect of a Note, Receipt or Coupon to any Holder who is not the sole beneficial owner of such Note, Receipt or Coupon to the extent that a beneficial owner thereof would not have been entitled to payment thereof had such beneficial owner been the Holder of such Note, Receipt or Coupon; or

 

  (viii) any combination of (i) to (vii).

As used herein, “ Relevant Date ” means whichever is the later of (i) the date on which such payment first becomes due and (ii) if the full amount of the moneys payable has not been made available to the Principal Paying Agent on or prior to such date, the date on which, the full amount of such moneys having been made available, notice to that effect shall have been given to the Noteholders in accordance with Condition 14.

References herein to principal of, or interest on, the Notes shall be deemed also to refer to any Additional Amounts which may be payable with respect thereto under this Condition or any undertakings given in addition thereto or in substitution therefor pursuant to the Trust Deed.

The provisions of this Condition shall be without prejudice to the rights of substitution conferred by Condition 15.

 

10 Repayment Upon Event of Default

 

  (A) The following events or circumstances (each, a “ Default ”) shall be acceleration events in relation to the Notes of a Series:

 

    

 

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  (a) there is a default in the payment of any principal of, or for more than 15 days in the payment of any interest due on, any of the Notes; or

 

  (b) there is a default in the performance or observance by the Issuer, N.V. or PLC of any other obligation under the Trust Deed or the Notes and such default continues for 30 days after written notice thereof shall have been given to the Issuer and the Guarantors by the Trustee requiring the same to be remedied; or

 

  (c) (i) any other indebtedness in respect of borrowed money (amounting in aggregate principal amount to not less than U.S.$100,000,000 or the equivalent thereof in any other currency or currencies) of either N.V. or PLC becomes prematurely repayable as a result of a default under the terms thereof, or (ii) either N.V. or PLC defaults in the repayment of any indebtedness in respect of borrowed money (amounting in aggregate principal amount to not less than U.S.$100,000,000 or the equivalent thereof in any other currency or currencies) at the maturity thereof (taking into account any applicable grace period therefor), or (iii) any guarantee or indemnity given by either N.V. or PLC in respect of any indebtedness in respect of borrowed money (amounting in aggregate principal amount to not less than U.S.$100,000,000 or the equivalent thereof in any other currency or currencies) shall not be honoured when due and called upon (taking into account any applicable grace period therefor) save where the Trustee is satisfied that liability under such guarantee or indemnity is being contested in good faith; or

 

  (d) an order is made or a decree or an effective resolution is passed for the winding-up, liquidation or dissolution of the Issuer or N.V. or PLC or an administration order is made or an administrator is appointed in relation to PLC (except for the purpose of a merger, reconstruction or amalgamation, under the terms of Condition 15 or the terms of which have previously been approved in writing by the Trustee or, where UJH is the Issuer, for the purpose of a merger, reconstruction or amalgamation, under the terms of Condition 15 or a merger, reconstruction or amalgamation not involving bankruptcy or insolvency) and (except where such order, decree or resolution is initiated or consented to by the relevant company or its shareholders) such order, decree or resolution is not discharged or stayed within a period of 60 days; or

 

  (e) the Issuer or N.V. or PLC (except in the case of N.V. or PLC for the purpose of a merger, reconstruction or amalgamation, under the terms of Condition 15 or the terms of which have previously been approved in writing by the Trustee or, where UJH is the Issuer, for the purpose of a merger, reconstruction or amalgamation under the terms of Condition 15 or a merger, reconstruction or amalgamation not involving bankruptcy or insolvency) ceases or threatens to cease to carry on the whole or substantially the whole of its business; or

 

  (f)

an administrative receiver or other receiver, trustee, assignee or like officer is appointed of (where the Issuer is UJH) the whole or a substantial part of the undertaking or assets of UJH or (in any case) the whole or a substantial part of the undertaking or assets of PLC or (in any case) an administrator

 

    

 

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  ( bewindvoerder ) is provisionally or definitively appointed by the District Court in the event of a moratorium ( surséance van betaling ) over the whole or a substantial part of the undertaking or assets of N.V. and (except where any such appointment is made by or at the instigation or motion of the relevant company or its shareholders) such appointment is not discharged within 30 days; or

 

  (g) a trustee in bankruptcy ( curator ) is appointed by the District Court in the event of bankruptcy ( faillissement ) affecting the whole or a substantial part of the undertaking or assets of N.V. and such appointment is not discharged within 30 days; or

 

  (h) a distress or execution is levied or enforced upon or sued out against a substantial part of the assets of either N.V. or PLC (being, in the case of N.V., either an executory attachment ( executoriaal beslag ) or a conservatory attachment ( conservatoir beslag )) and is not removed, discharged, cancelled or paid out within 30 days after the making thereof or any encumbrancer takes possession of (where the Issuer is UJH) the whole or a substantial part of the undertaking or assets of UJH or (in any case) the whole or a substantial part of the undertaking or assets of N.V. or PLC and is not discharged within 30 days; or

 

  (i) for any reason the guarantee of either N.V. or PLC in respect of the Notes ceases to be in full force and effect.

For the purposes of paragraphs (f), (g) and (h) the expression “ a substantial part ” means a part whose value is equal to or greater than 25 per cent. of the aggregate value of the fixed assets and current assets of the Unilever Group, such value and such assets being determined by reference to the then most recently published audited consolidated balance sheet of the Unilever Group. A report by the auditors of the relevant company that, in their opinion, (i) the amounts shown in a certificate provided by N.V. and PLC (showing the fixed assets and current assets of the relevant part and those fixed assets and current assets expressed as a percentage of the fixed assets and current assets of the Unilever Group) have been correctly extracted from the accounting records of the Unilever Group and (ii) the percentage of the fixed assets and current assets of that part to the fixed assets and the current assets of the Unilever Group has been correctly calculated, shall, in the absence of manifest error, be conclusive evidence of the matters to which it relates.

 

  (B)

If any Default shall occur in relation to the Notes of a Series, the Trustee in its discretion may, and (subject to its rights under the Trust Deed to be indemnified and/or secured and/or prefunded to its satisfaction), if so directed by an Extraordinary Resolution of the Holders of the Notes of the relevant Series or if so requested in writing by the Holders of not less than 25 per cent. in principal amount of the Notes of the relevant Series, shall, but, in the case of the happening of any of the events referred to in paragraphs (b), (c), (e), (f), (g) or (h) of Condition 10A, only if the Trustee shall have certified to the Issuer and the Guarantors that such event is, in its opinion, materially prejudicial to the interests of the Holders of the Notes of the relevant Series, by written notice to the Issuer and the Guarantors declare that such Notes are immediately repayable whereupon the same shall become immediately repayable at their default early redemption amount (which

 

    

 

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  shall be their principal amount or such other default early redemption amount as may be specified in the relevant Final Terms) less, in the case of any Instalment Note, the aggregate amount of all instalments which shall have become due and payable in respect of such Note prior to the date fixed for redemption under any other Condition and which remains unpaid at such date together with all interest (if any) accrued thereon (calculated as provided in these Terms and Conditions and in the Trust Deed) and, in the case of Undated Notes, arrears of interest (if any) in respect thereof.

 

11 Enforcement

At any time after the Notes of a Series shall have become repayable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer and the Guarantors as it may think fit to enforce repayment of such Notes together with accrued interest and to enforce the provisions of the Trust Deed, but it shall not be bound to take any such proceedings unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least 25 per cent. in principal amount of the Notes of the relevant Series then outstanding and (ii) it shall have been indemnified and/or received security to its satisfaction. Only the Trustee may enforce the provisions of the Notes or the Trust Deed and no Holder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantors unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.

 

12 Prescription

 

  (a) Claims against the Issuer and/or any Guarantors in respect of Notes, Receipts and Coupons will become void unless presented for payment within a period of 10 years, in the case of Notes and Receipts and five years, in the case of Coupons, from the Relevant Date (as defined in Condition 9) relating thereto.

 

  (b) In relation to Definitive Notes initially delivered with Talons attached thereto, there shall not be included in any Coupon sheet issued upon exchange of a Talon pursuant to Condition 8A(6) any Coupon which would be void upon issue or the due date for payment of which would fall after the due date for the redemption of the relevant Note or which would be void pursuant to this Condition 12.

 

13 Replacement of Notes, Receipts and Coupons

If any Note, Receipt or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Principal Paying Agent upon payment by the claimant of all expenses incurred in connection with such replacement and upon such terms as to evidence, security, indemnity and otherwise as the Issuer or the Principal Paying Agent may require. Mutilated or defaced Notes, Receipts and Coupons must be surrendered before replacements will be delivered.

