Unilever Annual Report 2014

FY2014 Annual Report · Unilever

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Certain sections of the Unilever Annual Report and Accounts 2014 have been audited. These
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MAKING
SUSTAINABLE
LIVING
COMMONPLACE

ANNUAL REPORT
AND ACCOUNTS 2014
STRATEGIC REPORT

NEW DOVE BOTTLES – LESS PLASTIC, LOWER COSTS

In 2014 Unilever launched a newly developed
packaging technology for Dove Body Wash bottles
that uses 15% less plastic. Projected cost savings for
the whole portfolio are €50 million. This is another
substantial step towards the USLP target of halving
Unilever’s waste footprint by 2020.

The MuCell® Technology for Extrusion Blow
Moulding was created in partnership with two
packaging suppliers – ALPLA and MuCell Extrusion.
By using gas-injection to create gas bubbles in the
middle layer of the bottle wall, it reduces the density
of the bottle and the amount of plastic required.

The technology represents a breakthrough for
Unilever and the industry. With up to 59 million
Dove Body Wash bottles sold across Europe, the
new technology will save approximately 180 tonnes
of plastic a year overall. A full roll-out across every
Unilever product and packaging format could save
up to 27,000 tonnes of plastic per year.

Unilever has waived exclusivity rights from
1 January 2015, so that other manufacturers
can also use the technology.

Our Purpose

UNILEVER HAS A SIMPLE PURPOSE – TO MAKE
SUSTAINABLE LIVING COMMONPLACE. WE SEE
IT AS THE BEST, LONG-TERM WAY FOR OUR
BUSINESS TO GROW.

Our clear Purpose helps us to remain
distinct in the eyes of consumers, retailers
and suppliers.

It also means we can set an ambitious
Vision – to double the size of the business
whilst reducing our environmental footprint
and increasing our positive social impact.

To meet our growth ambition we invest
in people whose talent will help us win
through our brands and innovation,
unrivalled execution in the market place
and a relentless focus on continuous
improvement for greater efficiency.

Our environmental and social ambitions
are driven through the Unilever Sustainable
Living Plan (USLP), which has economic
benefits and operates across all our brands,
markets and our entire value chain.

Even when markets are tough we cannot
ignore sustainability. If we did, this would
diminish the future resilience of Unilever
for its long-term shareholders.

We would miss out on the growing
consumer preference for goods that do not
damage the environment or exploit people.

Our entire business would rely on
increasingly rare and expensive raw
materials, pushing up our costs. Without
more efficient use of energy our production
costs would increase while we would
miss considerable savings from more
sustainable packaging and less waste.

We would also risk the disapproval of
governments, regulators and NGOs,
and our brands – Unilever’s crown jewels
– could suffer reputational damage,
representing serious economic loss
to the business.

That’s why sustainability is at the heart
of everything we do to ensure we have a
viable long-term business that is attractive
to investors.

ANNUAL REPORT AND ACCOUNTS 2014

CONTENTS

OUR ANNUAL REPORT AND ACCOUNTS 2014 IS IN TWO PARTS:

GOVERNANCE AND FINANCIAL REPORT
The Governance and Financial Report contains detailed corporate governance
information, how we mitigate risk, our Committee reports and how we remunerate
our Directors, plus our Financial Statements and Notes.

ONLINE

You can find more information about Unilever online at www.unilever.com.
For the latest information on the USLP visit www.unilever.com/sustainable-living.
Our Strategic Report and Governance and Financial Report, along with other relevant
documents, can be downloaded at www.unilever.com/ara2014/downloads.

Chairman’s statement
Chief Executive Officer’s review
Our performance
About us
Our markets
How we create sustainable value
– Our business model
– Our strategic focus
Delivering value for our
stakeholders
– Our consumers
– Society
– Our people
– Our shareholders
– Financial review 2014
Our principal risks
Summary remuneration report
Shareholder information

2
4
7
8
12
14
14
15

17
18
22
25
28
31
36
38
40

This Strategic Report has been approved by the
Boards and signed on their behalf by Tonia Lovell
– Group Secretary.

Unilever Annual Report and Accounts 2014Strategic ReportChairman’s statement

I AM PLEASED TO REPORT THAT 2014 WAS ANOTHER YEAR
OF PROGRESS FOR UNILEVER ACROSS A NUMBER OF FRONTS
DESPITE A DIFFICULT ENVIRONMENT FOR THE BUSINESS.

OVERVIEW
Tough economic and financial headwinds
with continued competitive intensity made
2014 one of the most challenging years that
the industry and Unilever have faced for
some time. A slowdown in the growth of
emerging markets proved a testing
environment while consumers in developed
markets continued to show caution. Volatile
currencies were a further negative.

However, Unilever’s business model
and strategy proved robust, delivering a
competitive performance with underlying
sales growth ahead of the market and solid
margin expansion. Our growth model is
based on a leaner, more agile Unilever and
consistency of delivery in this more volatile
market is key. The Boards remain
convinced that a clear, purpose-driven
business model is the best way for Unilever
to continue generating sustainable,
long-term returns for all stakeholders,
including our shareholders, as proved by a
year of strong, dependable cash flow and
steadily increasing dividends. The full year
dividend paid in 2014 rose to €1.12, a 7%
increase on 2013.

HIGHLIGHTS
For me, the Boards’ highlights of 2014 were:

DEEP UNDERSTANDING
OF THE BUSINESS
Investing in people and in innovation is
crucial in this tough environment. To that
end, the Boards were pleased to spend time
at Unilever’s new state-of-the-art training
facility in Singapore, and to see first-hand
the high-quality innovations being developed
for the Refreshment category at Unilever’s
global R&D laboratory in Colworth, UK.

The volatile currency environment made our
review of the Group’s treasury operations
particularly pertinent. The Boards also spent
time assessing the quality of talent
management and Unilever’s competitive
environment. Broad exposure to senior
managers in 2014 allowed the Directors to
gain a deeper understanding of the business
and helped in the wider strategy discussions.

STRATEGIC DISCUSSIONS
The Boards held in-depth discussions with
management on strategy and portfolio
development with particular attention to
changing market dynamics especially in
emerging markets. Despite the short-term
challenges, the Boards believe the growth
story in these markets remains intact.
The challenges in developed markets
are no less important; one response to
which is our new Baking, Cooking and
Spreading Business Unit in Europe and
North America.

The Boards also reviewed the progress
made under the Unilever Sustainable Living
Plan (USLP). The Directors are confident
that the USLP remains hugely relevant in
addressing today’s global challenges and
will continue to be a long-term driver of
profitable growth for Unilever.

BOARD COMPOSITION
AND SUCCESSION
We continue to work on succession planning
for both the Boards and management, and
thorough processes are in place.

Our Directors bring complementary and
relevant skills to the Boards. In addition to
wide global experience, these skills include
expertise on finance and accounting,
consumer markets, science and technology,
customers and marketing as well as
government and legal experience.

I’m delighted that Feike Sijbesma has
joined the Boards with effect from
1 November 2014. Feike, who has a wealth
of experience as a sustainable business
leader and in finance, food and nutrition,
has already added considerably to the
Boards’ discussions.

DIVERSITY
Over 40% of our Non-Executive Directors
are now women. This is not surprising for
a Group that has long understood the
importance of diversity within the
workforce and wider value chain. The
progress made in employee diversity over
recent years has been among the best in
our sector and led to widespread external
recognition.

UNILEVER’S AUDITOR
Our shareholders appointed KPMG as our
new auditor at the AGMs in May 2014 and
a smooth and well managed transition has
been completed.

BOARD EFFECTIVENESS
Our Board evaluation in 2014 was externally
facilitated and the results were discussed
at the November 2014 Board meeting.
The Boards continue to function well with
good leadership and competent and
engaged members. Good progress has
been made on the actions agreed in
previous evaluations. The actions agreed by
the Boards in the 2014 evaluation included
the continued focus on overall strategy,
portfolio management, and succession
and induction planning.

SHAREHOLDER AND
STAKEHOLDER ENGAGEMENT
In May 2014 we bought out certain third
party rights that were convertible in 2038
into over 70 million PLC ordinary shares.
This simplified Unilever's capital structure
and enhanced core earnings per share.
In addition, in 2014 we rolled out a new
employee share scheme to align our
employees’ interests with those of
shareholders.

Unilever values open, constructive
and effective communication with
shareholders. In 2014, I again met with
principal shareholders in Europe and
the US. Together with management,
we explained our strategy to shareholders
through meetings, conferences and at our
annual investor event.

In line with the focus on simplification in
the business, the Boards have decided to
simplify the 2015 AGMs. We will revert
to holding the NV and PLC AGMs on
consecutive days and will host our AGMs at
Unilever offices in the Netherlands and the
UK. More information can be found within
the NV and PLC AGM Notices which will be
published on 17 March 2015.

Unilever Annual Report and Accounts 2014Strategic ReportBOARD OF DIRECTORS

STRATEGIC REPORT
The Boards’ objective is to meet high
standards of disclosure and we consider this
Annual Report and Accounts to provide a fair,
balanced and understandable account of
Unilever’s year in 2014 with the information
required to assess performance, business
model and strategy.

This 2014 Annual Report and Accounts is
published in a two-part format: a stand-
alone Strategic Report and a separate
Governance and Financial Report.

Among many other things, this Strategic
Report explains how Unilever fulfils its core
Purpose of making sustainable living
commonplace for consumers, society and
people and how that delivers sustainable
value for shareholders.

Finally, on behalf of the Boards, I would like
to thank all Unilever’s 172,000 employees
for their hard work in delivering good
results in a challenging environment.

Michael Treschow
Chairman

For more information on Board evaluation and
shareholder engagement, see pages 42 and 45
of the Governance and Financial Report.

1. Michael Treschow

8. Byron Grote

Chairman

2. Kees Storm

Vice-Chairman and Senior
Independent Director

3. Paul Polman

Chief Executive Officer

4. Jean-Marc Huët

Chief Financial Officer

5. Laura Cha

Non-Executive Director

6. Louise Fresco

Non-Executive Director

7. Ann Fudge

Non-Executive Director

9. Mary Ma

Non-Executive Director

10. Hixonia Nyasulu

Non-Executive Director

11. Sir Malcolm Rifkind

Non-Executive Director

12. John Rishton

Non-Executive Director

13. Feike Sijbesma

Non-Executive Director

14. Paul Walsh

Non-Executive Director

For Directors’ biographies,
please see page 54
of the Governance and
Financial Report.

Unilever Annual Report and Accounts 2014Strategic ReportChief executive officer’s review

UNILEVER CONTINUED TO GROW AHEAD OF ITS MARKETS IN
2014 AND RE-AFFIRMED ITS REPUTATION FOR CONSISTENT
TOP AND BOTTOM LINE GROWTH, ENSURING CONTINUED
RETURNS FOR INVESTORS. PAUL POLMAN, CHIEF EXECUTIVE
OFFICER, ANSWERS THE KEY QUESTIONS ABOUT 2014.

Q: WHAT PLEASED YOU MOST
ABOUT THE COMPANY’S
PERFORMANCE IN 2014?

A: The ability to deliver results while
balancing the needs of our multiple
stakeholders. The consistency of our
delivery, even in these unusually volatile
and uncertain conditions, helps. It reassures
me that the fundamental pillars of the
business are strong and that we have
developed the resilience needed to compete
even in the most difficult circumstances.

What pleased me specifically was that we
were able to take the short-term measures
necessary to respond to events – further
tightening our belts, for example, and
simplifying the organisation through
initiatives like Project Half for Growth –
while at the same time continuing to invest
in the long-term drivers of growth. The
launches of some of our biggest brands into
new markets – like Omo in the Gulf, Clear
in Japan or Lifebuoy in China – were great
examples of this.

We also made a number of strategic
acquisitions over the year to help strengthen
our portfolio further: the Talenti super-
premium ice cream business in North
America, for example, and the Qinyuan water
purification business in China, both take us
into some attractive segments of the market.

RESHAPING OUR PORTFOLIO

I was equally delighted by the progress
we made during 2014 in increasing our
proportion of female managers. There is
much still to do, but beating our stretching
targets and ending the year with women
representing 43.3% of all managers was a
great achievement and a real sign of the
commitment felt across Unilever to make
progress in this area. Finally we have made
further progress on sustainable sourcing,
decoupling growth from environmental
impact and increasing positive social
impact throughout our value chain. This
has further enhanced our corporate
reputation and lowered risk and costs.

Q: WHAT DID ALL THIS MEAN
FOR THE GROUP’S FINANCIAL
PERFORMANCE?

A: Weakening consumer demand certainly
impacted our underlying sales growth yet
it provided a great opportunity to accelerate
our efficiency effort. Growth was therefore
profitable, with an improvement in core
operating margin of 0.4 percentage points,
driven by strong savings programmes.
Tight control of working capital contributed
to another year of healthy cash flow delivery
(more than €3.1 billion) which – combined
with the improvement in operating margin
– contributed to earnings per share (EPS)
growth of 2% (or 11% adjusted for
currency impact).

We continued to reshape our portfolio
in 2014 to ensure resources are best
utilised for growth. In June we sold the
Ragu and Bertolli pasta sauces business
in North America for approximately
US $2.15 billion. We invested capital
in growth opportunities by acquiring
a majority stake in the Qinyuan Group,
a leading Chinese water purification
business. This doubled our size in this
sector, addressing a fast-growing
consumer need and furthering our aim
to grow our business sustainably. More
details of our mergers and acquisitions
activity can be found on page 29.

Q: HOW WOULD YOU SUMMARISE
2014 FOR UNILEVER?

A: In a volatile environment consistency
of results is key. Our model calls for
consistent, competitive, profitable and
responsible growth. With 2.9% underlying
sales growth, and good profit progress,
this is the fifth consecutive year of top and
bottom line growth. This was achieved
despite a challenging external environment.

Our business is growing ahead of our
markets with 60% gaining share and we
believe this growth is also competitive. The
Unilever Sustainable Living Plan (USLP)
helps to ensure growth is responsible. The
consistency of our delivery is underlined by
the fact that our average growth over the
last five years is 4.9%, making us one of the
most reliable performers in our industry.

Q: HOW WOULD YOU CHARACTERISE
THE EXTERNAL ENVIRONMENT IN
WHICH YOU HAVE HAD TO OPERATE
OVER THE LAST YEAR?