 

14 Notices

Notices to Holders of Notes will be deemed to be validly given if published in one leading English language daily newspaper with circulation in London (which is expected to be the Financial Times ) or, if this is not possible, in one other leading English language daily newspaper with circulation in Europe or, in the case of a Temporary Global Note or

 

    

 

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Permanent Global Note, if delivered to Euroclear and/or Clearstream, Luxembourg and/or any other applicable clearing system for communication by them to the persons shown in their respective records as having interests therein provided that the requirements of the relevant stock exchange(s) have been complied with. All notices in respect of a Note listed on Euronext Amsterdam shall be published in the Euronext Amsterdam Daily Official List (“ Officiële Prijscourant ”). Any such notice shall be deemed to have been given on the date of such publication or, if so published more than once, on the date of first publication or, as the case may be, on the fourth day after the date of such delivery to Euroclear and/or Clearstream, Luxembourg and/or such other clearing system. If publication is not practicable in any such newspaper, notice will be validly given if made in such other manner, and shall be deemed to have been given on such date, as the Trustee may in each case approve in writing.

Holders of Coupons and Receipts will be deemed for all purposes to have notice of the contents of any notice given to Holders of Notes in accordance with this Condition.

In the case of Notes listed on the SIX Swiss Exchange, notices will be published in electronic form on the website of the SIX Swiss Exchange (www.six-swiss-exchange.com, where notices are currently published under the address www.six-swiss-exchange.com/news/official_notices/search_en.html) or otherwise in compliance with the regulations of the SIX Swiss Exchange.

 

15 Meetings of Noteholders; Modification; Waiver; Substitution

The Trust Deed contains provisions for convening meetings of Holders of any Series of Notes to consider any matter affecting their interests, including the modification by Extraordinary Resolution of these Terms and Conditions or the provisions of the Trust Deed. The quorum at any such meeting for passing an Extraordinary Resolution will be two or more persons holding or representing a clear majority in principal amount of the Notes of that Series for the time being outstanding or, at any adjourned meeting, two or more persons being or representing Noteholders whatever the principal amount of the Notes of that Series so held or represented, except that, at any meeting the business of which includes the modification of certain of these Terms and Conditions or provisions of the Trust Deed, the necessary quorum for passing an Extraordinary Resolution will be two or more persons holding or representing not less than 66 per cent., or at any adjourned such meeting not less than 33 per cent., of the principal amount of the Notes of that Series for the time being outstanding. An Extraordinary Resolution passed at any meeting of Noteholders of any Series of Notes will be binding on all Noteholders of that Series, whether or not they are present at the meeting, and on all Couponholders of that Series.

The Trust Deed contains provisions for the convening of a single meeting of Holders of Notes of more than one Series where the Trustee so decides.

The Trustee may agree, without the consent of the Noteholders or Couponholders of any Series, to any modification (subject to certain exceptions) of, or to the waiver or authorisation of any breach or proposed breach of, any of these Terms and Conditions or any of the provisions of the Trust Deed which, in the opinion of the Trustee, is not materially prejudicial to the interests of the Holders of such Notes or to any modification which is of a formal, minor or technical nature or is made to correct a manifest error. The Trustee may also determine that any event which would or might otherwise constitute a Default under Condition 10 shall not do so, provided that, in the opinion of the Trustee, such event is not materially prejudicial to the interests of the Holders of the Notes of the

 

    

 

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relevant Series. Any such modification, waiver, authorisation or determination shall be binding on the Holders of the Notes of such Series and of the Receipts and of the Coupons (if any) relating thereto and (unless the Trustee agrees otherwise) any such modification shall be notified to the Noteholders as soon as practicable thereafter in accordance with Condition 14.

The Trustee may also agree, subject to certain conditions set out in the Trust Deed, but without the consent of the Holders of the Notes of such Series and of the Receipts and of the Coupons (if any) relating thereto, (i) to the substitution of any Group Company in place of the Issuer as principal debtor in respect of the Notes of any Series or (ii) to the substitution in place of the Issuer as principal debtor, or of any Guarantor, of any successor in business (as defined in the Trust Deed) of the Issuer or, as the case may be, that Guarantor. It is a condition of any such substitution that such Notes, Receipts and Coupons (if any) relating thereto thereupon become or remain, as the case may be, unconditionally and irrevocably guaranteed on a joint and several basis by N.V. (except where N.V. is the new principal debtor), PLC (except where PLC is the new principal debtor) and UNUS (except where UJH is the new principal debtor).

So long as any Notes remain outstanding (as defined in the Trust Deed), neither UJH nor N.V. nor PLC will merge with, or transfer all or substantially all of its assets or undertaking to, another company (except where UJH, N.V. or PLC, as the case may be, is the continuing company) unless that other company agrees, in form and manner reasonably satisfactory to the Trustee, to be bound by the terms of the Notes, Receipts and the Coupons (if any) appertaining thereto and the Trust Deed in place of UJH or, as the case may be, N.V. or PLC and the Trustee is satisfied that the conditions set out in the Trust Deed are complied with.

In considering the interests of the Noteholders for the purposes of any substitution, merger or transfer as aforesaid the Trustee shall not have regard to the consequences for individual Noteholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political subdivision thereof.

 

16 Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings to enforce repayment unless indemnified to its satisfaction. The Trustee is entitled to enter into business transactions with N.V., PLC, UJH, UNUS and/or any Group Company without accounting to any Noteholders, Receiptholders or Couponholders for any profit resulting therefrom.

 

17 Further Issues and Additional Issuers

 

  (A) The Issuer may, from time to time, without the consent of the Holders of any Notes, Receipts or Coupons of any Series, create and issue further notes, bonds or debentures having the same terms and conditions as the Notes of an existing Series in all respects (or, in all respects except for the first payment of interest, if any, on them and/or the denomination thereof) so as to form a single series with the Notes of the existing Series.

 

    

 

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  (B) Subject as provided in the Trust Deed, N.V. and PLC may designate any Group Company to become an Issuer of Notes under the Trust Deed. As provided in the Trust Deed, any such Group Company which is to become an Issuer of any Series of Notes shall become such under the terms of a supplemental deed in or substantially in the form scheduled to the Trust Deed (or in such other form as may be approved by the Trustee in writing) (which shall take effect in accordance with its terms) whereby such Group Company agrees to be bound as an Issuer under the Trust Deed and the Paying Agency Agreement, all as more fully provided in the Trust Deed.

 

18 Governing Law

The Trust Deed, the Paying Agency Agreement, the Notes, the Receipts and the Coupons, and any non-contractual obligations arising out of or in connection with them, are governed by, and will be construed in accordance with, English law.

 

19 Jurisdiction

The Issuer and the Guarantors (other than PLC) have, in the Trust Deed, submitted to the jurisdiction of the English courts, save that where the Notes, Receipts or Coupons are denominated in the lawful currency of Switzerland and in respect of which it is specified in the relevant Final Terms that such Notes, Receipts or Coupons are to be listed on the SIX Swiss Exchange the Issuers and the Guarantors have, in the Trust Deed, submitted to the non-exclusive jurisdiction of the ordinary courts of the Canton of Zurich, place of jurisdiction being Zurich 1, Switzerland, for all purposes in connection with the Trust Deed, the Notes, the Receipts and the Coupons.

 

20 Rights of Third Parties

No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

 

    

 

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The Fifth Schedule

Form of Supplemental Deed increasing Programme Limit

This deed made the [•] day of [•], [•] between :

 

(1) UNILEVER N.V. , UNILEVER PLC , UNILEVER JAPAN HOLDINGS K.K. and UNILEVER UNITED STATES, INC. ; and

 

(2) THE LAW DEBENTURE TRUST CORPORATION p.l.c. as Trustee.

Supplemental to a Trust Deed dated 22 July 1994 made between the parties hereto relating to a Programme for the Issuance of Debt Instruments witnesses that the limit of U.S.$15,000,000,000 imposed by Clause 2(A) of the said Trust Deed as amended by Deeds supplemental thereto dated 24 July 1995, 11 July 1996, 13 November 1997, 11 November 1998, 4 July 2000, 2 July 2001, 1 July 2002, 27 June 2003, 2 June 2004, 10 August 2005, 15 May 2007, 13 May 2008, 11 May 2009, 6 May 2010, 5 May 2011, 4 May 2012, 3 May 2013, 2 May 2014, 1 May 2015 and 22 April 2016 is hereby increased to U.S.$[•].

In witness thereof the parties hereto have executed this Deed as a deed the day and year first above written.