A: Very challenging and among the most
difficult I can remember. We certainly
faced more headwinds than tailwinds.
For the first time in many years, for
example, we had to confront the reality
of largely flat developed markets and
markedly slowing emerging markets.
Indeed, markets slowed from some
3.5% in 2013 to around 2.5% in 2014.

At the same time, the world continued to
be rocked by a combination of geopolitical
instability and natural, climate-related
disasters that have sadly become the norm.

All of these add a cost to doing business,
which is why we believe that confronting
these issues and looking for solutions to
them – rather than just being buffeted by
events – is the only long-term viable growth
model. Agility is equally important in this
environment and we have worked hard once
again to reduce complexity and evolve the
organisational model for speed and efficiency.

Unilever Annual Report and Accounts 2014Strategic ReportQ: ARE THERE AREAS IN WHICH
YOU WOULD LIKE TO HAVE SEEN
MORE PROGRESS?

A: Even though we have made significant
strides over recent years in improving our
organisational agility and our ability to
respond quickly to events, there is still
room for improvement. I would like to have
seen us react a little quicker, for example,
to the slowdown in a number of markets,
particularly China, where frankly we were
caught off-guard by the speed and scale
of weakening consumer demand. In terms
of our categories, all of them contributed
– albeit in different ways – to the overall
performance of the Group and I have
confidence in the strength and long-term
growth potential of our portfolio.

We took steps last year to sharpen the
portfolio even further with a number of
strategic acquisitions and disposal of
non-core brands, although there is always
scope to do more and I would like to see the
level of activity accelerate in the year ahead.
It is also clear that we still need to do more
to get our Foods category growing again,
although we are winning market share.

This is a tough business to be in – with
much of our portfolio in flat or even
declining developed markets – but we have
to do more to leverage the strength of our
wonderful Foods brands and bring back the
growth momentum. By contrast, while our
Home Care and Refreshment categories
delivered good or solid growth, we need to
increase the levels of cash and profitability
if we are to invest in the many growth
opportunities. These will all be priorities
in 2015.

Q: HOW DID UNILEVER SERVE
THE INTERESTS OF ITS VARIOUS
STAKEHOLDERS IN 2014?

A: Meeting the diverse interests of multiple
stakeholders is a challenge for a company
of Unilever’s size but also a great
opportunity given our Vision to grow in
a sustainable and socially inclusive way.
Once again, we made good progress.

INVESTING IN EMERGING MARKETS

into Saudi Arabia and the Gulf region.
Brazil saw the entry of the Baby Dove
range and Omo stain removers.

In China we undertook large capital
expenditure, building a new dry savoury
plant and a new washing powder factory.
In Indonesia, large-scale capital
investment was made in Siliwangi,
creating a plant for Cikarang Foods,
adding significant capacity to dry and
wet savoury production. In the
Philippines a new dry savoury factory
was built. Detergent and ice cream
factories were built in Africa.

We are extending our distribution reach
in the outer islands of Indonesia, rural
India and the north and central west of
Brazil, while Singapore continues to be
a major hub for our development of
Unilever people at our Four Acres
training campus.

Unilever’s strategic commitment to
emerging markets continued in 2014
with significant investments in brand
launches, new production facilities and
our operations.

We undertook major launches of brands
including Lifebuoy into China and Omo

There is no doubt that over the long term
our investors have benefited from their
continued belief in Unilever, with total
shareholder return increasing by a further
18% in 2014. Our employees remain a
key priority of course and, despite the
constrained economic environment, we
did not compromise on our investments
in training, personal development, safety
and other employee support programmes.
It was heartening to see employee
engagement scores remain at historically
high levels in our annual Global People
Survey (GPS), with improvements across
all five metrics.

It is also clear that the demand to join
Unilever has never been greater. We
received over 2 million applications
or expressions of interest in 2014 and
for the second year running Unilever
was ranked the third most in-demand
employer among jobseekers on LinkedIn,
behind only Apple and Google, as more
and more young people want to work for
purpose-driven organisations.

We also made progress in our commitment
to serve a wider group of stakeholders
through the USLP and our Vision of
growing the business while reducing our
environmental footprint and increasing
our positive social impact, not only in that
part of the business under our direct
control but throughout the whole value
chain. This manifests itself in many
different ways – everything from playing
our part in putting an end to deforestation
to ensuring we embrace and advance
human rights principles throughout the
length of our supply chain. You can see a
number of examples set out in other parts
of this report.

It was pleasing to see our efforts
recognised once again in 2014, including
regaining sector leadership in the
prestigious Dow Jones Sustainability
Index (DJSI) and being ranked – for the
fourth year running – as the Number One
Company in the Globescan/SustainAbility
index of leading sustainability experts
around the world.

Unilever Annual Report and Accounts 2014Strategic ReportChief executive officer’s review
CONTINUED

UNILEVER LEADERSHIP EXECUTIVE (ULE)

1. Paul Polman∆

8. Nitin Paranjpe

Chief Executive Officer

President, Home Care

2. Doug Baillie

9. Antoine de Saint-Affrique

Chief Human Resources
Officer

3. David Blanchard
Chief R&D Officer

4. Kevin Havelock

President, Refreshment

5. Jean-Marc Huët∆

Chief Financial Officer

President, Foods

10. Pier Luigi Sigismondi

Chief Supply Chain Officer

11. Ritva Sotamaa

Chief Legal Officer

12. Keith Weed

Chief Marketing and
Communications Officer

6. Alan Jope

13. Jan Zijderveld

President, Personal Care

President, Europe

Kees Kruythoff
President, North America

∆ Board member

For ULE biographies,
please see page 55
of the Governance and
Financial Report.

Q: WHAT DO YOU SEE AS THE
PRINCIPAL CHALLENGES FOR
UNILEVER IN THE YEAR AHEAD?

A: Operating in an environment of almost
unprecedented volatility and complexity
will remain a big challenge for everyone.
Few people predicted that in 2014 we
would see such a sharp slowdown in
some of the major world economies or
the escalation of geopolitical conflicts
or the outbreak of pandemics like Ebola
and oil prices ending the year at less than
US $50 a barrel. We must be prepared for
a similarly unpredictable year in 2015.

The key is to have a model that responds
to people’s needs and concerns, and an
organisation that is both resilient and
agile in the face of growing economic and
geopolitical uncertainty. We achieved that
again in 2014 and I want to thank – and
recognise – the supreme efforts of our
172,000 colleagues and the many more
partners around the world.

Q: WHAT IS YOUR OUTLOOK
FOR 2015?

A: We expect the economic pressures
to continue. Consumer demand in
emerging markets is likely to remain
subdued for some time to come. There
is still little sign of a recovery in Europe
and, while conditions in North America
have improved, any increase in consumer
demand is likely to be slow and shoppers
will remain focused on value.

We are also prepared for managing
any continuing volatility on the world’s
currency markets and for what could be
fluctuations in commodity costs as a
result of the reduction in oil prices. At
the same time, we expect the levels of
competitive activity – both from global
competitors and, increasingly, from
local players – to remain high in 2015.

Despite these pressures, we are confident
that with the many positive changes we
have already made to Unilever we are
well placed to continue delivering our
objectives of volume growth ahead of
our markets, steady and sustainable
improvements in core operating margin,
and strong cash flow.

Paul Polman
Chief Executive Officer

Unilever Annual Report and Accounts 2014Strategic ReportOUR PERFORMANCE

IN 2014, DESPITE A CHALLENGING YEAR FOR OUR INDUSTRY,
WITH SIGNIFICANT ECONOMIC HEADWINDS AND WEAK
MARKETS, WE HAVE DELIVERED COMPETITIVE UNDERLYING
SALES GROWTH AND MARGIN EXPANSION.

OPERATIONAL HIGHLIGHTS
Turnover was €48.4 billion, down 2.7% with a negative impact from
foreign exchange of 4.6%, and net acquisitions and disposals of
0.9%. Underlying sales grew 2.9%.

Gross margin declined 0.2 percentage points driven by currency-
related cost increases in emerging markets, partly offset by
pricing, savings and mix such as margin accretive innovations.

Core operating margin rose by 0.4 percentage points despite
maintaining brand and marketing investment at 14.8% of turnover,
as overheads were reduced by 0.6 percentage points.

• Underlying sales growth of 2.9% was ahead of our markets,

with volume 1.0% and price 1.9%.

• Emerging markets, 57% of our business, grew underlying

sales by 5.7%.

• Developed markets reported a decline in underlying sales of

0.8%, with price down 1.3% and volume up 0.5%.

KEY PERFORMANCE INDICATORS
We report our performance against ten key performance indicators
(KPIs) – four financial and six non-financial – as shown below. Our
financial KPIs are described in more detail in the Financial review
starting on page 31.

KEY FINANCIAL INDICATORS

UNDERLYING SALES
GROWTH‡

CORE OPERATING
MARGIN‡

UNDERLYING VOLUME
GROWTH‡

FREE CASH FLOW‡

2014

2.9%

2013: 4.3%

2014

14.5%

2013: 14.1%

2014

1.0%

2013: 2.5%

Underlying sales growth over
five years has averaged 4.9%.

Core operating margin has
steadily increased over five
years from 13.6% to 14.5%.

Underlying volume growth
averaged 2.9% over five years.

2014

€3.1 Billion

2013: €3.9 billion

Over the last five years
Unilever has generated free
cash flow of €17.7 billion.

KEY NON-FINANCIAL INDICATORS

MANUFACTURING

2014

92.02KG◊ø

2013: 98.85kg◊ø

CO2 from energy per tonne
of production.

TOTAL RECORDABLE
ACCIDENT FREQUENCY
RATE

2014

1.05◊ø

2013: 1.03◊ø

Per 1 million hours worked.

2014

2.01M3◊ø

2013: 2.12m3◊ø

2014

1.19KG◊ø

2013: 2.96kg◊ø#

Water per tonne of production.

Total waste (sent for disposal)
per tonne of production.

DIVERSITY

ENGAGEMENT

2014

57%

male
2013: 58%

2014

43%

female
2013: 42%

The percentage of persons
of each sex who were
Unilever managers.

2014

75%

2013: 78%

Overall engagement score
among managers who
participated in our Global
People Survey in 2014.

‡ These measures 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 34 to 35.

◊ PricewaterhouseCoopers (PwC)

assured. For details and the basis
of preparation see www.unilever.
com/ara2014/downloads.

ø Measured 1 October –

30 September.

# Prior year restated to include
additional waste identified.

Unilever Annual Report and Accounts 2014Strategic ReportABOUT US

THIS SECTION EXPLAINS OUR BUSINESS – HOW AND WHERE WE
MAKE OUR PRODUCTS, HOW WE TAKE THEM TO MARKET AND HOW
WE ENSURE THAT OUR BRANDS REMAIN OUR CONSUMERS’ CHOICE.

1. CONSUMERS

INSIGHTS FOR INNOVATION
A fundamental requirement at Unilever is to
understand our consumers. We use focus groups
and quantitative studies and spend time with
consumers in stores and in their homes to find out
what is important to them – as citizens as well as
consumers – so we can create products they need
and want. Unilever carelines are also a rich source
of information. Digital communications and social
media mean we can engage with large numbers of
people consistently over long periods of time so we
can immerse ourselves in their day-to-day lives. We
can use online search data to identify and anticipate
future consumer trends and gain a competitive edge.

2. INNOVATION

TECHNOLOGY AT WORK
R&D is an engine of sustainable growth; Unilever
spends around €1 billion on R&D annually. Our 6,000
R&D professionals are responsible for building brands
through benefit-led innovation, which is unlocked
through science and technology. This includes looking
at long-term emerging science and transforming
science into technologies which are used to design
branded products.

4. SOURCING

SUSTAINABLE SOURCING
A dedicated team is responsible for Unilever’s annual
€35 billion procurement programme, including
agricultural raw materials. In 2014 we rolled out our
Responsible Sourcing Policy (RSP) as part of our
commitment to business integrity, openness, respect for
universal human rights and core labour principles. To
ensure that our suppliers embrace the RSP and move up
the continuous improvement ladder our initial goal is for
our key Partner To Win suppliers, approximately 200 large
companies, to meet mandatory RSP criteria by the end of
March 2015. We are also targeting our broader supplier
base to secure continuous improvement across the board.

By the end of 2014 all palm oil directly sourced for
Unilever’s European Foods business was close to 100%
traceable and certified sustainable (over 98% in December
2014 and on track to be 100% by the end of March 2015).
By leading the industry’s efforts to make sustainable palm
oil ubiquitous we help to halt deforestation and mitigate
the risk of rising commodity costs.

3. COLLABORATION

PARTNER TO WIN
To meet our Vision we know we must work in
partnership with others, such as suppliers,
agencies, universities, governments and NGOs.

The big development for 2014 has been the launch
of our Partner To Win 2020 programme to create a
supplier ecosystem where partners work with us and
each other to create breakthroughs in products
or packaging to deliver the capacity, innovation and
sustainable solutions to meet our growth ambition.
A great example is the new Dove Body Wash bottle
using 15% less plastic (see inside front cover).

15%

LESS PLASTIC USED
Unilever has waived exclusivity
rights from 1 January 2015 so that
other manufacturers can also use
the technology.

Unilever Annual Report and Accounts 2014Strategic ReportOUR VALUE CHAIN
Unilever’s value chain – the process by
which we create brands, products and
ultimately shareholder value – begins with
acquiring insight into consumers’ needs,
which vary considerably between developed
and emerging markets.

Insight requires close engagement with
consumers, often over prolonged periods,
and allows us to identify future trends to
gain a competitive edge.

That knowledge helps us to target our
subsequent R&D activities and our
investments in innovation. Unilever has
filed more than 200 new patent applications
in 2014 and our Partner To Win 2020
programme, also launched in 2014, creates
a new platform for us to work with our
suppliers in the development of product
and packaging innovations that capture
consumers’ interest and attention.

Bringing these innovations to market
as physical products is a core function
of Unilever’s supply chain, which employs
about 110,000 of our 172,000 people.
It also involves working with suppliers
around the world.

Unilever itself manufactures the majority
of its products and we maintain an
international network of 240 manufacturing
sites. In sourcing large amounts of raw
materials we also have a direct impact on
the environment. By sourcing sustainably,
we can protect scarce resources, ensure
security of supply for our business and
reduce price volatility while protecting the
environment and enhancing people’s
lives, which is at the heart of our Unilever
Sustainable Living Plan (USLP). More
detail can be found on page 11.