 

    

 

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The Sixth Schedule

Form of Supplemental Deed joining a New Issuer

This Supplemental Deed is made this [•] day of [•], [•] by:

 

(1) [•] a company incorporated in [•] having its registered office at [•] (the “ New Issuer ”);

 

(2) UNILEVER N.V. , a company incorporated under the laws of The Netherlands, whose corporate seat is in Rotterdam and its address at Weena 455, 3013 AL, Rotterdam, The Netherlands, UNILEVER PLC , a company incorporated under the laws of England, whose registered office is at Port Sunlight, Wirral, Merseyside CH62 4UJ, United Kingdom, UNILEVER JAPAN HOLDINGS K.K. , a company incorporated under the laws of Japan, whose registered office is at 1-1, Kamimeguro 2-chome, Meguro-ku, Tokyo 153-8578, Japan and UNILEVER UNITED STATES, INC. , a company incorporated under the laws of the State of Delaware, United States of America, whose registered office is at 1209 Orange Street, Wilmington, Delaware 19801, United States of America;

 

(3) THE LAW DEBENTURE TRUST CORPORATION p.l.c. , a company incorporated under the laws of England, whose registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX (the “ Trustee ”);

 

(4) [•] in its capacity as principal paying agent (the “ Principal Paying Agent ”, which expression shall include any successor to [•] in its capacity as such); and

 

(5) [•] and [•] in their capacities as paying agents (the “ Paying Agents ”, which expression shall include the Principal Paying Agent and any substitute or additional paying agents so appointed).

Whereas:

 

(A) This Supplemental Deed is supplemental to the trust deed dated 22 July 1994 made between Unilever N.V., Unilever PLC and Unilever Japan Holdings K.K. as issuers (the “ Original Issuers ”), Unilever PLC, Unilever N.V. and Unilever United States, Inc. as guarantors (the “ Original Guarantors ”) and the Trustee (such trust deed, as from time to time amended and restated or supplemented in accordance with its terms being referred to herein as the “ Trust Deed ”) and to the paying agency agreement dated 22 July 1994 made between the Original Issuers, the Original Guarantors, the Trustee, the Principal Paying Agent and the Paying Agents (such paying agency agreement, as from time to time amended and restated or supplemented with the prior consent of the Trustee being referred to herein as the “ Paying Agency Agreement ”).

 

(B) The New Issuer is a Group Company of Unilever N.V. and Unilever PLC.

 

(C) At the request of [•], the New Issuer wishes to execute this Supplemental Deed (being a deed supplemental to the Trust Deed in order to become an Issuer as defined in the Trust Deed) and pursuant to the provisions therein contained, and pursuant to the provisions contained in the Paying Agency Agreement.

 

(D) Each of the Agents (as defined in Clause 1 hereof) wishes, pursuant to the terms of the Paying Agency Agreement to act as an agent (in the capacity in which it has been appointed under the Paying Agency Agreement and in accordance with the terms thereof) of [•] which becomes an Issuer pursuant to, and in the manner provided in, Clause 17(E) of the Trust Deed.

 

    

 

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(E) [•] has agreed to guarantee the payment of all moneys payable by the New Issuer under the Trust Deed and in respect of any Notes issued by the New Issuer in the manner appearing hereunder and under the Trust Deed.

 

(F) [The Trustee has received legal opinion(s) from legal counsel in the country of incorporation of the New Issuer and of [•] and from legal counsel in England, reasonably satisfactory to it, to the effect, inter alia , that the New Issuer and [•] each have the capacity and power to enter into this supplemental deed and that, when executed and delivered by such New Issuer and [•], this supplemental deed will constitute valid and legally binding obligations of such New Issuer.] 37

Now therefore this Supplemental Deed witnesseth and it is hereby declared as follows:

 

1 Definitions and Interpretations

 

  (A) In this Supplemental Deed, any reference to “ Agents ” is to the Principal Paying Agent and the other Paying Agents.

 

  (B) To the extent to which the same are applicable and unless otherwise defined herein, the definitions and provisions contained in Clause 1 of the Trust Deed shall apply to and be incorporated in this Supplemental Deed (including the recitals hereto).

Acknowledgement by New Issuer

The New Issuer hereby appoints the Trustee (and the Trustee hereby accepts such appointment) to act as Trustee on the same terms as set out in the Trust Deed.

Guarantee

[•] hereby confirms that the guarantee contained in Clause 8 of the Trust Deed applies to all amounts owing by the New Issuer under or pursuant to the Trust Deed and any Notes, Receipts or Coupons appertaining thereto.

Appointment of Agents

The New Issuer hereby appoints each of the Agents as its agent on the same terms set out in the Paying Agency Agreement and each of the Agents accepts its appointment as agent of the New Issuer in relation to any Notes issued by the New Issuer and shall comply with the terms and conditions applicable thereto, the provisions of the Paying Agency Agreement and, in connection therewith, shall take all such action as may be incidental thereto.

Incorporation of Terms

It is declared that there shall be deemed to be incorporated in this Supplemental Deed all the covenants, undertakings, powers, obligations and/or other provisions of the Trust Deed, the Schedules thereto, the Conditions and the Paying Agency Agreement relating to or affecting the Issuers in the same manner and to the same extent as if the same had been, mutatis mutandis , set out in full in this Supplemental Deed and made applicable to

 

37  

Recital (F) and Clause 6 of this Supplemental Deed are alternatives, one of which (to be determined by the Trustee) should be deleted.

 

    

 

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the New Issuer, and (without prejudice to the generality of the foregoing) the New Issuer accordingly covenants:

 

  (i) in favour of the Trustee to duly perform and observe and be bound by the said covenants, undertakings, powers, obligations and/or other provisions imposed on or relating to or affecting it by or under the Trust Deed or the Schedules or the Conditions; and

in favour of the Trustee and each of the Agents, to duly perform and observe and be bound by the said covenants, undertakings, powers, obligations and/or other provisions imposed on or relating to or affecting it by or under the Paying Agency Agreement.

[Conditions

This Supplemental Deed shall not take effect unless and until the Trustee shall have received opinions of legal counsel in the country of incorporation of the New Issuer and of [•] and in England, reasonably satisfactory to it, to the effect, inter alia , that the New Issuer and [•] each have the capacity and power to enter into this Supplemental Deed and that this Supplemental Deed constitutes valid and legally binding obligations of the New Issuer and [•].]

Counterparts

This Supplemental Deed may be executed in any number of counterparts, each of which shall be identical and all of which, when taken together, shall constitute one and the same instrument and any one of the parties hereby may execute this Supplemental Deed by signing any such counterpart.

Governing Law

This Supplemental Deed, and any non-contractual obligations arising out of or in connection with it, is governed by, and shall be construed in accordance with, the laws of England.

[Jurisdiction

In relation to all claims arising hereunder (including a claim relating to any non-contractual obligations arising out of or in connection with this Supplemental Deed) [•] severally agree that the courts of England are to have jurisdiction to settle any such claim and that accordingly any suit, action or proceedings (together referred to as “ Proceedings ”) arising hereunder may be brought in such courts, save that in respect of Notes issued under the Trust Deed which are denominated in the lawful currency of Switzerland and in respect of which it is specified in the relevant Final Terms that such Notes are to be listed on the SIX Swiss Exchange, each of the parties hereto irrevocably agrees, for the benefit only of the Trustee and the holders of such Notes that the ordinary courts of the Canton of Zurich, place of jurisdiction being Zurich 1, Switzerland, shall have non-exclusive jurisdiction to hear and determine Proceedings. Nothing contained in this Clause shall limit any right to take proceedings against [•] in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. Each of [•] irrevocably agrees that any legal proceedings or any demand or any notice may be made or served on it by the same being posted in a prepaid registered or recorded delivery letter addressed to it at the

 

    

 

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address set out in Clause 32 of the Trust Deed for the time being of Unilever PLC (or at such other office as it may have notified in writing to the Trustee and as the Trustee shall from time to time have approved) and marked for the attention of the Group Secretary of Unilever PLC or such other official of Unilever PLC as [•] may have notified in writing to the Trustee and the Trustee shall from time to time have approved.]

In witness where of this Supplemental Deed has been executed as a deed by the parties hereto and is intended to be and is hereby delivered on the date first above written.

 

    

 

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The Seventh Schedule

Form of Supplemental Deed releasing an Issuer

This Supplemental Deed is made this [•] day of [•],[•] by :

 

(1) [•] a duly incorporated company having its [registered office at [•]] 1 [corporate seat in Rotterdam, The Netherlands] 2 (the “ Retiring Issuer ”);

 

(2) THE LAW DEBENTURE TRUST CORPORATION p.l.c. , a company incorporated under the laws of England, whose registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX (the “ Trustee ”);

 

(3) [•] in its capacity as principal paying agent (the “ Principal Paying Agent ”, which expression shall include any successor to [•] in its capacity as such);

 

(4) [•] and [•] in their capacities as paying agents (the “ Paying Agents ”, which expression shall include the Principal Paying Agent and any substitute or additional paying agents so appointed).

Whereas :

 

(A) This supplemental deed is supplemental to the trust deed dated 22 July 1994 made between Unilever N.V., Unilever PLC and Unilever Japan Holdings K.K. as Issuers (the “ Original Issuers ”), Unilever PLC and Unilever N.V. and Unilever United States, Inc. as Guarantors (the “ Original Guarantors ”) and the Trustee (such trust deed, as from time to time amended and restated or supplemented in accordance with its terms being referred to herein as the “ Trust Deed ”) and to the paying agency agreement dated 22 July 1994 made between the Original Issuers, the Original Guarantors, the Trustee, the Principal Paying Agent and the other Paying Agents (such paying agency agreement, as from time to time amended and restated or supplemented with the prior consent of the Trustee being referred to herein as the “ Paying Agency Agreement ”).

 

(B) [There are not outstanding any Notes issued by the Retiring Issuer.]/[•] has assumed the obligations under the Notes.] 3

 

(C) At the request of the Retiring Issuer, the Trustee has agreed to execute this supplemental deed in order to release the Retiring Issuer from its obligations, undertakings and covenants under the Trust Deed.

 

(D) The Trustee and each of the Agents (as defined in Clause 1 of these presents) have agreed that the Retiring Issuer shall be released from its obligations, undertakings and covenants under the Paying Agency Agreement upon the execution and delivery of this supplemental deed.

Now therefore this Supplemental Deed witnesseth and it is hereby declared as follows:

1

 

  (A) In this supplemental deed, any reference to “Agents” is to the Principal Paying Agent and the other Paying Agents as such expressions are defined in the Paying Agency Agreement.

 

1   Delete if N.V. is the Retiring Issuer.
2   Include if N.V. is the Retiring Issuer.
3   Delete as applicable.

 

    

 

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  (B) To the extent to which the same are applicable, the definitions and provisions contained in Clause 1 of the Trust Deed shall apply to and be incorporated in this supplemental deed (including the recitals hereto).

At the request of the Retiring Issuer:

 

  (a) the Trustee hereby releases the Retiring Issuer from its obligations, undertakings and covenants under the Trust Deed; and

the Trustee and each of the Agents hereby releases the Retiring Issuer from its obligations, undertakings and covenants under the Paying Agency Agreement.

The release of the Retiring Issuer shall not affect any accrued rights and liabilities as between the Retiring Issuer, the Trustee and the Agents pursuant to the Trust Deed and the Paying Agency Agreement.

This supplemental deed may be executed in any number of counterparts, each of which shall be identical and all of which, when taken together, shall constitute one and the same instrument and any one of the parties hereby may execute this supplemental deed by signing any such counterpart.

This supplemental deed, and any non-contractual obligations arising out of or in connection with it, is governed by, and shall be construed in accordance with, the laws of England.

In witness whereof this supplemental deed has been executed as a deed by the parties hereto and is intended to be and is hereby delivered on the date first above written.

 

    

 

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The Eighth Schedule

Provisions for Meetings of Holders of Notes

1

 

  (A) As used in this Schedule, the following expressions shall have the meanings hereinafter mentioned unless the context otherwise requires:

 

  (1) voting certificate ” shall mean a certificate in the English language issued by any Paying Agent and dated, in which it is stated:

 

  (a) that on the date thereof, Notes of any Series (not being Notes in respect of which a block voting instruction has been issued and is outstanding in respect of the meeting specified in such voting certificate or any adjournment thereof) of the principal amount(s) specified and bearing specified serial numbers have been deposited with such Paying Agent and that no such Notes will be released until the first to occur of:

 

  (i) the conclusion of the meeting specified in such certificate or if applicable any adjournment thereof or any poll taken on any resolution proposed thereat (whichever is the later); and

 

  (ii) the surrender of the voting certificate to the Paying Agent who issued the same; or

that until the release of the Notes represented thereby the bearer thereof is entitled to attend and vote at such meeting or any adjournment thereof in respect of the Notes represented by such certificate;

 

  (2) block voting instruction ” shall mean a document in the English language issued by any Paying Agent and dated, in which:

 

  (a) it is certified that Notes of the relevant Series (not being Notes in respect of which a voting certificate has been issued and is outstanding in respect of the meeting specified in such block voting instruction or any adjournment thereof) have been deposited with such Paying Agent and that no such Bearer Notes will be released until the first to occur of:

 

  (i) the conclusion of the meeting specified in such document or if applicable any adjournment thereof or any poll taken on any resolution proposed thereat (whichever is the later); and

 

  (ii) the surrender, not less than 48 hours before the time for which such meeting or adjourned meeting is convened or poll called, of the respective receipts to the Paying Agent who issued the same in respect of each such deposited Note which is to be released coupled with notice from the Paying Agent to the relevant Issuer of such surrender;

it is certified that each depositor of such Notes has instructed such Paying Agent that the vote(s) attributable to his or its Notes so deposited should be cast in a particular way in relation to the resolution or resolutions to be put to such meeting or any adjournment thereof and that all such

 

    

 

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instructions are, during the period of 48 hours prior to the time for which such meeting or adjourned meeting is convened, neither revocable nor subject to amendment;

the total number, the principal amounts and the certificate numbers of the Notes so deposited are listed, distinguishing with regard to principal amount and with regard to each such resolution between those in respect of which instructions have been given as aforesaid that the votes attributable thereto should be cast in favour of the resolution, and those in respect of which instructions have been given that the votes attributable thereto should be cast against the resolution; and

one or more persons named in such document (hereinafter called a “ proxy ”) is or are authorised and instructed by such Paying Agent to cast the votes attributable to the Notes so listed in accordance with the instructions referred to in (c) above as set out in such document.

 

  (B) Voting certificates and block voting instructions shall only be issued in respect of Notes deposited with any Paying Agent not less than 48 hours before the time for which the meeting or the poll to which the same relate has been convened or called and shall be valid only for so long as the relevant Notes will not be released pursuant to this paragraph 1 hereof and during the validity thereof the Holder of any such voting certificate or (as the case may be) the proxy or proxies named in any block voting instruction shall, for all purposes in connection with any meeting of Holders of Notes, be deemed to be the Holder of the Notes of the relevant Series to which such voting certificate or block voting instruction relates and the Paying Agent with which such Notes have been deposited shall nevertheless be deemed for such purposes not to be the Holder of those Notes.

The Trustee, the relevant Issuer or the relevant Guarantors at any time may, and the Trustee shall (subject to its being indemnified to its satisfaction against all costs and expenses thereby occasioned) upon a request in writing at the time by Holders of Notes holding not less than one-tenth of the principal amount outstanding of the Notes of any particular Series for the time being outstanding shall, convene a meeting of the Holders of Notes of such Series. Whenever the relevant Issuer or the relevant Guarantors is or, as the case may be, are about to convene any such meeting it shall forthwith give notice in writing to the Trustee of the day, time and place thereof and of the nature of the business to be transacted thereat. Every such meeting shall be held at such place as the Trustee may approve.

At least 21 days’ notice (exclusive of the day on which the notice is given and of the day on which the meeting is held) specifying the day, time and place of meeting shall be given to the Holders of the Notes of the relevant Series in the manner provided in the Conditions. A copy of the notice shall be given to the Trustee unless the meeting shall be convened by the Trustee, and to the relevant Issuer or the relevant Guarantors unless the meeting shall be convened by such relevant Issuer or the relevant Guarantors. Such notice shall be given in the manner provided in these presents and shall, unless in any particular case the Trustee otherwise agrees, specify the terms of the resolutions to be proposed and shall include to the extent applicable to the relevant Series, inter alia , statements to the effect that Notes of the relevant Series may be deposited with any Paying Agent for the purpose of obtaining voting certificates or appointing proxies until 48 hours before the time fixed for the meeting but not thereafter.

A person (who may, but need not, be the Holder of a Note of the relevant Series) nominated in writing by the Trustee shall be entitled to take the chair at every such meeting but if no such nomination is made or if at any meeting the person nominated shall not be present within 15 minutes after the time appointed for the holding of such meeting the Holders of Notes present shall

 

    

 

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choose one of their number to be chairman and, failing such choice, the relevant Issuer may appoint a chairman who may, but need not, be the Holder of a Note.