By the time manufacturing is under way
Unilever’s marketing teams have worked
with our category experts to define the
complete marketing mix, including
communications, that makes our brands
come alive. Communicating the benefits
of our products and brands to consumers
is increasingly complex, with digital
communications and social media creating
new and more direct ways to engage
alongside traditional media.

Our logistics operations move Unilever
products to retailers and our go-to-market
teams ensure that we get enough of the right
products in the right price bracket in the
right sales channels for consumers to buy,
be they stores or the fast-growing
e-commerce channel.

5. MANUFACTURING

GLOBAL SCALE, LOCAL AGILITY
We make the majority of what we sell through a network
of more than 240 manufacturing sites around the
world. We have invested significantly in our factories in
recent years to create an efficient, reliable and more
sustainable network. We are now able to maximise the
global scale of our operations, while having the agility
to meet local demands. More eco-efficient production
is helping us meet the USLP targets, so by the end
of January 2015, for instance, all our factories had
achieved zero non-hazardous waste to landfill,
producing 140,000 tonnes less waste. Since 2008,
we estimate that eco-production has avoided costs
in excess of €400 million.

8. SALES

GO-TO-MARKET EXPERTISE
We work closely with retailers to win in the market place
and make sure that our brands are always available,
properly displayed and in the right price bracket. Our
go-to-market capability ensures that we become the
supplier of choice for our customers and trade partners,
through strong joint business planning and in-store
execution via Perfect Store programmes, to help deliver
sustainable sales growth. This is essential for us to be
able to add premium brand extensions to our product
ranges, land product innovations on the shelves,
enter new geographies and markets, and build our
distribution strength to reach new consumers.

6. LOGISTICS

7. MARKETING

CENTRALISED LOGISTICS EXPERTISE
How we move products from factories to customers
is the role of our logistics operation. We are now
rolling out our global network of logistics centres
that organise movement of goods centrally and
more efficiently, delivering savings, reduced stocks,
reduced carbon emissions and improved customer
service. These operational hubs now allow us to
centralise other services too, including monitoring
orders from customers through to payment.

22%

CO2 SAVINGS FROM LOGISTICS
Improvement in CO2 efficiency
since 2010 measured across
14 countries.

GENERATING CONSUMER-LED GROWTH
We spend about €7 billion annually on marketing,
making us one of the world’s biggest advertisers.
This ensures that our brands and products are
consumers’ first choice. We use multiple media
to achieve cut-through in a highly competitive and
busy world. Traditional media channels continue
to play a big part but digital communications have
revolutionised the way marketing engages with
people, creating entirely new sales and marketing
opportunities. We create our own entertainment
content, including Unilever brand advertising, and
this is distributed, for example, by mobile devices
in emerging markets.

Unilever Annual Report and Accounts 2014Strategic ReportABOUT US
CONTINUED

OUR CATEGORIES AND BRANDS

Unilever’s portfolio has four categories:
Personal Care, Foods, Refreshment and
Home Care. We have 13 brands with sales
of more than €1 billion. Brands are our
biggest asset but also present a risk if they
do not maintain value and relevance to
consumers. That’s why innovation and
remaining competitive are crucial. We
launched new brands in 2014, backed by
marketing and customer insight, for
example Regenerate, a dental care product.
In addition to the Qinyuan and Talenti Gelato
& Sorbetto acquisitions, we are also in the
process of acquiring the Camay and Zest
brands, to expand categories and boost
growth. To sharpen our portfolio in 2014
we disposed of Slim.Fast, Ragu and Bertolli
in North America, and other non-core
Foods brands.

PERSONAL CARE

FOODS

REFRESHMENT

HOME CARE

Underlying sales growth

3.5%

2013: 7.3%

(0.6)%

2013: 0.3%

3.8%

2013: 1.1%

5.8%

2013: 8.0%

Core operating margin

18.7%

2013: 17.8%

Turnover

18.6%

2013: 17.7%

Turnover

8.8%

2013: 9.1%

Turnover

6.3%

2013: 6.4%

Turnover

€17.7 BILLION

2013: €18.1 billion

€12.4 BILLION

2013: €13.4 billion

€9.2 BILLION

2013: €9.4 billion

€9.2 BILLION

2013: €8.9 billion

WHERE WE OPERATE

Unilever’s products sell in more than
190 countries and are used by 2 billion
consumers every day. Our business is
organised across three geographies: the
Americas; Europe; and markets comprising
Asia, Australasia, Africa, Middle East,
Turkey, Russia, Ukraine and Belarus.
We also analyse operations by developed
and emerging markets. This wide spread
exposes us to economic and political risks
beyond our control. However, the diversity
of our portfolio and geographic reach help
mitigate our exposure to any specific risk.

Unilever Annual Report and Accounts 2014Strategic ReportUNILEVER SUSTAINABLE LIVING PLAN

We cannot achieve our Vision to double our size unless we find
new ways to operate that decouple growth from our environmental
impact, while using growth as an enabler for positive social
impact. Launched in 2010, the Unilever Sustainable Living Plan
(USLP) is our blueprint for sustainable growth. It is helping to drive
profitable growth for our brands, save costs and fuel innovation.

The USLP sets out three big, ambitious goals. Underpinning these
goals are nine commitments supported by targets spanning our
social and environmental performance.

We are making good progress with our first goal: to help more
than a billion people improve their health and well-being by
2020, reaching 397 million by the end of 2014. The progress
on our second goal is more mixed. We have achieved zero
non-hazardous waste to landfill from our factories, and continue
to make significant reductions in the greenhouse gas (GHG)

and water impacts of our manufacturing. But the consumer
element of our target to halve the water and GHG impacts of
our products remains a challenge. On waste reduction, new
technology such as the roll-out of compressed deodorant sprays
and our new Dove Body Wash bottles has enabled reductions.
On our third goal, we are also making good progress. We are
now sourcing more than half our agricultural raw materials
sustainably and have reached around 800,000 smallholder
farmers with help and training. We have created 70,000 women
micro-entrepreneurs distributing our products in India while
making progress on our new commitments to enhance livelihoods
across the value chain.

More on our performance against our targets can be found in our
online Sustainable Living Report 2014 to be published in May 2015.

www.unilever.com/sustainable-living

IMPROVING HEALTH
AND WELL-BEING

REDUCING
ENVIRONMENTAL IMPACT

ENHANCING
LIVELIHOODS

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

By 2020 our goal is to halve the
environmental footprint of the
making and use of our products
as we grow our business.

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

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

OUR WATER IMPACT
PER CONSUMER USE
HAS REDUCED BY
AROUND 2% SINCE 2010

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

55% OF AGRICULTURAL
RAW MATERIALS
SUSTAINABLY
SOURCED BY END 2014

8. OPPORTUNITIES
FOR WOMEN
By 2020 we will empower
5 million women.

WE TRAINED 70,000
WOMEN MICRO-
ENTREPRENEURS TO
SELL OUR PRODUCTS IN
RURAL INDIA BY END 2014

2. NUTRITION
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.

33% OF OUR PORTFOLIO
BY VOLUME MET
HIGHEST NUTRITIONAL
STANDARDS IN 2014

1. HEALTH AND
HYGIENE
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.

AROUND 397 MILLION
PEOPLE REACHED BY
END 2014 THROUGH
OUR PROGRAMMES
ON HANDWASHING,
SAFE DRINKING
WATER, SANITATION,
ORAL HEALTH AND
SELF-ESTEEM

3. GREENHOUSE
GASES
Halve the greenhouse
gas impact of our
products across the
lifecycle by 2020.

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

OUR GREENHOUSE GAS
IMPACT PER CONSUMER
USE HAS INCREASED BY
AROUND 4% SINCE 2010

OUR WASTE IMPACT PER
CONSUMER USE HAS
REDUCED BY AROUND
12% SINCE 2010

7. FAIRNESS IN
THE WORKPLACE
By 2020 we will advance
human rights across our
operations and extended
supply chain.

BY MARCH 2015 OUR KEY
STRATEGIC SUPPLIERS
(AROUND 200 LARGE
COMPANIES) WILL MEET
OUR RESPONSIBLE
SOURCING POLICY’S
MANDATORY CRITERIA

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

IN PARTNERSHIP WITH
OUR AGRICULTURAL
SUPPLIERS AND OTHER
PARTNERS, WE HELPED
800,000 SMALLHOLDER
FARMERS GAIN ACCESS
TO TRAINING AND
SUPPORT BY END 2014

Our Nutrition, Water and Greenhouse Gases commitments, and Health and Hygiene targets for handwashing and safe drinking
water, are independently assured by PwC. For details and the basis of preparation see www.unilever.com/ara2014/downloads.

Our other commitments and targets are subject to internal verification. For details of the definitions and reporting periods
used in the preparation of these commitments and targets see our Sustainable Living Report 2014 to be published in May 2015
at www.unilever.com/sustainable-living.

Our water metric measures the water we add to the product plus the water used by consumers with our products in seven water-
scarce countries. From 2014 we are reporting against our five water-using sub-categories (laundry, hair care, oral care, skin
cleansing and household care) in these countries. Of Unilever’s 12 sub-categories, these five represent 99% of our absolute water
impact (as measured by our metric).

Unilever Annual Report and Accounts 2014Strategic ReportOur markets

UNILEVER OPERATES IN FAST MOVING CONSUMER GOODS
(FMCG) MARKETS WHICH INVOLVE THE MANUFACTURE,
DISTRIBUTION AND MARKETING OF BRANDED PRODUCTS
ADDRESSING A BROAD RANGE OF EVERYDAY NEEDS
INCLUDING FOOD, REFRESHMENT AND HOME AND
PERSONAL CARE.

The top 25 companies in the FMCG market
have global sales of approximately
US $870 billion.

The market is characterised by high levels
of competition between brands and FMCG
companies are among the world’s biggest
advertisers, accounting for about a fifth of
all advertising expenditure.

CONSUMER CONFIDENCE
Levels of consumer confidence are critical
to the FMCG market. Confidence has
benefited from governments and central
banks around the world engaging in various
economic support programmes since the
2008 financial crisis.

But in 2014 the major trend in global
consumption patterns was a marked
slowdown, evidenced by a fall in growth
rates in emerging economies, notably
China, which is now growing at its slowest
rate for five years, and Brazil, which is
in recession.

Inflation and a rising cost of living have
squeezed consumers in emerging markets,
while economies only narrowly missed
falling back into recession in Europe. A
small number of major markets, such
as the US and UK, saw better levels of
economic activity but the outlook for
consumer confidence remains weak.

This broad economic trend was reflected
in our markets, which grew at around 2.5%.

CHANGING CONSUMER
HABITS: E-COMMERCE
E-commerce, driven by the rapid
take-up of smartphones and tablets,
is an increasingly significant
distribution channel. In the retail
market, FMCG e-commerce sales are
growing and account for 1.2% of total
sales, although on current trends this
is expected to double to 2.4% by 2020.

In some developed markets, such
as the UK, e-commerce is already
up to 5% of FMCG sales.

Online shoppers can be up to 25%
more loyal, while e-commerce
also offers FMCG companies the
opportunity of round-the-clock
shopping, access to new consumers,
improved margins and easier
product launches.

100%

GROWTH IN THE FMCG E-COMMERCE
CHANNEL BY 2020

POLITICS AND COMMODITIES
The FMCG market is also sensitive to
geopolitical events which can hold back
growth such as the current situation in
Russia and Ukraine where sanctions and
political tensions are having an impact
on the market.

A further area of exposure is raw material
and commodity prices, which drive the
industry’s cost base. Across many
emerging markets, devaluing currencies
have imported inflation into local raw
material production.

Elsewhere the oil price has been
trending down, compounding price
deflation in Europe.

Unilever Annual Report and Accounts 2014Strategic ReportCOMPETITION
Some of the largest FMCG companies,
along with Unilever, include: Nestlé,
Procter & Gamble, L’Oréal, Danone,
Kraft Foods and Colgate-Palmolive. All
have identified emerging markets as a
major growth opportunity in years to come.

Of growing influence in the FMCG markets
are discount stores which are providing
fierce competition to the incumbent
supermarket chains, most notably in
the US and Europe.

30%

WORLD POPULATION GROWTH BY 2050

The expected rise in world population highlights
the fact there will be 3 billion middle class
consumers in the world as a source of growth for
FMCG companies, but also the pressure being
placed on raw materials and sustainability.

POPULATION TRENDS
The FMCG market is driven in part by
global population trends and demographic
changes within countries.

World population is expected to rise to
8 billion by 2025 and, by then, more than
4 billion will be part of the ‘consuming class’.
For the first time the number of people with
discretionary income will exceed the number
struggling to meet basic needs – a trend
described by management consultancy
McKinsey as possibly the biggest opportunity
in the history of capitalism.

ENVIRONMENTAL PRESSURES
Population growth also places a strain
on the world’s natural resources – the raw
materials that the FMCG industry relies
on to make its products.

FMCG companies are among the world’s
largest buyers of commodities such as
agricultural products, natural oils and
fats, coffee, tea, paper and board.

Cultivation of commodities such as palm oil
has contributed to deforestation which has
been a major factor behind climate change.
This in turn has reduced the availability of
raw materials, increasing their price and
FMCG production costs.

While the world population grew fourfold in
the 20th century, fresh water withdrawals
grew nine times – which highlights the threat
of water scarcity to the economic production
and consumption of consumer goods.

Numerous initiatives are under way
led by industry working in partnership
with governments and NGOs to place raw
material production on a sustainable footing.

Meanwhile, consumer trends are also
shifting towards responsible consumption,
and products defined or labelled as natural,
organic, ecological or fairly traded.

Boston Consulting Group estimates that
two thirds of the US grocery sector market
growth comes from the responsible
consumption of products which are now
worth US $400 billion.

The segment has grown about 9% a year
over the past three years and, in the UK,
Fairtrade products grew at 14% in 2013
versus overall growth of food spending
of less than 5.1%.

HEALTH, HYGIENE AND NUTRITION
FMCG product development is also reacting
to consumers’ concerns about their own
health and well-being.