At any such meeting two or more persons present in person holding Notes of the relevant Series and/or voting certificates and/or being proxies or representatives and being or representing in the aggregate a clear majority in principal amount of the Notes of the relevant Series for the time being outstanding shall form a quorum for the action of business and no business (other than the choosing of a chairman) shall be transacted at any meeting unless the requisite quorum be present at the commencement of business. The quorum at any such meeting for passing an Extraordinary Resolution shall (subject as provided below) be two or more persons present in person holding Notes of the relevant Series or voting certificates or being proxies and holding or representing in the aggregate a clear majority in principal amount of the Notes of the relevant Series for the time being outstanding; PROVIDED THAT at any meeting the business of which includes any of the following matters (each of which shall only be capable of being effected after having been approved by Extraordinary Resolution) namely:

 

  (i) varies the date of maturity or any date of redemption of any of the Notes of the relevant Series or any date for payment of any principal or interest in respect thereof; or

reduces or cancels the principal amount of the Notes of the relevant Series, varies any provision regarding the calculation of the amount or the rate of interest payable thereon or varies the rate of discount, rate of amortisation or any other rate of return applicable thereto or reduces the amount of principal or interest payable on any date; or

modifies the provisions contained in this Schedule concerning the quorum required at any meeting of Holders of Notes in respect of the Notes of the relevant Series or any adjournment thereof or concerning the majority required to pass an Extraordinary Resolution; or

varies the currency in which any payment (or other obligation) in respect of the Notes of the relevant Series is to be made; or

amends this proviso in any manner,

the quorum shall be two or more persons present holding Notes or voting certificates or being proxies and holding or representing in the aggregate not less than 66 per cent. of the principal amount of the Notes of the relevant Series for the time being outstanding.

If within half an hour from the time appointed for any such meeting a quorum is not present the meeting shall, if convened upon the requisition of Holders of Notes, be dissolved. In any other case it shall be adjourned for such period, not being less than fourteen days nor more than 42 days, and to such time and place as may be appointed by the chairman. Save as otherwise provided in the proviso to this paragraph, at such adjourned meeting two or more persons present in person holding Notes of the relevant Series and/or voting certificates and/or being proxies or representatives (whatever the principal amount of the Notes so held or represented) shall form a quorum and shall have the power to pass any resolution and to decide upon all matters which could properly have been dealt with at the meeting from which the adjournment took place had a quorum been present at such meeting Provided that at any adjourned meeting the business of which includes any of the matters specified in the proviso to paragraph 5 above, the quorum shall be two or more persons present holding Notes or voting certificates or being proxies or representatives and holding or representing in the aggregate no less than 33 per cent. of the principal amount of the Notes of the relevant Series for the time being outstanding.

 

    

 

122

    


The chairman may with the consent of (and shall if directed by) any meeting adjourn the same from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place.

At least fourteen days’ notice of any meeting adjourned through want of a quorum shall be given in the same manner as for an original meeting and such notice shall state the quorum required at such adjourned meeting. Subject as aforesaid, it shall not be necessary to give any notice of an adjourned meeting.

Every question submitted to a meeting shall be decided in the first instance by a show of hands and in case of equality of votes the chairman shall both on a show of hands and on a poll have a casting vote in addition to the vote or votes (if any) to which he may be entitled as a Holder of a Note or as a Holder of a voting certificate and/or as a proxy.

At any meeting, unless a poll is (before or on the declaration of the result of the show of hands) demanded by the chairman or the relevant Issuer or the relevant Guarantors or by one or more persons holding one or more Notes of the relevant Series or voting certificates and/or being proxies or representatives and holding or representing in the aggregate not less than one-fiftieth part of the principal amount outstanding of the Notes of the relevant Series for the time being outstanding, a declaration by the chairman that a resolution has been carried or carried by a particular majority or lost or not carried by any particular majority shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

If at any meeting a poll is so demanded, it shall be taken in such manner and (subject as hereinafter provided) either at once or after such an adjournment as the chairman directs and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded as at the date of the taking of the poll. The demand for a poll shall not prevent the continuance of the meeting for the transaction of any business other than the question on which the poll has been demanded.

Any poll demanded at any meeting on the election of a chairman or on any question of adjournment shall be taken at the meeting without adjournment.

The Trustee, the relevant Issuer and the relevant Guarantors (through their respective representatives) and their respective financial and legal advisers shall be entitled to attend and speak at any meeting of the Holders of Notes. Save as aforesaid, no person shall be entitled to attend or vote at any meeting of the Holders of Notes or to join with others in requesting the convening of such a meeting unless he is the Holder of a voting certificate or is a proxy or representative.

Neither the relevant Issuer nor the relevant Guarantors nor any of their group companies shall be entitled to vote in respect of Notes held by or on its behalf but this shall not prevent any proxy or representative named in the block voting instructions from being a director, officer or representative of, or otherwise connected with, the relevant Issuer, the relevant Guarantors or any of their group companies.

 

  (a)

Subject as provided in paragraph 13 above, at any such meeting (a) on a show of hands every person who is present in person or who produces his appointment as a representative or a Note or a voting certificate or who is a proxy, shall have one vote and (b) on a poll every person who is so present shall have one vote in

 

    

 

123

    


  respect of each U.S.$1 (a “ Unit ”) of Notes of the relevant Series so produced or represented by the voting certificate so produced or in respect of which he is a proxy. Without prejudice to the obligations of the proxies named in any block voting instruction or form of proxy, any person entitled to more than one vote need not use all his votes or cast all the votes to which he is entitled in the same way.

If any Issuer shall have issued and have outstanding Notes which are not denominated in U.S. dollars, in the case of any meeting of holders of Notes of more than one currency, the amount of such Notes shall (i) for the purposes of paragraph 22 below be the equivalent in U.S. dollars at the spot rate of a bank nominated by the Trustee for the conversion of the relevant currency or currencies to U.S. dollars on the day on which the request in writing or instrument in writing is received by the Trustee or if that is not a day on which banks and foreign exchange markets are open in London, the next following such day and (ii) for the purposes of paragraphs 5, 6, 10 and 14(a) above and paragraph 17 below (whether in respect of the meeting, or any adjournment thereof or any poll resulting therefrom) be the equivalent at such spot rate on the Business Day (as defined in Condition 8B(1)) prior to the day of such meeting. In such circumstances, and where Notes denominated in U.S. dollars but of different amounts are to be treated together for the purposes of this Schedule, on any poll each person present shall have one vote for every U.S.$1 in principal amount of the Notes (converted as above) held.

A proxy named in any block voting instruction need not be a Holder of any Note.

Each block voting instruction and each form of proxy, together (if so required by the Trustee) with proof satisfactory to the Trustee of its due execution on behalf of the relevant Paying Agent, shall be deposited at the registered office of the relevant Issuer (or at such other place as the Trustee shall designate or approve) not less than 24 hours before the time appointed for holding the meeting or adjourned meeting or for the taking of the poll at which the proxy named in the block voting instruction or form of proxy proposes to vote and in default the block voting instruction or form of proxy shall not be treated as valid unless the chairman of the meeting decides otherwise before such meeting or adjourned meeting or poll proceeds to business. A notarially certified copy of each such block voting instruction and form of proxy and satisfactory proof as aforesaid (if applicable) shall be deposited with the Trustee before the commencement of the meeting, adjourned meeting or poll but the Trustee shall not thereby be obliged to investigate or be concerned with the validity of, or the authority of the proxy named in, any such block voting instruction or form of proxy.

Any vote given in accordance with the terms of a block voting instruction or form of proxy shall be valid notwithstanding the previous revocation or amendment of the block voting instruction or form of proxy or of any of the Noteholders’ instructions pursuant to which it was executed; provided that no intimation in writing of such revocation or amendment shall have been received from the Principal Paying Agent by the relevant Issuer at its registered office or by the chairman of the meeting in each case not less than 24 hours before the commencement of the meeting or adjourned meeting at which the block voting instruction or form of proxy is intended to be used.

A meeting of the Holders of Notes shall, in respect of the Notes of the relevant Series and subject to the provisions contained in the Conditions, in addition to the powers hereinbefore given, but without prejudice to any powers conferred on other persons by these presents, have the following powers exercisable by Extraordinary Resolution namely:

 

  (a)

to sanction any proposal by the relevant Issuer or the relevant Guarantors for any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the Holders of Notes and/or the Receiptholders and/or the

 

    

 

124

    


  Couponholders in respect of the Notes of the relevant Series, against the relevant Issuer and/or Guarantors whether such rights shall arise under these presents, the Notes, the Receipts or Coupons (if any) of that Series or otherwise;

power to sanction any scheme or proposal for the exchange or sale of the Notes of any Series, for the conversion of the Notes of any Series, into or the cancellation of the Notes of any Series, in consideration of, shares, stock, bonds, notes, debentures, debenture stocks and/or other obligations and/or securities of the relevant Issuer or any other company formed or to be formed, or for or into or in consideration of cash, or partly for or into or in consideration of such shares, stock, bonds, notes, debentures, debenture stock and/or other obligations and/or securities as aforesaid and partly for or into or in consideration of cash;

to assent to any modification or alteration of the provisions contained in the Notes or the Coupons of the relevant Series, the Conditions thereof or these presents which shall be proposed by the relevant Issuer, the relevant Guarantors or the Trustee;

to waive or authorise any breach or proposed breach by the relevant Issuer or the relevant Guarantors of its or their obligations under the Conditions applicable to the Notes of the relevant Series or these presents or determine that any act or omission which might otherwise constitute an Event of Default under the Conditions applicable to the Notes of the relevant Series shall not be treated as such;

to authorise the Trustee to concur in and execute and do all such documents, acts and things as may be necessary to carry out and give effect to any Extraordinary Resolution;

to give any authority, direction or sanction which under these presents or the Conditions applicable to the Notes of the relevant Series is required to be given by Extraordinary Resolution;

to appoint any persons (whether Holders of Notes or not) as a committee or committees to represent the interests of the Holders of Notes in respect of the Notes of the relevant Series and to confer upon such committee or committees any powers or discretions which such Holders of Notes could themselves exercise by Extraordinary Resolution;

to approve a person proposed to be appointed a new Trustee under these presents and to remove any Trustee or Trustees for the time thereof; and

to discharge or exonerate the Trustee from any liability in respect of any act or omission for which the Trustee may have become responsible under these presents or under the Notes of the relevant Series.

An Extraordinary Resolution passed at a meeting of the Holders of Notes in respect of the Notes of the relevant Series duly convened and held in accordance with these presents shall be binding upon all the Holders of Notes of the relevant Series, whether present or not present at such meeting, and upon all the Receiptholders and Couponholders in respect of Notes of the relevant Series and each of the Holders of Notes and Receiptholders and Couponholders shall, in respect of the Notes of that Series, be bound to give effect thereto accordingly. The passing of any such resolution shall be conclusive evidence that the circumstances of such resolution justify the passing thereof.

The expression “ Extraordinary Resolution ” when used in these presents means a resolution passed at a meeting of the Holders of Notes in respect of the Notes of the relevant Series duly convened and held in accordance with the provisions contained herein by a majority consisting of not less than three-fourths of the votes cast thereon or an instrument or instruments in writing

 

    

 

125

    


signed by the Holder or Holders of not less than 75 per cent. of the Notes of the relevant Series for the time being outstanding.

If and whenever an Issuer shall have issued and have outstanding any Notes which do not form one single Series then the foregoing provisions of this Schedule shall have effect subject to the following modifications:

 

  (i) a resolution which in the opinion of the Trustee affects one Series only of the Notes shall be deemed to have been duly passed if passed at a separate meeting of the Holders of the Notes of the relevant Series;

a resolution which in the opinion of the Trustee affects more than one Series of the Notes but does not give rise to a conflict of interest between the Holders of Notes of any of the Series affected shall be deemed to have been duly passed if passed at a single meeting of the Holders of the Notes of all Series so affected;

a resolution which in the opinion of the Trustee affects more than one Series of Notes and gives or may give rise to a conflict of interest between the Holders of the Notes of one Series or group of Series so affected and the Holders of the Notes of another Series or group of Series so affected shall be deemed to have been duly passed only if in lieu of being passed at a single meeting of the Holders of the Notes of all such Series it shall be duly passed at separate meetings of the Holders of the Notes of each Series so affected; and

to all such meetings as aforesaid all preceding provisions of this Schedule shall, mutatis mutandis, apply as if references therein to Notes and Noteholders or Holders of Notes of the relevant Series were references to the Notes of the Series or group of Series in question and to the Holders of such Notes respectively.

Minutes of all resolutions and proceedings at every such meeting as aforesaid shall be made and duly entered in books to be from time to time provided for that purpose by the relevant Issuer or the Trustee and any such minutes as aforesaid, if purporting to be signed by the chairman of the meeting at which such resolutions were passed or proceedings transacted or by the chairman of the next succeeding meeting of the Holders of Notes in respect of the Notes of the relevant Series, shall be conclusive evidence of the matters therein contained and until the contrary is proved every such meeting in respect of the proceedings of which minutes have been made and signed as aforesaid shall be deemed to have been duly held and convened and all resolutions passed or proceedings transacted thereat to have been duly passed and transacted.

Subject to all other provisions contained in these presents, the Trustee may by agreement with N.V. and PLC, without the consent of the Noteholders, the Receiptholders or the Couponholders, prescribe such further regulations regarding the holding of meetings of Noteholders and attendance and voting thereat as the Trustee may in its discretion determine.

So long as the Notes of the relevant Series are represented by any Notes in global form, the Holder of the relevant Notes in global form shall for the purposes of this Schedule be deemed to be two persons and, at any such meeting, as having one vote in respect of each Unit for which such Notes in global form may be exchanged.

 

    

 

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Exhibit 4.3

 

LOGO

 

  

Unilever PLC

Unilever House

Blackfriars

London EC4P 4BQ

 

T: +44 (0)20 7822 5252

F: +44 (0)20 7822 5951

www.unilever.com

STRICTLY PERSONAL AND CONFIDENTIAL

Mr Graeme Pitkethly

14 March 2016

Dear Graeme,

Your reward package effective 1 January 2016

This letter is to confirm your reward package as from 1 January 2016 as approved by the Compensation Committee (the ‘Committee’). The Committee set your reward package prior to your appointment with effect from 1 October 2015, and has agreed that no changes will be made for 2016.

2016 base salary

Your annual base salary for 2016 will remain unchanged at £625,000.

2015 annual bonus

Your total bonus of £470,867 gross for 2015 was calculated as follows:

Period as WL5

In respect of the period from 1 January 2015 to 30 September 2015, your gross bonus award is £298,992. This figure is based on a target bonus of 70%, a PDP rating of 3 (Personal Performance Multiplier of 110%) and a Business Differentiation Factor of 132% applied to your pro-rated grossed up WL5 salary of GBP 392,224.

Period as WL6

In respect of the period from 1 October 2015 to 31 December 2015, your gross bonus award is £171,875 (110% of your pro-rated salary i.e. 100% of salary (target bonus) x 100% (individual multiplier) x 110% (business differentiation factor)).

The cash portion of your pro-rated WL5 annual bonus and your WL6 annual bonus is payable in the March 2016 payroll.

2016 annual bonus

Your target bonus for 2016 will continue to be 100% of base salary and your maximum bonus continues to be 150% of your base salary.

The performance measures for 2016 for the annual bonus plan are:

Page 1 of 12


Performance measure

   Weighting  

Underlying Sales Growth

     1/3   

Free Cash Flow

     1/3   

Core Operating Margin (vs PY)

     1/3   

Details of the performance targets for the annual bonus plan as approved by the Committee will be communicated to you separately. The Committee will assess Unilever’s 2016 business performance not only against these performance targets but also relative to the overall quality and competitiveness of our performance delivery.

Your personal bonus will then be based both on the Committee’s assessment of overall business performance and your personal achievement against your stretching, ambitious, and output-oriented ‘3+1’ goals.

2016 long-term incentives

For executive directors, our long term incentive program consists of two vehicles:

 

 

The Management Co-Investment Plan (MCIP), and

 

 

The Global Share Incentive Plan (GSIP).

2016 MCIP

Under this plan, 25% of your gross annual bonus will be invested in Unilever shares, although you may elect to invest up to 60% of your earned bonus.

The invested shares must be held for a period of three years and Unilever will match this investment with an award of an equal number of performance shares. The vesting of these matching performance shares will be between 0% and 150% contingent on the achievement of the same three-year performance targets as exist under our GSIP. The value of this award may be further enhanced by earning dividends / dividend equivalents during the vesting period.

2016 GSIP

Under the 2016 GSIP, you have been made a conditional award of shares worth £937,500 (150% of your 2016 base salary) which will vest between 0% and 200% three years from the award date based on company performance.

The performance measures for the Unilever Leadership Executive Team for 2016 are:

 

Performance measure

   Weighting  

Underlying Sales Growth (USG)

     25%   

Core Operating Margin (vs PY) (COM)

     25%   

Operating Cash Flow (Cumulative)

     25%   

Relative Total Shareholder Return

     25%   

The minimum of the performance range for USG and COM must be reached before any shares subject to either metric can vest. Details of the performance targets for the 2016 MCIP and GSIP awards as approved by the Committee will be communicated to you separately.


Fixed allowance in lieu of perquisites and benefits

Your annual fixed allowance for 2016 will remain unchanged at £200,000.

You also receive medical cover for you and your family via Unilever BUPA International medical arrangement.