Malnutrition – under and over nutrition – is an
issue affecting the industry in both emerging
and developed markets. This is creating a
trend toward the manufacture of healthier
food products, which either have fortified

THE ROLE OF WOMEN

Women play a pivotal role in the
FMCG market, controlling the
majority of purchasing decisions.
The promotion of women’s rights
and opportunities has clear
long-term implications for the
FMCG market in terms of product
development and innovation.
Significant developments such
as the UN’s new Sustainable
Development Goals are expected
to accelerate these opportunities.

ingredients to improve dietary quality or
address other dietary-related complaints
such as unhealthy cholesterol levels.

Initiatives such as the UN’s new Sustainable
Development Goals also have implications
for the industry. Governments in emerging
markets, such as India, have made
commitments to universal sanitation to
improve health and hygiene which will drive
increased use of personal and household
care products.

DIGITAL MEDIA AND ADVERTISING GROWTH

print or radio. However, mobile phone
penetration and usage is high. As a
result, Unilever has launched Kan
Khajura Mobile Radio Station in India,
which delivers radio content to mobile
phones through the simple mechanism
of giving a missed call.

This mobile channel provides content
including Bollywood movie songs,
dialogues and jokes that can be
accessed for free by the mobile user.
The content is interspersed with
Unilever brand advertising. Data
and analytics are extensively used to
vary content to make it relevant and
interesting. The channel reaches
approximately 10 million people
without a TV in Bihar and Jharkhand
states, making it one of the largest
media channels in these regions.
The channel had 29.5 million users
by the end of December 2014, helping
increase spontaneous awareness of
Unilever brands.

FMCG advertising is rapidly migrating
to digital platforms, driven by the
take-up of smartphones and tablets.
Global digital advertising is estimated at
US $137.5 billion, or a quarter of total
advertising spend.

The trend is being driven in developed
and also emerging markets where
mobile phones are proving to be one
of the most effective ways of delivering
advertising to individuals, particularly
in the most remote rural locations. For
instance, large parts of rural India have
no, or very limited, access to television,

Unilever Annual Report and Accounts 2014Strategic ReportHow we create sustainable value

OUR BUSINESS MODEL AND STRATEGY COME TOGETHER TO
DELIVER VALUE FOR SHAREHOLDERS. HERE WE EXPLAIN
THEIR ELEMENTS AND HOW THEY ARE COMBINED.

COST
LEVERAGE +
EFFICIENCY

OUR CORE PURPOSE

MAKING SUSTAINABLE LIVING COMMONPLACE
Our business model starts with our core Purpose which is a clear
expression of what we believe to be the best long-term way for
Unilever to grow. It is a simple Purpose to help us meet changing
consumer preferences and the challenges of a volatile, uncertain,
complex and ambiguous world.

COST
LEVERAGE +
EFFICIENCY

KEY INPUTS

BRANDS, OPERATIONS, PEOPLE
Our business model works by combining three key inputs and
filtering them through the lens of the Unilever Sustainable Living
Plan (USLP). Our brands have significant value and succeed
through products that meet the needs of consumers. Our people
identify social and consumer needs to grow our brands, market
them and manufacture and distribute them. Our operations are the
essential supply chain functions and assets of raw material supply,
factories, logistics, go-to-market expertise and marketing. We
invest financial capital to support all these assets and activities.

HOW WE DRIVE PROFIT

PROFITABLE VOLUME GROWTH, COST LEVERAGE +
EFFICIENCY, INNOVATION + MARKETING INVESTMENT
Unilever aims for a virtuous circle of growth. Profitable volume
growth is driven by investment in innovation and brands to deliver
products which 2 billion consumers use every day. We can leverage
this scale to spread fixed costs and improve profitability while
further investing in the business. This investment funds R&D
and innovation to create new and improved products backed by
marketing to create even stronger brands. This drives profitable
volume growth and the virtuous circle continues.

Our business model

PROFITABLE
VOLUME
GROWTH

O U R BRANDS

SUSTAINABLE
LIVING

O U R BRANDS
INNOVATION +
MARKETING
INVESTMENT

SUSTAINABLE
LIVING

INNOVATION +
MARKETING
INVESTMENT

S
N
O
TI
A
R

U R OPE

S
N
O
TI
A
R

U R OPE

PROFITABLE
VOLUME
GROWTH

O U R BRANDS

COST
LEVERAGE +
EFFICIENCY

SUSTAINABLE
LIVING

S
N
O
TI
A
R

U R OPE

INNOVATION +
MARKETING
INVESTMENT

Unilever Annual Report and Accounts 2014Strategic Report

Our strategic FOCUS

OUR STRATEGIC
VISION

OUR STRATEGIC
CHOICES

OUR
FINANCIAL
GROWTH
MODEL

OUR KEY
RISKS

DOUBLE THE SIZE
OF OUR BUSINESS

REDUCE OUR
ENVIRONMENTAL
FOOTPRINT

INCREASE OUR POSITIVE
SOCIAL IMPACT

OUR STRATEGIC VISION
Our Vision provides
leadership and direction
for Unilever and the people
operating our business
model. We aim to double
the business with innovative
brands backed by marketing
and brilliant execution and
a best-in-class supply chain.
We will achieve our social
and environmental ambitions
through the USLP which
helps to identify areas of
opportunity for brand-led
growth, cost savings and
future profit.

PERSONAL CARE

SALES GROWTH

HOME CARE

FOODS

MARGIN IMPROVEMENT

BRAND PREFERENCE

EARNINGS PER SHARE

TALENT

REFRESHMENT

FREE CASH FLOW

SUSTAINABILITY

EMERGING MARKETS

DIVIDENDS

OUR STRATEGIC CHOICES
These are the choices
Unilever makes to maximise
value from our business
model and drive returns to
shareholders. We operate
across four categories and
focus resources on growing
our brands in each of them
around the world. We are
committed to growing in
emerging markets which
retain good long-term
growth prospects.

OUR FINANCIAL
GROWTH MODEL
All our activity combines
to deliver the single goal
of creating shareholder
value. 2014 has witnessed
challenging economic and
financial conditions but
we have still delivered a
competitive performance
with underlying sales growth
of 2.9% and an improvement
in core operating margin,
partly driven by our cost
saving initiatives. We
continue to be highly cash
generative to help fund
investment and growth with
free cash flow remaining
strong at €3.1 billion. We
have paid a total dividend
of €1.12 per share in 2014,
a 7% increase over 2013.

OUR KEY RISKS
Our business faces risks
which we actively mitigate
through our various
operations. Our success
is at risk if our brands and
products do not remain
of value and relevance to
consumers. It is also at risk
if we fail to maintain a skilled
workforce. Long term,
Unilever is at risk if we do not
find more sustainable ways
of doing business to ensure
growth, mitigate cost
pressures and support the
good reputation of the Group
and our brands. A more
comprehensive definition
of our principal risks can be
found on pages 36 and 37.

Unilever Sustainable Living Plan

The USLP is our key differentiator – how we will achieve sustainable growth by improving
the health and well-being of more than a billion people, reducing the environmental
footprint of the making and use of our products, and enhancing the livelihoods of millions
of people across our value chain.

Unilever Annual Report and Accounts 2014Strategic Report16

Unilever Annual Report and Accounts 2014Strategic ReportDELIVERING VALUE FOR
OUR STAKEHOLDERS

THE FOLLOWING PAGES SPELL OUT HOW
UNILEVER HAS PERFORMED FOR THE BENEFIT
OF OUR CONSUMERS, WIDER SOCIETY, OUR
PEOPLE AND OUR SHAREHOLDERS IN 2014.

OUR PEOPLE
Delivering our business goals requires
Unilever to recruit, develop and retain the
right talent. We are determined to help all
our people to be the best they can be, to
help fulfil their potential and the potential
of the business. Training and development
are crucial at all levels and we strive to
create a working environment that
respects the human rights and interests
of all our employees. Ensuring gender
equality is a fundamental part of our
approach while our Purpose of making
sustainable living commonplace is a
commitment that our people can engage
with every day and make a reality through
their work.
PAGES 25 TO 27

OUR SHAREHOLDERS
We aim to deliver the best possible
operational performance from the
business to deliver maximum returns to
shareholders. The resulting investment
case of long-term, sustainable growth
and improvement in returns is clear.

How we manage our portfolio of assets
and finances is an important contributor
to shareholder returns and reflects how
the business is changing to meet a more
volatile and uncertain world.
PAGES 28 TO 30

OUR CONSUMERS
In 2014 many consumers have faced
tough conditions as economic uncertainty
has held back growth around the world,
both in the developed markets and
in emerging markets. Meanwhile
consumption continues to be linked to
many of the world’s biggest problems
– deforestation, climate change, water
scarcity, malnutrition and unhealthy diets.

However, each of our categories continues
to innovate to meet the challenges posed
by these trends and changing consumer
preferences, such as products that are
sustainably sourced. Whether it’s laundry
products which use less water or
compressed cans for deodorant packaging
with 25% less aluminium, consumers
are reacting positively to our innovations.
PAGES 18 TO 21

SOCIETY
Acting alone Unilever can only do so much
to make sustainable living commonplace.
Acting in partnership with others it can
help bring about transformational change
at a societal level to tackle the world’s
major social, environmental and economic
issues. By adopting a leadership role,
and working with governments, NGOs,
suppliers and others, we are influencing
change on a bigger scale, with a much
bigger prize for the business on offer.
We are deepening our efforts in three
areas where we have scale, influence
and resources to create transformational
change: deforestation; sustainable
agriculture and smallholder farmers;
and water, sanitation and hygiene.
PAGES 22 TO 24

IT TAKES A VILLAGE

Our Flora Pro.activ ‘It Takes
A Village’ campaign to lower
cholesterol is featured on page 19.

Unilever Annual Report and Accounts 2014Strategic ReportOur consumers

PERSONAL CARE

Personal Care is Unilever’s largest
category. It includes five of Unilever’s 13
€1 billion brands: global names such as
Dove, Rexona, Axe, Lux and Sunsilk.

Sales of €17.7 billion in 2014 accounted for
37% of Group turnover and 41% of operating
profit. The strategic role of the category is
to generate continued excellent returns,
delivering competitive growth while
expanding gross margins to release
further investment for future growth.

Our Personal Care brands serve
consumers across the full range of price
points, playing to the category’s historic
strengths of developing markets and
reaching down while very deliberately
adding a new dimension to the business
through accessing faster growing
premium segments.

We also continue to expand our presence
by launching our brand portfolio in new
geographic markets and by improving our
presence in distribution channels where we
are under-represented. Our current focus
is the e-commerce channel and specialist
drug stores.

In 2014 the global market slowed. In this
context, Personal Care achieved 3.5%
growth and continued to gain market share.

Many of our leading brands have enjoyed
success. Dove, our biggest brand, delivered
another year of strong performance, driven
by double-digit growth in deodorants and
consistent performance in skin cleansing,
which is rooted in a successful repeatable
model of compelling communication and
targeted innovation in bar and body wash.
In hair, Dove’s success was helped by the
strong start of the Advanced Hair Care
range launched in the US and Europe. The
brand is also building a premium offering
with, for example, its new Oxygen Moisture
hair care range in Europe and the launch of
Dove Advanced Care solid deodorant sticks
in the US.

We also made progress against our
Unilever Sustainable Living Plan (USLP)
commitment to improve opportunities for
women with the Dove Self-Esteem project,
which has already reached over 15 million
people. The brand partnered with the World
Association of Girl Guides and Girl Scouts to
launch the ‘Free Being Me’ Girl Guides

REGENERATE – NEW PRODUCTS, NEW MARKETS

badge awarded to girls taking part
in education on common body myths.
Also working to improve livelihoods,
Lifebuoy soap continues to drive the
largest handwashing behavioural
change programme in the world, having
reached 257 million people in more than
16 countries between 2010 and 2014.

We made less progress on the USLP target
of reducing our water footprint. Research
and development will be critical to finding
commercially viable and sustainable ways
of driving the necessary changes in
consumer behaviour when using our hair
and skin cleansing products.

15%

LIFEBUOY GROWTH IN 2014

Lifebuoy enjoyed 15% growth, helped by the
re-launch in South Asia of the core range,
with ANS (Activ Naturol Shield) – a patented
combination of synergistic natural ingredients –
proven to protect against ten infection-causing
germs. We also entered China with the brand
in 2014. More detailed coverage of Lifebuoy’s
success and its contribution to our USLP can
be found on page 24.

Regenerate, a completely new Personal Care brand,
was launched in the UK in 2014. It is a highly differentiated,
oral care system based on revolutionary science and
market-leading technology.

Regenerate is the first dental care system to regenerate tooth
enamel mineral, reversing the early enamel erosion process.
The products work using our patented NR-5 technology and
took scientists nine years of research across our R&D facilities
in Port Sunlight, Milan and Shanghai to master. At each use,
the NR-5 specific ingredients combine to form a fresh supply
of enamel mineral which wraps and integrates on to teeth.

Unilever Annual Report and Accounts 2014Strategic ReportFOODS

Foods is a €12.4 billion category, home
to Unilever’s largest brand, Knorr, and
several €1 billion-plus brands including
Hellmann’s and Family Goodness
(Rama/Blue Band).

The category accounts for 25% of Group
turnover and 45% of operating profit and its
strategic role is to accelerate growth while
maintaining above average cash and profit.
To that end we continued the sale of
non-core businesses, such as Ragu and
Bertolli pasta sauces in North America,
and the meat snacks business under the
Bifi and Peperami brands in Europe, while
positioning the remaining business for
organic growth and expansion, especially
in emerging markets.

While the category improved profitability,
sales were affected by a continued
deterioration in market conditions,
particularly for margarine where the decline
in bread consumption has had an impact
on the spreads markets in Europe and
North America, which remain challenging.

The underlying picture saw improved
competitiveness though, with global
market share gains in savoury, dressings
and margarine, as well as strong
performance in our Food Solutions
business, which is focused on serving
professional, out-of-home channels.

In savoury, Knorr continued to expand its
presence in emerging markets accounting
for 50% of sales, with the brand enjoying
double-digit growth in South Asia, North
Africa, the Middle East and Turkey. Also
brands like Royco and Bango, catering to
local market needs, registered good growth.

Knorr continues to spearhead
the sustainability agenda in
Foods, with more than 90% of
our 13 most used vegetables
sustainably sourced. ‘Knorr
Landmark Farms’ use
and promote advanced
sustainable farming
practices; there are 45 in
operation globally, almost
twice the number than in
2013, demonstrating the
brand’s commitment to
sustainable agriculture.