You will continue to receive life insurance at GBP 2,955,680. The company will provide cover at three times your base salary and the excess cover of GBP 1,080,680 will be paid for by you.

You will continue to be provided with actual and reasonable costs of tax return preparation via Unilever’s global Tax Advisor.

Pension

With effect from 1 October 2015, you have not been entitled to participate in any Unilever pension scheme.

Malus and clawback

Going forward, all performance-related remuneration awarded to you, including but not limited to your annual bonuses and awards granted under the MCIP and GSIP, will be subject to malus and clawback as set out below and subject to the rules of both the MCIP and the GSIP where applicable.

Malus

If the Committee considers:

 

  (i) there is a significant downward restatement of the financial results of Unilever; and/or

 

  (ii) there is reasonable evidence of gross misconduct or gross negligence by you; and/or

 

  (iii) there is reasonable evidence of material breach by you of Unilever’s Code of Business Principles or Code Policies; and/or

 

  (iv) there is reasonable evidence of conduct by you which results in significant losses or reputational damage to Unilever,

the Committee may, in its discretion, at any time prior to your performance-related remuneration vesting or being paid, decide that some or all of your performance-related remuneration (which is subject to this malus and clawback provision) will be reduced, lapsed, will not vest or will only vest in part.

Clawback

If the Committee considers there is a significant downward restatement of the financial results of Unilever, it may in its discretion, within two years of your performance-related remuneration being paid or vesting:

 

  (i) require you to repay to Unilever (or as Unilever directs) an amount equal to the after-tax value of some or all of any cash bonus you were paid (as determined by the Commitee); and/or

 

  (ii) require you to transfer to Unilever (or as Unilever directs) for nil consideration, some or all of the after-tax number of Unilever shares which have previously vested, or pay to Unilever (or as Unilever directs) an amount equal to the value of those shares (as determined by the Committee); and/or


  (iii) require Unilever to withhold from, or offset against, any other remuneration to which you may be or become entitled in connection with your employment with Unilever such an amount as the Committee considers appropriate.

Where you are notified you must transfer shares or pay an amount in accordance with this clawback provision, any shares or cash must be transferred or paid (in the manner directed by Unilever) within 30 days of the notification.

For the avoidance of doubt, in exercising its powers under this malus and clawback provision, the Committee, in its discretion, may apply different treatments to: (i) different employees; and/or (ii) different remuneration, and may apply such different treatment in combination.

Personal shareholding requirement

As previously communicated, in this role you are required to demonstrate a significant personal shareholding commitment to Unilever.

Within five years from 1 October 2015, you are required to raise and then maintain your personal shareholding in Unilever to at least three times your base salary.

As Executive Director you are required to hold shares to the value of 100% of your minimum shareholding requirement for 12 months post cessation of your employment at Unilever and 50% of these shares for 24 months post cessation of your employment with Unilever.

You will be deemed to have accepted the terms and conditions of this letter, including the operation of clawback and malus, and consent to any repayments, withholdings or deductions made in accordance with it, unless you provide written notice to Peter Newhouse, SVP Global Head of Reward by no later than 31 March 2016 (email to peter.newhouse@unilever.com) that you do not accept such terms.

With kind regards

/s/ Paulus Gerardus Josephus Maria Polman

Paul Polman

Chief Executive Officer


Appendix – Application of personal shareholding requirement

Personal shareholding requirement

As part of Unilever’s long-term incentive arrangements, it is a requirement that Board members and certain other managers build up a personal shareholding in Unilever. The following principles on shareholding have been agreed:

Date of commencement:

The personal shareholding must be built up over a period of five years commencing from the individual’s first grant from the Global Share Incentive Plan (GSIP). Once the required level of personal shareholding has been achieved, this shareholding must be maintained (and increased, as necessary, as base salary levels increase or where shares are clawed back).

Qualifying shares:

Shares in either Unilever PLC or Unilever NV (or a combination of both) will qualify provided they are personally owned by the Director or by a member of his/her (immediate) family.

Shares purchased from the annual bonus (variable pay) programme will qualify as from the moment of purchase. Shares acquired under a restricted share/stock arrangement will qualify on a net of tax basis.

Shares awarded on a conditional basis by way of the GSIP, including those by way of the MCIP, will not qualify until the moment of vesting (i.e. once the precise number of shares is fixed after the three-year vesting period has elapsed).

Share options will not qualify until the shares in question have eventually been acquired (and retained) following the exercise of the option.

Value of shares to be taken into account:

The shares will be valued on the date of measurement, or if that outcome fails the personal shareholding test, on the date of acquisition. The share price for the relevant measurement date will be based on the average closing share prices and the euro/sterling/US dollar exchange rates from the 60 calendar days prior to the measurement date.

Salary on which shareholding requirement to be based :

The level of base salary at the date of measurement shall be used to assess the level of personal shareholding.

Level of personal shareholding:

The level of personal shareholding for you is three times base salary.

As an Executive Director you are required to hold shares to the value of 100% of your minimum shareholding requirement for 12 months post cessation of your employment at Unilever and 50% of these shares for 24 months post cessation of your employment with Unilever.

Monitoring of personal shareholding target:

Global Reward will monitor the level of personal shareholding.

The consequence of not having achieved the required shareholding will be that no awards under the GSIP will be made until the necessary shareholding has been built up.


Other matters:

It is not permitted to trade in options or derivatives over Unilever shares as this would be in conflict with our Share Dealing Standard.


LOGO

 

  

Unilever PLC

Unilever House

Blackfriars

London EC4P 4BQ

 

T: +44 (0)20 7822 5252

F: +44 (0)20 7822 5951

www.unilever.com

STRICTLY PERSONAL AND CONFIDENTIAL

Mr Paul Polman

14 March 2016

Dear Paul,

Your reward package effective 1 January 2016

This letter is to confirm your reward package as from 1 January 2016 as approved by the Compensation Committee (the ‘Committee’).

2016 base salary

At your request, your annual base salary has remained unchanged at £1,010,000.

2015 annual bonus

In respect of 2015, your annual gross bonus award is £1,866,480 (185% of salary i.e. 120% of salary (target bonus) x 140% (individual multiplier) x 110% (business differentiation factor).

The cash portion of your annual bonus is payable in the March 2016 payroll.

2016 annual bonus

Your target bonus for 2016 will continue to be 120% of base salary and your maximum bonus continues to be 200% of your base salary.

The performance measures for 2016 for the annual bonus plan are:

 

Performance measure

   Weighting  

Underlying Sales Growth

     1/3  

Free Cash Flow

     1/3  

Core Operating Margin (vs PY)

     1/3  

Details of the performance targets for the annual bonus plan as approved by the Committee will be communicated to you separately. The Committee will assess Unilever’s 2016 business performance not only against these performance targets but also relative to the overall quality and competitiveness of our performance delivery.

Your personal bonus will then be based both on the Committee’s assessment of overall business performance and your personal achievement against your stretching, ambitious, and output-oriented ‘3+1’ goals.

2016 long-term incentives

For executive directors, our long term incentive program consists of two vehicles:

 

 

The Management Co-Investment Plan (MCIP), and

 

 

The Global Share Incentive Plan (GSIP).


2016 MCIP

Under this plan, 25% of your gross annual bonus will be invested in Unilever shares, although you may elect to invest up to 60% of your earned bonus.

The invested shares must be held for a period of three years and Unilever will match this investment with an award of an equal number of performance shares. The vesting of these matching performance shares will be between 0% and 150% contingent on the achievement of the same three-year performance targets as exist under our GSIP. The value of this award may be further enhanced by earning dividends / dividend equivalents during the vesting period.

2016 GSIP

Under the 2016 GSIP, you have been made a conditional award of shares worth £2,020,000 (200% of your base salary) which will vest between 0% and 200% three years from the award date based on company performance.

The performance measures for the Unilever Leadership Executive Team for 2016 are:

 

Performance measure

   Weighting  

Underlying Sales Growth (USG)

     25%   

Core Operating Margin (vs PY) (COM)

     25%   

Operating Cash Flow (Cumulative)

     25%   

Relative Total Shareholder Return

     25%   

The minimum of the performance range for USG and COM must be reached before any shares subject to either metric can vest. Details of the performance targets for the 2016 MCIP and GSIP awards as approved by the Committee will be communicated to you separately.

Fixed allowance in lieu of perquisites and benefits

Your annual fixed allowance for 2016 will remain unchanged at £250,000, and will continue to be paid to you in lieu of car allowance, partner travel, entertainment allowance and company pension contribution.

You also receive medical cover for you and your family via the Allianz International medical arrangement when you and your family are outside of Switzerland. You will be covered by the Swiss Sanitas scheme when resident in Switzerland. You will also continue to receive life insurance cover at three times the salary used to calculate your pension benefit.

Pension

The company will continue to accrue on your behalf the supplemental conditional pension provision of 12% salary, with investment returns replicating those of the International Pension Plan. Accordingly, with effect from 1 January 2016, the base salary for this provision remains unchanged at £976,025 along with the corresponding maximum annual contribution of £117,123.

Malus and clawback

Going forward, all performance-related remuneration awarded to you, including but not limited to your annual bonuses and awards granted under the MCIP and GSIP, will be subject to malus and clawback as set out below and subject to the rules of both the MCIP and the GSIP where applicable.


Malus

If the Committee considers:

 

  (i) there is a significant downward restatement of the financial results of Unilever; and/or

 

  (ii) there is reasonable evidence of gross misconduct or gross negligence by you; and/or

 

  (iii) there is reasonable evidence of material breach by you of Unilever’s Code of Business Principles or Code Policies; and/or

 

  (iv) there is reasonable evidence of conduct by you which results in significant losses or reputational damage to Unilever,

the Committee may, in its discretion, at any time prior to your performance-related remuneration vesting or being paid, decide that some or all of your performance-related remuneration (which is subject to this malus and clawback provision) will be reduced, lapsed, will not vest or will only vest in part.

Clawback

If the Committee considers there is a significant downward restatement of the financial results of Unilever, it may in its discretion, within two years of your performance-related remuneration being paid or vesting:

 

  (i) require you to repay to Unilever (or as Unilever directs) an amount equal to the after-tax value of some or all of any cash bonus you were paid (as determined by the Commitee); and/or

 

  (ii) require you to transfer to Unilever (or as Unilever directs) for nil consideration, some or all of the after-tax number of Unilever shares which have previously vested, or pay to Unilever (or as Unilever directs) an amount equal to the value of those shares (as determined by the Committee); and/or

 

  (iii) require Unilever to withhold from, or offset against, any other remuneration to which you may be or become entitled in connection with your employment with Unilever such an amount as the Committee considers appropriate.

Where you are notified you must transfer shares or pay an amount in accordance with this clawback provision, any shares or cash must be transferred or paid (in the manner directed by Unilever) within 30 days of the notification.

For the avoidance of doubt, in exercising its powers under this malus and clawback provision, the Committee, in its discretion, may apply different treatments to: (i) different employees; and/or (ii) different remuneration, and may apply such different treatment in combination.

Personal shareholding requirement

As previously communicated, you are required to build and maintain a personal shareholding in Unilever of at least four times your base salary within five years from the later of 2010 or when you were granted your first GSIP award to attain your shareholding requirement. I am pleased to note that you currently satisfy this requirement.

As Executive Director you are required to hold shares to the value of 100% of your minimum shareholding requirement for 12 months post cessation of your employment at Unilever and 50% of these shares for 24 months post cessation of your employment with Unilever.

You will be deemed to have accepted the terms and conditions of this letter, including the operation of clawback and malus, and consent to any repayments, withholdings or deductions made in accordance with it, unless you provide written notice to Peter Newhouse, SVP Global Head of Reward by no later than 31 March 2016 (email to peter.newhouse@unilever.com) that you do not accept such terms.

With kind regards

/s/ Michael Treschow

Michael Treschow

Chairman


Appendix – Application of personal shareholding requirement

Personal shareholding requirement

As part of Unilever’s long-term incentive arrangements, it is a requirement that Board members and certain other managers build up a personal shareholding in Unilever. The following principles on shareholding have been agreed:

Date of commencement:

The personal shareholding must be built up over a period of five years commencing from the individual’s first grant from the Global Share Incentive Plan (GSIP). Once the required level of personal shareholding has been achieved, this shareholding must be maintained (and increased, as necessary, as base salary levels increase or where shares are clawed back).

Qualifying shares:

Shares in either Unilever PLC or Unilever NV (or a combination of both) will qualify provided they are personally owned by the Director or by a member of his/her (immediate) family.

Shares purchased from the annual bonus (variable pay) programme will qualify as from the moment of purchase. Shares acquired under a restricted share/stock arrangement will qualify on a net of tax basis.

Shares awarded on a conditional basis by way of the GSIP, including those by way of the MCIP, will not qualify until the moment of vesting (i.e. once the precise number of shares is fixed after the three-year vesting period has elapsed).

Share options will not qualify until the shares in question have eventually been acquired (and retained) following the exercise of the option.

Value of shares to be taken into account:

The shares will be valued on the date of measurement, or if that outcome fails the personal shareholding test, on the date of acquisition. The share price for the relevant measurement date will be based on the average closing share prices and the euro/sterling/US dollar exchange rates from the 60 calendar days prior to the measurement date.

Salary on which shareholding requirement to be based :

The level of base salary at the date of measurement shall be used to assess the level of personal shareholding.

Level of personal shareholding:

The level of personal shareholding for you is four times base salary.

As an Executive Director you are required to hold shares to the value of 100% of your minimum shareholding requirement for 12 months post cessation of your employment at Unilever and 50% of these shares for 24 months post cessation of your employment with Unilever.

Monitoring of personal shareholding target:

Global Reward will monitor the level of personal shareholding.

The consequence of not having achieved the required shareholding will be that no awards under the GSIP will be made until the necessary shareholding has been built up.


Other matters:

It is not permitted to trade in options or derivatives over Unilever shares as this would be in conflict with our Share Dealing Standard.

Exhibit 7.1

Calculation of Ratio of Earnings to Fixed Charges (times)

The ratio of earnings to fixed charges is determined using the following applicable factors:

Earnings available for fixed charges are calculated, first, by determining the sum of: (a) net profit before taxation and the Unilever Group’s share of net profit/(loss) of joint ventures and associates; (b) dividend income receivable from joint ventures and associates; and (c) fixed charges, as defined below.

Fixed charges are calculated as the sum of: (a) finance costs (both expensed and capitalized); and (b) one-third of lease costs (e.g., that portion of rental expense that is representative of the interest factor).

 

Earnings to Fixed Charges

   € million
2016
    € million
2015
    € million
2014
    € million
2013
    € million
2012
 

Earnings

          

Net profit

     5,547       5,259       5,515       5,263       4,836  

Add: Taxation

     1,922       1,961       2,131       1,851       1,697  

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

     (127     (107     (98     (113     (105

Add: Dividend income receivable from joint ventures and associates

     144       124       131       110       119  

Add: Fixed charges

     761       694       678       663       712  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     8,247       7,931       8,357       7,774       7,259  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed charges

          

Finance costs

     584       516       500       500       526  

Add: One-third of lease costs

     177       178       178       163       186  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     761       694       678       663       712  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges (times)

     10.8       11.4       12.3       11.7       10.2  

Exhibit 12.1

Section 302 Certification

CERTIFICATIONS

I, PAUL POLMAN, certify that:

 

1. I have reviewed this annual report on Form 20-F of UNILEVER PLC ;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: 28 February 2017

/s/ Paulus Gerardus Josephus Maria Polman

Chief Executive Officer


Section 302 Certification

CERTIFICATIONS

I, GRAEME PITKETHLY, certify that:

 

1. I have reviewed this annual report on Form 20-F of UNILEVER PLC ;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: 28 February 2017

/s/ Graeme David Pitkethly

Chief Financial Officer

Exhibit 13.1

Certification Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F of Unilever PLC , a corporation organized under the laws of the United Kingdom (the “Company”) for the period ending December  31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: 28 February 2017

/s/ Paulus Gerardus Josephus Maria Polman

Paulus Gerardus Josephus Maria Polman

Chief Executive Officer

Dated: 28 February 2017

/s/ Graeme David Pitkethly

Graeme David Pitkethly

Chief Financial Officer

Exhibit 15.1

Consent of Independent Registered Public Accounting Firms

The Board of Directors

Unilever PLC

We consent to the incorporation by reference in the registration statements on Form F-3 (No. 333-199023-02) and Form S-8 (No. 333-185299) of Unilever PLC of our report dated 24 February 2017, with respect to the consolidated balance sheets of the Unilever Group (Unilever N.V. and Unilever PLC, together with their subsidiaries) as at 31 December 2016 and 2015, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements for each of the years in the three-year period ended 31 December 2016, and the Guarantor Statements, and the effectiveness of internal control over financial reporting as at 31 December 2016, which report appears in the 31 December 2016 annual report on Form 20-F of Unilever PLC.

 

KPMG LLP   KPMG Accountants N.V.

London, United Kingdom

 

/s/ KPMG LLP

 

Amsterdam, Netherlands

 

/s/ KPMG Accountants N.V.

28 February 2017