IT TAKES A VILLAGE

Our Foods business plays an important
role in delivering the USLP goals,
particularly improving health and
well-being, by delivering commercially
attractive brands to meet consumer
needs. In 2014 we continued the global
roll-out of the ‘It Takes A Village’ initiative
under leading brands such as Becel and
Flora Pro.activ.

The campaign shows that, with small
changes to diet and lifestyle, cholesterol
can be significantly reduced in three
weeks and more than 80% of people
who have participated have achieved
this result.

Consumers continue to enjoy Knorr
which is growing, supported by its
commitment to sustainability. Our target
is to source 100% of our agricultural
raw materials sustainably by 2020.

In spreads, we accelerated the roll-out of
our successful mélange range (blends of
vegetable oils and butter), such as Rama
with Butter, into 20 markets.

Overall the markets in Europe and North
America remained challenging and our
margarine business declined. To address
this we announced the creation of a
stand-alone Baking, Cooking and Spreading
Business Unit in these regions, which
will be fully operational by the middle of
2015. The aim is to return to growth through
greater management focus, speed and
agility in executing the strategy.

Growth in dressings was broad-based,
thanks to positive contributions from all
key brands and segments: mayonnaise,
ketchup and mustard.

NO.1

HELLMANN’S – A WORLD-LEADING BRAND

Hellmann’s, the world’s No.1 mayonnaise
brand, kept pushing into new markets,
successfully launching in Portugal and the
Netherlands. We also continued to venture into
new channels and locations with the exclusive
Maille brand, including a new store opening in
New York, the brand’s first stand-alone
boutique outside Europe.

Unilever Annual Report and Accounts 2014Strategic ReportOur consumers
CONTINUED

REFRESHMENT

Refreshment generated €9.2 billion in sales.
It includes ice cream brands such as Wall’s,
Magnum, Cornetto and Ben & Jerry’s, and
tea brands Lipton, Brooke Bond and PG tips.
Lipton, Magnum and Heartbrand (Wall’s)
are all €1 billion brands.

The category accounts for 19% of Group
turnover and 7% of operating profit, and its
strategic role is to contribute to growth and
improve profitability.

Our ice cream brands grew well in 2014,
and ahead of our markets, helped by
emerging countries, with strong growth
in Brazil, Turkey, Indonesia, South Africa
and the Philippines.

AISLES OF JOY

Unilever’s Aisles of Joy initiative,
based on the Wall’s brand, drives
in-home consumption of ice cream
around desserts and special
occasions. It is a good example of our
go-to-market expertise to ensure that
Unilever brands enjoy best positioning
and visibility in stores which drives
ice cream sales growth.

Aisles of Joy has been rolled out
across both developed and emerging
markets. In Europe a partnership with
Carrefour saw 400 stores adopt Aisles
of Joy.

In 2014 we fulfilled our
commitment to ensure that all
our children’s ice cream brands
were 110 calories or less per
serving, driving growth in Asia,
offering a better choice for
parents and contributing to our
USLP goal of improving health
and well-being.

North America is one of the largest
geographies for ice cream where
consumption is high, but the market is
challenging with regional and local
supermarket brands operating at low

prices and low margins. Although profitable
growth has been tough, our business has
shown the best improvement in several
years. We have premiumised the portfolio,
aided by innovations such as Ben & Jerry’s
Cores and Breyers Gelato. Towards the end
of 2014 we announced the acquisition of
Talenti Gelato & Sorbetto.

Europe witnessed poor summer weather but
we managed to grow sales and market share
in a flat market. The ‘25 Year’ celebration of
Magnum drove growth while innovations
included downsized packs to enter the
snacks market, such as the €1 Cornetto, and
a responsible approach to nutrition, with all
children’s ice creams now 110 calories or
less. Magnum also now has more than 70%
of its cocoa sustainably sourced from
Rainforest Alliance certified farmers.

Performance in leaf tea was mixed. Our
strategy is to innovate with premium,
higher quality teas and new formats, such
as capsules like those used in coffee
machines. Lipton K-Cup® tea capsules
were launched in 2013 into the US and led
a growth improvement in 2014.

Lipton intends to grow all its tea on
Rainforest Alliance certified estates by
2015. Total beverages performance was
lower than expected partly due to the low
momentum of AdeS growth post the
product recall in 2013.

Our recent premium tea acquisition T2
has demonstrated strong growth in
Australia and New Zealand of 26%.
Globally retail sales have grown 31%
in a difficult retail environment.

Last year we bought T2, a
premium tea brand. In 2014 we
opened T2 stores, which retail
tea and tea ware products, in
Shoreditch, the King’s Road and
Westfield in London, and SoHo
in New York, with a further eight
stores planned in the UK in 2015.

Unilever Annual Report and Accounts 2014Strategic ReportHOME CARE

The Cleanipedia online
platform, currently available
in Argentina, Brazil, Indonesia,
India, the UK, Russia and
across the Gulf, leverages the
years of experience of our
household care brands, such
as Cif, Domestos, Persil, Omo
and Comfort, to provide advice
and solutions for the specific
cleaning and housekeeping
needs of our consumers.

Home Care is a €9.2 billion category with
nearly 80% of sales coming from emerging
markets, making it well positioned for
long-term growth. Its products cover fabric
cleaning, with €1 billion brands such as Omo
and Surf, as well as fabric conditioners such
as Comfort, and household care including
Domestos – a product which typifies the
success of Unilever’s brands with purpose.

More on the role Domestos plays in driving
social change is on page 24.

The category has delivered strong top line
performance consistently, with growth
averaging 8.1% per annum over the last
four years. Even in the tough operating
conditions of 2014, it has had an underlying
sales growth of 5.8%, well ahead of the
market. The growth has been broad-
based, with our household care business
continuing its strong performance, as we
continued to expand our presence across
markets. Laundry also grew strongly, with
our biggest laundry brand Omo entering
the Gulf markets in 2014.

Pureit, our water purification business,
continued to make rapid strides, with an
underlying sales growth of 20%. The
acquisition of the Qinyuan business adds
to our capabilities in this area, giving us
greater scale and presence in China.

However, overall category margins were
under pressure, due to a combination
of competitive battles and currency
devaluation in the emerging markets,
which together had a significant impact
on our costs.

ECO-PACKS AND THE ENVIRONMENT

The category’s strategic role is to increase
the value it generates for Unilever by
continuing to grow ahead of the market
while increasing our operating margins
over time.

We are well positioned for growth as we
look to cater to the opportunities that
emerge as a result of global trends. Our
footprint and strong competitive position in
emerging markets are strong tailwinds and
we are identifying segments that emerge.
One such segment is wash additives, a
segment which is already approximately
12% of the fabric cleaning market in some
parts of the developed world and one we
have entered in 2014 in Brazil.

Opportunities to upgrade consumers to
newer benefits and more convenient
formats not only drive growth, but also
increase our operating margins by
improving the mix of products we sell.
A continued focus on delivering our
low-cost business model, which unlocks
savings across our entire operations,
will also contribute to margin expansion,
giving us the confidence that we can
deliver on our strategic role of increasing
the value we generate for Unilever.

2014 saw the launch of wash
additives in Brazil, under the
Omo brand name. The product
delivers a significant
improvement in the quality of
wash delivered in a machine,
especially on stain removal,
and marks our entry into the
wash additives and ancillaries
segments.

In laundry, we are rolling out our
concentrated liquid brands in eco-packs
which drive growth, increase the benefit
we deliver to our consumers and improve
our profitability, while at the same time
reducing our environmental impact.

Eco-packs use less plastic, meaning up
to 70% less plastic used and a 50-85%
reduction in greenhouse gases per
consumer use. Simultaneously,

a reduction in plastic packaging delivers
a significant cost saving, allowing us to
pass on lower costs to our consumers
and improve the category profitability.
Overall, eco-packs have a significantly
lower impact on the environment
compared to traditional packaging.

Having launched eco-packs in the UK, Italy
and Switzerland, we are aiming to launch
them across Europe in 2015.

Unilever Annual Report and Accounts 2014Strategic ReportSociety

In September 2015 the UN will agree a
new set of Sustainable Development Goals.
In December Paris hosts the next major
UN Climate Change Summit. The close link
between human development and climate
will focus the world on growth that is more
inclusive, sustained and sustainable.

With this in mind, in 2014 Unilever examined
where it can bring about improvements
on a larger, societal scale by creating
transformational change in key areas
relevant to our business. These are:

• the elimination of deforestation;
• championing sustainable agriculture
and the development of smallholder
farmers; and
improving health and hygiene through
handwashing, safe drinking water
and sanitation.

•

Later in this section we have highlighted
new, related areas of Unilever activity under
way in 2014 that are of broad benefit to
society, including our work on behalf of
women, which will continue to develop in
the next few years.

THE BUSINESS CASE
FOR SUSTAINABILITY
Sustainability is an integral part of our
business model. It meets growing consumer
preference for responsible consumption and
retailers’ own sustainability targets. It acts
as a catalyst for innovation, thus developing
new markets, and is an inspiration to
Unilever’s current and future employees.

Alleviating social problems, such as the
lack of effective sanitation, safe drinking
water and related hygiene issues, helps
communities while increasing sales of
brands like Domestos, Pureit and Lifebuoy.

Access to sustainable and plentiful raw
materials reduces volatility and mitigates
risk. More efficient use of energy and the
development of packaging with less plastic

In June 2014 Unilever, along with fellow
members of the Consumer Goods Forum,
called on heads of state for a binding global
climate change deal. In September 2014 we
helped facilitate the New York Declaration
on Forests at the UN Climate Summit where
more than 170 governments, companies
and NGOs pledged to cut forest loss by half
by 2020, end it by 2030 and restore 350
million hectares of degraded land.

Also in the same month, Unilever and
the World Resources Institute announced
a partnership aimed at increasing
transparency in agricultural commodity
supply chains. This will enable Unilever
and our suppliers to use the Global Forest
Watch Commodities platform to monitor
forest cover change around commodity
supply areas and processing facilities
such as palm oil mills.

Unilever’s work in moving from commitment
to action in combating deforestation has
been recognised. In November, we were
ranked joint first for corporate action on
tackling deforestation in our sector by CDP,
formerly the Carbon Disclosure Project.
The CDP report was produced on behalf
of 240 investors, who together represent
US $15 trillion in assets, and analysed the
disclosures of 152 companies from around
the world. It said: “Companies that regularly
respond to CDP’s forests program are
now identifying many more opportunities
available to them, including securing their
supply chain against the risks associated
with deforestation and commodity
sourcing. This in turn is helping to secure
shareholder value.”

further reduces costs. Brand reputation is
defended and enhanced.

DEFORESTATION – 2014
A DEFINING YEAR
Unilever is one of the world’s biggest
buyers of palm oil as a raw material for
use in a number of our Foods and Personal
Care brands. Palm oil is recognised as
one of the four major commodities driving
deforestation, which contributes up to 15%
of the world’s greenhouse gas emissions.

We have committed to source 100% of
our palm oil sustainably from certified,
traceable sources by 2020. We also set
ourselves the ambition that, by the end
of 2014, all the palm oil we buy would
be traceable to known sources. On that
ambition we still have work to do but
we have achieved a significant milestone
in our European Foods business.

PALM OIL IN FOODS – A UNILEVER BREAKTHROUGH

oil supply chain. We now have visibility
of about 1,800 crude palm oil mills,
representing around two thirds of all
mills in the global palm oil industry. We
can also demonstrate traceability to a
consumer product, which five years ago
appeared unachievable. This represents
a considerable breakthrough for
Unilever and the food industry generally.

Unilever is determined to work
with the palm oil industry to drive
deforestation out of its supply chain.
Knowing the origin of palm oil is vital
to halt deforestation.

We want to build on our progress in
Europe by repeating the achievement
internationally. One of the next steps is
our new processing plant in Sei Mangke,
Indonesia. The plant is a significant
investment to source palm oil from
known and certified sources for our
global use.

In 2014 we were able to announce a
significant achievement that by the end of
the year all palm oil directly sourced for
Unilever’s European Foods business was
close to 100% traceable and certified
sustainable (over 98% in December 2014
and on track to be 100% by the end of
March 2015).

On a global level Unilever is working
hard to drive transparency in the palm

Unilever Annual Report and Accounts 2014Strategic Reportwhile Unilever benefits from better yields,
sustainably produced crops and security of
raw material supply. However, assessing
the impact of our programmes on farmers’
livelihoods is a complex area and our
challenge is to find a practical and
cost-effective means to demonstrate this.

Our Unilever Sustainable Agriculture Code
is used by our own suppliers to drive these
improvements but it is also a benchmark
for other companies and organisations
encouraging broader change.

In February 2014 we signed a five-year
partnership with the International Fund for
Agricultural Development (IFAD) to improve
the livelihoods of smallholder farmers.
Signed by IFAD President Kanayo F Nwanze
and our CEO, Paul Polman, the partnership
aims to help improve food security, by
raising agricultural productivity and
linking farmers to markets.

In January 2014, we signed a partnership
with our supplier, Symrise, and overseas
development agency GIZ to source vanilla
from Madagascar. The programme is set
to benefit 4,000 farmers in 32 villages.

In 2014 we published our Responsible
Sourcing Policy (RSP). The RSP embodies
our commitment to conduct business with
integrity, openness, and respect for
universal human rights and core labour
principles. The RSP breaks new ground by
defining a ‘continuous improvement ladder’
to help our suppliers move from a base
level of ‘do no harm’ to ‘good practice’ and
ultimately up to ‘best practice’ and as such
is intended progressively to replace our
Supplier Code in our dealings with key
suppliers. The new code has been

SCIENCE AND
SUSTAINABILITY

Unilever is one of the world’s biggest
tea suppliers with brands such as
Lipton, PG tips and Brooke Bond. We
are helping to safeguard the world’s
tea supply through an R&D programme
to cultivate sustainable varieties.

Our partnership with Nature Source
Genetics uses plant breeding to meet
global demand while supporting
communities that rely on the crop
for income. The aim is to enhance
productivity, quality and overall
sustainability, and help stem any
decline in crop diversity that could
limit its ability to withstand drought,
disease and pests.

introduced to the supply base through
communications and engagement from
Procurement, and also through targeted
events in critical markets such as Brazil,
China and Vietnam.

SUSTAINABLE AGRICULTURE
AND THE DEVELOPMENT OF
SMALLHOLDER FARMERS
In 2014 Unilever enhanced its Unilever
Sustainable Living Plan (USLP) by
introducing new pillars to its goal of
enhancing livelihoods. These were: fairness
in the workplace, where we will advance
human rights across our operations and
extended supply chain; opportunities for
women, where we will empower 5 million
women by 2020; and inclusive business,
where we will have a positive impact on
the lives of 5.5 million people by 2020.

This latter commitment includes improving
livelihoods of smallholder farmers and
links directly to our USLP goal of reducing
our environmental impact through
sustainable sourcing.

Around half of Unilever’s raw materials
come from farms or forests so sustainable
agriculture is a strategic priority.

Smallholder farmers produce 70% of the
world’s food and make up 85% of the
world’s farmers. Most grow their crops on
less than two hectares and are often cut
off from training so lack knowledge of how
to maximise incomes by improving their
agricultural practices. Many of our
smallholder farmers are women.

Through our own supply chain, our suppliers
and our NGO partners, we are providing
help and training to 800,000 smallholders to
enable them to adopt sustainable practices.
This helps them to increase yields, increase
profits, invest and become more competitive

The tax Unilever pays is an
important part of its wider
economic impact and plays a
key role in the development of
countries where we operate.
We are supportive of
international tax reform and
believe public trust in tax
systems for companies is
essential. We have published
a set of global tax principles
covering issues including
transfer pricing, use of tax
havens and relationships with
tax authorities that represent
good corporate practice. They
also balance the interests of
our various stakeholders.

Unilever Annual Report and Accounts 2014Strategic ReportSociety
CONTINUED

DOMESTOS – IMPROVING
SANITATION AND SALES

Domestos has led our efforts on
sanitation in partnership with UNICEF.
Our brand, together with the Unilever
Foundation, supports UNICEF’s
Community Approaches to Total
Sanitation (CATS) programme which
aims to eliminate open defecation
by changing people’s behaviour and
promoting demand for sanitation.
Domestos contributed 5% of its
average proceeds from specially
marked bottles on sale in certain
markets to UNICEF. Domestos sales
continue to grow strongly and were
up 7.3% in 2014.

WATER, SANITATION AND HYGIENE
In his first Independence Day address in
2014, Narendra Modi, India’s new Prime
Minister, made a commitment that by 2019
every Indian would have access to a toilet.
The promise highlights that about 2.5 billion
people globally are without access to
adequate sanitation, good hygiene and safe
drinking water. There are still 46 countries
in the world where less than half the
population has access to adequate
sanitation facilities. 800,000 children die
every year from diarrhoea caused by unsafe
water, and poor sanitation and hygiene.

Transformational change is needed to
combat these issues. Unilever is uniquely
placed to help because of our expertise in
consumer behaviour change, our global
reach and our portfolio of health and

hygiene brands, including Domestos,
Lifebuoy and Pureit, our water purifier.
However, bringing about widespread,
sustainable behaviour change is not
something we can do alone, so we need to
work closely with governments, NGOs,
academia and funding partners to increase
our reach and impact.

In 2014 we committed to help 25 million
people gain improved access to a toilet
by 2020. By helping people who don’t
have a toilet to get one and by promoting
the benefits of using a clean toilet, we will
open new markets and drive demand for
our products.

Lifebuoy has long championed the health
benefits of handwashing with soap and
aims to change the hygiene behaviour of
1 billion consumers across Asia, Africa
and Latin America. To achieve this
ambition, we have to find ways to scale up
our programmes: we need to develop
lower cost, mass-scale behaviour change
approaches and expand our partnerships
and co-investment models. Lifebuoy
has enjoyed four years of sequential
double-digit sales growth.

EMPOWERING WOMEN
Women are the majority of our consumer
base and their purchasing decisions are
pivotal to our growth. They are strongly
represented in our agricultural supply
chains and in the distribution of our brands
to market. At the same time we are a large
employer and need the best available talent
to succeed in our business goals.

But women around the world face
discrimination and disadvantage, lack
access to skills and training, and face
obstacles to economic participation.

Our approach starts with respect for
the rights of women, such as safety,
and extends to their promotion as well
as helping to develop skills and open
opportunities, both in our own operations,
where 43% of managers are women, and
in our value chain.

To this end we are implementing the UN
Women’s Empowerment Principles across
our business. These principles reinforce
the direct action we are also taking as
a business.

We believe we can create a
brighter future for our children.
Project Sunlight is a growing
community of people who
believe it is possible to build
a world where everyone lives
well and lives sustainably.
The campaign continues to
engage people in programmes
that can help to contribute
to a #brightfuture – almost
180 million ‘acts of sunlight’
were pledged by the end of
December 2014.

www.projectsunlight.com

For instance in Sekondi, Ghana, a
three-day workshop by the Unilever Ghana
Foundation taught 60 women how to think
and act like entrepreneurs, coached them
in bookkeeping procedures, and cash and
working capital management. This brings
to more than 700 the number of women
trained in Ghana and supports Unilever’s
commitment to empower 5 million
women by 2020.

To date we have trained and recruited
more than 3,400 women from nearly 1,100
villages in Pakistan as part of the Guddi Baji
(‘Good Sister’) programme. This initiative
helps increase sales as well as generating
sustainable incomes for women through
the sale of Unilever hygiene and personal
care brands and through the provision of
beauty services to other local women.

In India, recruiting and training more
women entrepreneurs (Shakti Ammas)
were central to our rural expansion in
2014, reaching more remote villages.

Our programmes also help young women
and men. Our Wall’s team has developed a
youth employment programme, known as
‘Feet on the Street’, to help tackle the youth
jobless rate in Europe while driving our
growth agenda by bringing ice cream to
the streets. Wall’s provides tools and
equipment, such as trikes or push carts and
freezers, to enable a micro-entrepreneur
to run his or her own mini-business selling
ice cream and also to provide young people
with their first job experience. In Portugal,
Spain and Italy, 250 seasonal jobs were
also created to enhance livelihoods while
boosting ice cream sales. Our ambition is to
have 50,000 micro-entrepreneurs by 2020
with a potential contribution to turnover of
more than €100 million.

Unilever Annual Report and Accounts 2014Strategic Report
Our People

Future Leaders League started with
teams from ten countries competing
in 2013. In 2014 this was increased to
teams from 22 countries.

UNILEVER 2020
Critical to our success are leaders
equipped to deliver our Vision and USLP.
Our new leadership programme, UL2020,
based at the Four Acres site, is designed to
meet this need by developing leaders with
the insight and imagination to anticipate
the challenges and opportunities in the
world of 2020.

Guided and supported by some of
the world’s top thought leaders, UL2020
identifies some of Unilever’s most critical
challenges and asks small, diverse
leadership teams to create solutions.
These projects, called Purpose to Impact
Initiatives, are structured programmes
that deliver individual and wider business
development consistent with our
commercial and social aims.

Recent programmes have focused on
topics such as the Muslim consumer
opportunity, leveraging mobile for
our business, and linking business
development and job creation. UL2020
is unlocking groundbreaking ways of
working and new leadership skills,
while delivering results that help to
define our future.

UNILEVER HEROES

Every year, our people nominate
‘Unilever heroes’ for work that brings
our Purpose to life. Anila Gopal, Global
Social Mission Manager for Lifebuoy,
based in India, is a Unilever hero. She
is helping to run the world’s largest
handwashing behaviour change
programme that demonstrates how
using soap could help save children
from deadly, but preventable, diseases.

To achieve Unilever’s Vision of doubling
the size of its business, reducing its
environmental footprint and increasing its
positive social impact, we need to ensure
the talent in the business today can realise
these ambitions in future.

Some years ago we set three priorities for
the development of our employees around
the world. They were to:

• build depth of capability and leadership;
• live our values and build a performance

culture; and

• build an agile, flexible and diverse

organisation.

These priorities still underpin everything
we do. Our people are also the embodiment
of the Unilever Sustainable Living Plan
(USLP) – without their commitment and
belief, the business could not achieve the
plan’s three main goals of improving health
and well-being, reducing our environmental
impact and enhancing livelihoods. More
than 75% of employees say they can
contribute to the USLP in their roles and
help realise our Vision.

BUILDING TALENT AND LEADERS
FOR THE FUTURE
Two growth drivers have been implementing
a robust talent and leadership programme
suitable for a business doubling in size,
and developing the necessary skills for
the business.

We support these with activities that
together develop Unilever’s capability
and leadership, and make it an agile,
flexible and diverse organisation with
the right values and culture.

Engagement scores among our managers
who participated in our Global People
Survey (GPS) in 2014 remain very high at
75%, while engagement across our whole
employee population has risen by two
percentage points to 77% since last
measured in 2012.

EMPLOYER OF CHOICE
Our status as Employer of Choice in the
FMCG sector is at an all-time high. We enjoy
this status in 32 countries around the world.
This compares to just three in 2009 and 26
in 2013.

NO.1

EMPLOYER OF CHOICE

Unilever is the No.1 most sought-after FMCG
employer and is a Top 3 most sought-after
global employer according to LinkedIn’s Most
in Demand Employers Index 2014.

This independent measure reveals our
success at engaging with future leaders
which has been driven in part by our
Future Leaders League. This is a global
competition in which universities around
the world send a representative team
of undergraduates to our Four Acres
campus in Singapore. They are each set
a demanding case study to run one of our
brands, which in 2014 was TRESemmé,
with a strong sustainability theme.

All participants interact with senior
management, including our CEO,
Paul Polman, and receive first-hand
insights into business and leadership.
They learn what it’s like to contribute
to a business and build ideas.

Unilever Annual Report and Accounts 2014Strategic ReportOur People
CONTINUED

PROVIDING FUEL FOR
BUSINESS GROWTH
Key to this initiative has been delivering
the Fit To Win programme. Activity has
taken place throughout the business to
make it leaner, more agile and more
efficient with resources aligned behind
the growth priorities.

We continued the implementation of
Project Half for Growth which is how we
have been simplifying the organisation
and our work processes. It follows the
principle of half the time, half the process,
double the speed.

We identified key internal processes
where time and effort could be reduced.
A significant saving was the time spent on
Performance & Development Planning
assessments. By reducing and simplifying
the number of steps involved, we saved
an estimated 200,000 employee hours.

Elsewhere, over 2013-14, there has been
a 51% reduction in the number of internal
reports prepared for leadership teams,
releasing time to focus on more productive
activity. We also simplified the GPS which
we ask all employees to complete annually,
enabling us to cut the time individuals
spent completing the survey significantly.

In 2013 we successfully ran the Winning
Together Campaign to drive more
inclusive and efficient ways of working
among teams in the organisation. Building
on that, in 2014 we launched a second
campaign called Time Saving Idea to
make simplification a habit and
encouraged employees to try simple
time-saving ideas. As a result more than
10,000 ideas were tried and rated by
our employees.

CAPABILITIES FOR THE FUTURE
During 2013-14 we completed 30 Talent
& Organisation assessments in 69
countries, across four categories and
three functions, to identify global themes
and risks that need addressing and the
capabilities required.

Key issues include replenishing the
talent pipeline as we promote people.
We need new talent in the business and
to accelerate their development. We need
to improve mid-career attrition and
female attrition. Improved maternity
programmes have been introduced to
address this latter issue.

We also invested in building the
capabilities of our people across
the business.

OUR SAFETY RECORD

strengthened travel standard that
includes programmes and strategies
specifically targeted at high and medium
risk locations. By the middle of 2015,
we will also have in place a mandatory
global ban on using all hand-held and
hands-free mobile phone devices while
driving on company business.

This year saw considerable advancement
in our behavioural-based approach to
health and safety, with 84% of our
manufacturing and 38% of our
non-manufacturing sites now having
rolled out the first phase of the BeSafE
programme. This includes training
79 master coaches and 91 trainers,
who have in turn trained more than
1,840 employees.

2014 also saw some challenges. Our
overall safety performance, as measured
by the Total Recordable Frequency Rate
(TRFR), increased slightly from 1.03 to
1.05 per 1 million hours worked due to
a spike in injury rates in the first quarter
of the year. With a renewed focus on
safety programmes and initiatives, in
co-operation with our project partners,
injury rates have been brought back
down since the first quarter.

Our aim is to improve the safety and
well-being not only of our employees,
but also of the wider community in which
Unilever operates, with our Vision Zero
strategy – zero fatalities, zero injuries,
zero motor vehicle accidents, zero
process incidents, zero tolerance of
unsafe behaviour and practices – serving
as our foundation. To meet our
commitments, we assess and reduce
risk through a variety of programmes,
including our continued work to address
behaviour safety, process safety, safe
travel and construction safety.

In 2014, we introduced a step change in
our Safe Travel programme. With more
people on the road than ever before,
including many in developing countries
where there is a higher risk of car
accidents, we released a revised and

The Marketing Fit To Win programme
put in place the DOIT approach which
aims to drive greater interdependence
and improved collaboration within the
Marketing function. All our marketeers
attended DOIT workshops to understand
roles and relationships better. This is key
to tackling barriers and achieving faster,
brand-led growth.

In the supply chain we have taken a
broad approach to building capabilities
for our employees. This includes a
host of skills development programmes
for blue and white collar employees.
Training in core skills is mandatory
across 130 roles. Skill assessments are
completed every two years and the data
is used to understand and address
specific gaps across roles, capabilities
and geographies.

We also ran a Manufacturing Leadership
Development programme to improve the
skills of our factory leaders who fulfil
pivotal roles.

84%

BESAFE PROGRAMME

By the end of 2014 we had rolled out the first
phase of our BeSafE programme to 84%
of our manufacturing sites and 38% of our
non-manufacturing sites globally.

DIVERSITY
Women are Unilever’s core consumers,
controlling nearly two thirds of consumer
spending, so it’s important that we represent
them in our workforce. In fact, 2014 marks
five years since we began the process of
building an agile and diverse Unilever and
making sure we have the right gender
balance throughout the organisation.

By the end of 2014, over 43% of our
managers were women, up from 38%
in 2010. The hard work we are doing to
retain more women in our workforce by
promoting flexible working, women’s
networks, job shares and maternity and
paternity support is paying benefit and
will remain a focus area.

As at 31 December 2014, around 117,559
(68%) of our global workforce of 172,471
employees were male and 54,912 (32%)
female.

Unilever Annual Report and Accounts 2014Strategic ReportA PERFECT VILLAGE

A team in Nigeria looked at how to
bring the concept of a Perfect Village
to life in Africa, embracing broad
areas such as water, health, hygiene,
nutrition, women’s empowerment and
smallholder farming. They developed
a strategy we can take forward
globally. Their work took them from
the classroom to the field as they
brought their pilot programme to life.

There is therefore both a business and a
moral case for ensuring that human rights
are upheld across our operations and our
value chain. In giving effect to our Human
Rights Policy Statement, we continue to
raise awareness, build capacity and engage
with others to address root causes and
provide remedies where needed.

In 2014 we strengthened the enhancing
livelihoods ambition of the USLP. An
integral part of this is our implementation
of the UN Guiding Principle on Business
and Human Rights and our public reporting
on this. We also committed to enhancing

access to training and skills for women and
to advancing women’s rights. A key aspect
of this has been our safety programme for
women and girls, with the involvement of
men and boys, which we have begun at
our tea plantation in Kericho, Kenya, in
response to reports of sexual harassment
in 2013. The programme is being rolled out
to other locations. More information on our
progress on women’s rights is in the Society
section on pages 22 to 24, with full details
to be published in our Sustainable Living
Report 2014 which will be found on
www.unilever.com/sustainable-living
in May 2015.

However, challenges remain. We have not
made sufficient progress among the top
110 executive managers in the business, a
group where just under 20% are women.
If you include employees who are statutory
directors of the corporate entities whose
financial information is included in the
Group’s 2014 consolidated accounts in
this Annual Report and Accounts, the
number increases to 592 males and 157
(21%) females.

We are pleased though that 36% (five out
of 14) of the Board are female which is over
40% of the Non-Executive Directors.

MENTAL HEALTH AND RESILIENCE
In 2014 we paid particular attention to
mental health initiatives. The rising
incidence of mental ill health in the UK
is reflected in our absence data. Help and
support on nutrition, sleep, exercise and
mindfulness all improve the day-to-day
well-being of employees. A robust
framework with support tools is now
in place and is being rolled out across
the organisation.

HUMAN RIGHTS
In 2014 we published our Human Rights
Policy Statement which contains over-
arching principles which are embedded into
our policies and systems. A full version of
the document can be read at www.unilever.
com/humanrightspolicystatement.

We believe that business can only flourish in
societies where human rights are protected
and respected. We recognise that business
has the responsibility to respect human
rights and has the ability to contribute to
a positive impact on human rights.

This is an area of growing importance to
our employees, shareholders, customers,
consumers, the communities where we
operate and civil society groups.

We promote human rights by
upholding values and standards
in our operations, with suppliers
and through initiatives such as
the UN Global Compact.

Unilever Annual Report and Accounts 2014Strategic ReportOur shareholders
Our shareholders

OUR TRACK RECORD

This Strategic Report lays out how
Unilever’s business works, the highlights
of 2014 and the underlying importance
of the Unilever Sustainable Living Plan
(USLP), to ensure that our business will
remain relevant to future generations of
consumers and investors. The following
pages reveal how this adds up to
sustainable value for shareholders.

Our financial growth model is based on
applying all the levers of value creation.
Underlying sales growth, core operating
margin improvement and efficient financial
management all contribute to growth in
earnings per share and free cash flow, from
which we pay dividends to our shareholders
or reinvest in the business. We aim for
these dividends to be attractive, growing
and sustainable over time.

The USLP is embedded into our
business model. It helps to drive
long-term shareholder value by:
• driving growth through

innovations that bring new
sustainability benefits to
consumers and retailers;
• reducing waste and energy
and thereby saving cost; and
• managing risk in our supply

chain, for example by securing
long-term sustainable
sourcing of materials.

Over the period 2010-14 underlying
sales grew by an average of 4.9% per
year, which was ahead of our markets,
and core operating margin grew by an
average of 0.25 percentage points per year.
Core earnings per share has grown by an

average of 9% per year at current exchange
rates and 11% per year at constant
exchange rates. We have delivered an
average free cash flow of €3.5 billion.
Dividends have increased by an average
of 8% per year over this time.

EMERGING MARKETS

At Unilever we look to the future and what the consumer of tomorrow will need.
This has inevitably drawn us to increase our business in emerging markets where
population and consumption growth offer attractive opportunities. In 2014, 57% of
our turnover was generated in emerging markets.

These markets also bring challenges. Performance can prove volatile as witnessed
in 2014. Economies have slowed and exchange rates have weakened leading to a
reduction in consumer spending.

That said, over time emerging markets have delivered Unilever a source of remarkably
consistent growth. Over the past five years, emerging markets have generated
underlying sales growth averaging 9% a year.

These markets are also among the most sensitive to environmental and social
pressures brought about by growth in population and consumption and the activities
of companies such as Unilever. That’s why our USLP goals are to improve health and
well-being, reduce our environmental impact and enhance livelihoods through direct
action and partnerships.

Underpinning our financial performance
are our strong brands, with 13 €1 billion
brands at our core, accounting for 53% of
turnover, and 57% of our business is in the
emerging markets which offer the greatest
long-term growth opportunity. We have
a ‘grow everywhere’ mindset with action
in place to evolve our brand portfolio into
more premium segments of existing
markets, enter new geographies, and seek
new consumers to add to the 2 billion we
serve every day.

Our growth model is enabled by a leaner,
fitter, more agile Unilever, with costs being
reduced through our supply chain efficiency
programmes. These have been boosted
by our low-cost business model initiative,
which has delivered €450 million of savings
since 2011.

Our supply chain was recognised in 2014 by
Gartner as No.1 in the FMCG industry and
the overall No.1 supply chain in Europe. Our
go-to-market performance has sharpened.
The on-shelf availability of our brands has
improved 2.2% in 2014 with more than
8.5 million shops now enrolled in our
Perfect Stores programme.

Our award-winning marketing expertise
has positioned us well in the most popular
media channels, be they traditional print
and broadcast, online video and social
media, or creating our own content for
distribution through mobile devices in
emerging markets.

37%

Our efforts have been recognised and Unilever is No.1 in the Dow Jones Sustainability
Index for Food, Beverage & Tobacco.

PORTFOLIO EVOLUTION

Personal Care is now our largest category at
37% of sales. Unilever has been reclassified
to the Personal Products subsector from the
Food Products subsector by the Industry
Classification Benchmark Panel. The
reclassification provides a more accurate
stock market definition for our business,
reflecting our strategy to evolve the portfolio to
ensure Unilever continues to deliver sustainable
long-term returns for our shareholders.

57%

TURNOVER FROM EMERGING MARKETS

Our average emerging markets growth over
the period was 9%.

Unilever Annual Report and Accounts 2014Strategic ReportDEVELOPMENTS IN 2014

In March 2014 Unilever announced the issuance of our first ever green
sustainability bond which raised £250 million. The fixed rate notes pay
a coupon of 2% and are due for repayment in 2018. The proceeds are
being deployed on projects which support the achievement of the goals
of the USLP in reducing greenhouse gas emissions, water usage and
production of waste.

We are also taking action to make sure
that we get the most out of our core
business by making sharper choices within
our existing category portfolio and
addressing areas of under-performance.
For example, we have set a clear target to
double our core operating margin in Home
Care over the coming years, as this is a
category where profitability is relatively
low. We also announced a new stand-alone
business unit for European and North
American spreads, where turnover has
been declining. The new unit, called Baking,
Cooking and Spreading, will be fully in place
by the middle of 2015. It will bring greater
focus, address new growth opportunities,
and has a clear objective to stabilise sales
while maintaining strong cash delivery.

In June 2014 we sold the Ragu and Bertolli
pasta sauces business in North America
for approximately US $2.15 billion to
Mizkan Group. In Europe we disposed of
our meat snacks business to Jack Link’s.
We also sold our Royal pasta brand in
the Philippines for US $48 million and
our Slim.Fast business in the US.

On the acquisition front, in March 2014
we bought a majority stake in the Qinyuan
Group, a leading Chinese water purification
business. Qinyuan generated sales of
€163 million in the year to 31 December
2014.

In December 2014 we bought Talenti Gelato
& Sorbetto in the US. Founded in 2003,
Talenti has grown into the best-selling
packaged gelato in the US with products
made from the finest ingredients, using
artisanal methods. Talenti generated sales
of more than US $126 million in the year to
31 December 2014. We also committed to
acquire the skin cleansing brands Camay,
globally, and Zest outside North America
and the Caribbean. Our Mexican market
position will be a particular beneficiary
of these deals.

Our long-term track record of delivery for
shareholders continued during 2014 despite
some significant challenges in the business
environment. These included continued
weak consumer demand in developed
markets, slowing demand in emerging
markets and currency devaluations in many
countries. The resilience of our business
and the broad nature of our brand portfolio
and geographic reach enabled us to deliver
a year of steady progress in slower markets.

In a lower growth environment we
stepped up our cost savings initiatives.
We accelerated Project Half for Growth
which is simplifying the business and
reducing costs, particularly in overheads.
As a result we were able to continue to
invest in sustained brand and marketing
investment and deliver underlying sales
growth ahead of our markets and a further
improvement in core operating margin.

We took action to reshape our portfolio to
ensure we have the right mix of brands to
address growth opportunities today and
in the future.

Continuing our policy of enhancing
earnings for shareholders with a
more simple capital structure, we
announced in May 2014 the £715
million purchase of rights left in
family trusts by Lord Leverhulme.
These were convertible in 2038
into 70,875,000 Unilever PLC
ordinary shares and were bought
for the equivalent of £10.09 per
share. We estimate that
annualised core earnings per
share will be enhanced by 2%
as a result.

Unilever Annual Report and Accounts 2014Strategic ReportOur shareholders
Our shareholders
CONTINUED
CONTINUED

OUR FINANCIAL GROWTH MODEL

We continued to deliver shareholder value in 2014, despite the lower
growth environment, as we applied all the levers of value creation.

UNDERLYING
SALES
GROWTH

Underlying sales grew 2.9%, driven by a 1.0% improvement in underlying volume and a 1.9% rise in
underlying price. This growth was ahead of our markets which grew around 2.5% with volumes flat.
Broad-based growth in emerging markets across our categories offset a decline in Europe, where
sales of margarine were down as consumers spread less.

CORE
OPERATING
MARGIN

Our core operating margin increased by 0.4 percentage points largely driven by improvements in
efficiency through our Project Half for Growth initiative, which generated more than €250 million of
savings in 2014 and is on track to exceed our annualised target of €500 million savings. Brand and
Marketing Investment was sustained at the level of last year.

EARNINGS
PER SHARE

As a result of all these actions, our core earnings per share rose to €1.61, an increase of 2.0%.
This was despite currency translation headwinds of close to 9%. At constant exchange rates, EPS
grew by 11%.

FREE
CASH FLOW

Free cash flow was €3.1 billion in 2014 compared with €3.9 billion in 2013. This measure excludes the
cash proceeds from disposals but includes tax on disposal profits which was €0.8 billion. Adjusting
for that, free cash flow would be €3.9 billion. Our cash performance was underpinned by our
continued focus on capital discipline. Our net capital expenditure of €2.0 billion, or 4.2% of turnover,
reflects the investment in capacity to support our growing business and was consistent with 2013.
Working capital also ended the year in line with the prior year.

DIVIDENDS
In April Unilever announced an increase in the quarterly
dividend to €0.2850 giving a total payout during 2014 of
€1.12 per share. Dividends increased by 7% in 2014.
Dividends have increased by an average of 8% per year
in the last five years.

SHARE PRICE
Our NV shares closed more than 11% higher than the prior year
while PLC shares closed 6% higher. Over the period 2010-14
our NV share price has grown 43% while PLC shares have
grown 32%. Total Shareholder Return, which includes the
increase in both the share price and the dividends, was 18%
in 2014 and 79% over the last five years.

SHARES 2010-14

2010

2011

2012

2013

2014

NV shares (€)

PLC shares (£)

FINANCIAL MANAGEMENT
We continued to follow our financial strategy of maintaining a strong balance
sheet, equivalent to a ‘strong single A’ credit rating. This provides the financial
flexibility to fund investments in the business and acquisitions, and at the
same time allows our weighted cost of capital to benefit from the lower cost
of debt compared with equity.

Unilever Annual Report and Accounts 2014Strategic ReportFinancial Review 2014

FINANCIAL OVERVIEW 2014

CONSOLIDATED INCOME STATEMENT
Turnover at €48.4 billion decreased 2.7%, including a negative impact from both foreign exchange,
of 4.6%, and acquisitions net of disposals of 0.9%. Underlying sales growth was 2.9% (2013: 4.3%),
balanced between volume growth of 1.0% (2013: 2.5%) and pricing of 1.9% (2013: 1.8%). Emerging
markets, consistent at 57% of total turnover, were down 2.2% at reported exchange rates, with
underlying sales growth of 5.7% versus 8.7% in the prior year. Developed markets underlying sales
declined by 0.8%. Globally, our markets grew by around 2.5% with flat volumes.

Core operating margin was up 0.4 percentage points to 14.5%. Gross margin declined by 0.2
percentage points to 41.4%. This was driven by increased costs in emerging markets, largely currency
related, partly offset by pricing, savings and margin-accretive innovation. Commodity costs increased
around 4%, at constant exchange rates, as devaluing currencies have imported inflation into local raw
material production partially offset by cost savings.

Significant efficiencies in the cost of producing advertising allowed us to increase our share of
spend while maintaining brand and marketing investment at 14.8%. Overheads were reduced by
0.6 percentage points largely due to saving initiatives such as Project Half for Growth and some
favourable one-off items such as property sales in India.

Operating profit was €8.0 billion, compared with €7.5 billion in 2013, up 6%. The increase was driven
by non-core items which were a net credit of €960 million (2013: €501 million). Included within
non-core items was the gain on disposal of the Ragu and Bertolli pasta sauces business and the
Bifi and Peperami brands. We sold the Slim.Fast business and recognised an impairment charge
of €305 million on the related assets within non-core items.

Highlights for the year ended 31 December

Turnover (€ million)
Operating profit (€ million)
Core operating profit (€ million)*
Profit before tax (€ million)
Net profit (€ million)
Diluted earnings per share (€)
Core earnings per share (€)*

2014

2013

48,436
7,980
7,020
7,646
5,515
1.79
1.61

49,797
7,517
7,016
7,114
5,263
1.66
1.58

%
change

(2.7)
6
–
7
5
8
2

The cost of financing net borrowings in 2014 was €383 million versus €397 million in 2013. The average
interest rate on borrowings was 3.5% and the average return on cash deposits was 3.8%. Pensions
financing was a charge of €94 million versus a charge of €133 million in the prior year.

The effective tax rate was 28.2%, higher than 26.4% in 2013 due to the impact of business disposals.
Our longer term expectation remains around 26%.

Net profit from joint ventures and associates, together with other income from non-current
investments, contributed €143 million compared to €127 million in 2013. Diluted earnings per share
for the full year was up 8% at €1.79. Core earnings per share were €1.61, up 2% from €1.58 in 2013
after a 9% currency headwind.

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 of the Governance and Financial Report.

The consolidated financial statements have been prepared in accordance with
IFRS. 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 and 89
of the Governance and Financial Report and are consistent with those applied
in 2013.

* 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 34 and 35.

Unilever Annual Report and Accounts 2014Strategic ReportFinancial Review 2014
CONTINUED

PERSONAL CARE

2014

2013

%
Change

FOODS

2014

2013

Turnover (€ million)
Operating profit (€ million)
Core operating profit (€ million)

17,739
3,259
3,325

18,056
3,078
3,206

(1.8)
5.9
3.7

Turnover (€ million)
Operating profit (€ million)
Core operating profit (€ million)

12,361
3,607
2,305

13,426
3,064
2,377

Core operating margin (%)

18.7

17.8

0.9

Core operating margin (%)

Underlying sales growth (%)
Underlying volume growth (%)
Effect of price changes (%)

3.5
1.2
2.3

7.3
5.5
1.7

Underlying sales growth (%)
Underlying volume growth (%)
Effect of price changes (%)

18.6

(0.6)
(1.1)
0.6

17.7

0.3
(0.6)
0.9

%
Change

(7.9)
17.7
(3.0)

0.9

KEY DEVELOPMENTS
• Personal Care delivered another year of underlying growth, although
exchange rate movements (5.0%) led to turnover decreasing on last
year. Underlying sales growth, at 3.5%, remained above our markets
which slowed to around 3% for the year. Volume growth was lower
than the previous year due to the slowdown of global markets and
high competitive intensity. Growth benefited from a strong set of new
product launches such as the Dove Advanced Hair Series and
compressed deodorants in Europe.

• Core operating profit improved by €119 million over the prior year
despite a €300 million reduction from exchange rate movements.
Underlying sales growth contributed €189 million while improved
margin added €230 million. Margin improvement was driven by
our savings programmes, an improved mix from margin accretive
innovation and savings in the cost of producing advertising, which
is highest in Personal Care.

KEY DEVELOPMENTS
• Foods turnover declined primarily due to exchange rate

movements (3.9%) and business disposals (3.6%) including the
Ragu and Bertolli pasta sauces business. Savoury and dressings
both grew but spreads declined due to lower consumer demand
for margarine in Europe and North America. We gained market
share in margarine but this was insufficient to offset the decline
of the category which also saw price deflation in a benign
commodity cost environment.

• Core operating profit was €72 million lower than the prior

year after a €95 million adverse impact from exchange rates,
a reduction of €105 million from disposals and a €23 million
reduction from declining underlying sales. Improved margin
added €152 million driven by savings in supply chain costs
and our overheads reduction programme, particularly in
Europe where we have a large Foods business.

REFRESHMENT

Turnover (€ million)
Operating profit (€ million)
Core operating profit (€ million)

Core operating margin (%)

Underlying sales growth (%)
Underlying volume growth (%)
Effect of price changes (%)

2014

2013

9,172
538
811

8.8

3.8
2.0
1.8

9,369
851
856

9.1

1.1
(1.8)
2.9

%
Change

(2.1)
(36.8)
(5.3)

HOME CARE

Turnover (€ million)
Operating profit (€ million)
Core operating profit (€ million)

(0.3)

Core operating margin (%)

Underlying sales growth (%)
Underlying volume growth (%)
Effect of price changes (%)

%
Change

2.4
9.9
0.3

(0.1)

2014

2013

9,164
576
579

6.3

5.8
2.4
3.4

8,946
524
577

6.4

8.0
5.7
2.1

KEY DEVELOPMENTS
• Refreshment turnover declined due to exchange rate movements
(4.6%) and business disposals (1.6%), primarily Slim.Fast, offset by
acquisitions of 0.4%, primarily Talenti Gelato & Sorbetto. Underlying
sales growth was driven by good volume growth in ice cream due to
a strong innovation programme. The more premium brands like
Ben & Jerry’s and Magnum grew particularly well. Cornetto also
had a strong year with multi-media advertising building the core
brand and new smaller products launched at lower price points.
Tea grew, with a better performance in the US offsetting weaker
sales in Russia and Poland.

• Core operating profit was €45 million lower than the prior year

due to underlying sales growth, which added €80 million, offset by
a €73 million adverse impact of exchange rates and a €41 million
reduction due to disposals. Margins declined, reducing profit by
€11 million, as higher dairy and chocolate prices were not fully
recovered by pricing and savings.

KEY DEVELOPMENTS
• Home Care turnover showed strong underlying growth, supported
by the impact of the Qinyuan acquisition in March of 1.8%, but this
was partially offset by exchange rate movements (4.8%). This is
the result of a strong portfolio of brands across price points,
the depth of our distribution and sustained investment in product
performance. We have successfully extended the Omo brand into
Saudi Arabia and the Gulf, and we have launched a range of Omo
stain removers and pre-treaters in Brazil.

• Core operating profit at €579 million was broadly unchanged
on last year after an adverse €84 million from exchange rates
was offset by underlying sales growth adding €100 million with
acquisitions adding €5 million. Decreasing margin reduced profit
by €19 million as gross margins were impacted by cost increases
from weaker currencies in emerging markets which were not fully
offset by pricing and savings. There was a strong improvement in
the second half of the year, which was boosted by gains from
property sales in India.

Unilever Annual Report and Accounts 2014Strategic Report

CASH FLOW

Net cash flow from operating
activities and free cash flow
were down by €0.8 billion mainly
due to tax on disposal profits
which were €0.8 billion versus
€0.2 billion in 2013. Year-end
working capital was in line with
the prior year. Our net capital
expenditure of €2.0 billion, or
4.2% of turnover, reflects the
investment in capacity to
support our growing business.

€ million
2014

€ million
2013

Goodwill and intangible assets
Other non-current assets
Current assets

Total assets

Current liabilities
Non-current liabilities

Total liabilities

Shareholders’ equity
Non-controlling interest

Total equity

Total liabilities and equity

€ million
2014

€ million
2013

22,174
13,506
12,347

20,904
12,487
12,122

48,027

45,513

19,642
14,122

17,382
13,316

33,764

30,698

13,651
612

14,344
471

14,263

14,815

48,027

45,513

Operating profit
Depreciation, amortisation and impairment
Changes in working capital
Pensions and similar obligations less payments
Provisions less payments
Elimination of (profits)/losses on disposals
Non-cash charge for share-based compensation
Other adjustments

7,980
1,432
8
(364)
32
(1,460)
188
38

7,517
1,151
200
(383)
126
(725)
228
(15)

Cash flow from operating activities

7,854

8,099

Income tax paid
Net capital expenditure
Net interest and preference dividends paid

Free cash flow

(2,311)
(2,045)
(398)

(1,805)
(2,027)
(411)

3,100

3,856

Net cash flow (used in)/from investing activities

(341)

(1,161)

Net cash flow (used in)/from financing activities

(5,190)

(5,390)

The net outflow from investing activities was €0.8 billion lower
than the previous year. While net capital expenditure and interest
were broadly unchanged, the net inflow of acquisitions, disposals
and other investing activities increased €0.8 billion compared with
2013. The increase was principally driven by the disposal of the
Ragu and Bertolli pasta sauces business partially offset by the
acquisition of Qinyuan and Talenti Gelato & Sorbetto.

Net cash outflow from financing activities was €0.2 billion lower
than the prior year. Of the €5.2 billion outflow, €3.2 billion was used
to fund our dividend payments and €0.9 billion to purchase the
rights left in trust by the first Viscount Leverhulme. The prior year
included €2.5 billion in relation to the acquisition of an increased
stake in Hindustan Unilever Limited as well as an increase in
borrowings of €1.3 billion, which was flat in 2014.

BALANCE SHEET
In the year to December 2014, Unilever’s combined market
capitalisation rose from €83.8 billion to €93.9 billion.

Goodwill and intangible assets increased by €1.3 billion mainly due
to business acquisitions and currency movements. All material
goodwill and indefinite-life intangible assets have been tested for
impairment. An impairment charge of €0.3 billion was recognised
assets related to the Slim.Fast business as part of the disposal.
Increases in other non-current assets of €1.0 billion were driven
by capital expenditure and favourable currency movements.

Current assets were up €0.2 billion largely due to the impact
of currency. Cash and cash equivalents on the balance sheet
amounted to €2.2 billion compared to €2.3 billion at the end of
2013. Closing net debt was €9.9 billion versus €8.5 billion as at 31
December 2013. The increase was driven by payment of dividends,
the repurchase of the Leverhulme Estate shares and adverse
currency movements, offset by free cash flow generated by
operations and net cash inflow from acquisitions and disposals.

Current liabilities were €2.3 billion higher mainly driven by
an increase in current financial liabilities of €1.4 billion due
to bonds maturing in 2015 and by the impact of currency and
other underlying movements of €0.9 billion.

Non-current liabilities (excluding pensions) were broadly flat with
increases as a result of currency offset by a decrease in financial
liabilities due to the bond movements noted above. During the year
the following bonds matured and were repaid: (i) US $750 million
3.65%, (ii) Renminbi 300 million 1.15%, and (iii) £350 million 4.00%.
On 20 February 2014, we issued Renminbi 300 million 2.95% fixed
rate notes due February 2017. On 19 March 2014 we issued
£250 million 2% fixed rate notes due December 2018.

The net movement in assets and liabilities for all pension
arrangements during the year was as follows:

€ million
2014

1 January
Current service cost
Employee contributions
Actual return on plan assets (excluding interest)
Net interest cost
Actuarial loss
Employer contributions
Currency retranslation
Other movements(1)
31 December

(1,977)
(259)
16
1,316
(94)
(3,026)
537
(137)
53
(3,571)

(1) Other movements relate to special termination benefits, past service costs
including losses/(gains) on curtailment, settlements and reclassification
of benefits. For more detail see Governance and Financial Report note 4B
on page 96.

The overall net liability for all pension arrangements was
€3.6 billion at the end of 2014, up €1.6 billon from the end of 2013.
The increase in the net obligation reflects the impact of changes
in actuarial assumptions, largely due to decreases in the discount
rates, partially offset by returns on plan assets. Cash expenditure
on pensions was €0.7 billion, the same as in the prior year.

Unilever Annual Report and Accounts 2014Strategic Report

Financial Review 2014
CONTINUED

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. More detail is provided on pages 114 to 119 of our
Governance and Financial Report.

Approximately €1.7 billion (or 81%) 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 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 was €452 million (2013: €243 million,
2012: €220 million). 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 2014 were US $6,550 million.

CONTRACTUAL OBLIGATIONS AT 31 DECEMBER 2014

€ million

Total

Due
within
1 year

Due in
1-3
years

Due in
3-5
years

Due in
over
5 years

Total contractual
obligations(1)

19,015

6,812

4,016

2,623

5,564

(1) Included within total contractual obligations are long-term debt, interest
on financial liabilities, operating lease obligations, purchase obligations
for raw and packing materials and finished goods, finance leases and other
long-term obligations (not including pensions).

Further details are set out in the Governance and Financial Report
in the following notes to the consolidated financial statements: note
10 on pages 105 and 106, note 15C on pages 112 and 113, and note
20 on pages 124 to 125. 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 €14 million (2013: €21 million)
paid to the external auditor, of which €14 million (2013: €16 million)
related to statutory audit services. Remuneration of the external
auditor in respect of 2014 was payable to KPMG while in respect
of 2013 it was payable to PricewaterhouseCoopers.

NON-GAAP MEASURES
Certain discussions and analyses set out in this Annual Report
and Accounts 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, ability to retire debt and invest in
new business opportunities. Our management uses these financial
measures, along with the most directly comparable GAAP financial
measures, in evaluating our operating performance and value
creation. Non-GAAP financial measures should not be considered
in isolation from, or as a substitute for, financial information
presented in compliance with GAAP. Non-GAAP financial

measures as reported by us may not be comparable with
similarly titled amounts reported by other companies.

In 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;
• core operating profit and core operating margin;
• core earnings per share (core EPS);
• free cash flow; and
• net debt.

UNDERLYING SALES GROWTH (USG)
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.

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

TOTAL GROUP

Underlying sales growth (%)
Effect of acquisitions (%)
Effect of disposals (%)
Effect of exchange rates (%)
Turnover growth (%)(a)

PERSONAL CARE

Underlying sales growth (%)
Effect of acquisitions (%)
Effect of disposals (%)
Effect of exchange rates (%)
Turnover growth (%)(a)

FOODS

Underlying sales growth (%)
Effect of acquisitions (%)
Effect of disposals (%)
Effect of exchange rates (%)
Turnover growth (%)(a)

REFRESHMENT

Underlying sales growth (%)
Effect of acquisitions (%)
Effect of disposals (%)
Effect of exchange rates (%)
Turnover growth (%)(a)

2014
vs 2013

2013
vs 2012

2.9
0.4
(1.3)
(4.6)
(2.7)

4.3
–
(1.1)
(5.9)
(3.0)

2014
vs 2013

2013
vs 2012

3.5
–
(0.1)
(5.0)
(1.8)

7.3
–
(0.2)
(6.8)
(0.2)

2014
vs 2013

2013
vs 2012

(0.6)
–
(3.6)
(3.9)
(7.9)

0.3
–
(3.7)
(3.8)
(7.0)

2014
vs 2013

2013
vs 2012

3.8
0.4
(1.6)
(4.6)
(2.1)

1.1
0.1
–
(4.7)
(3.7)

Unilever Annual Report and Accounts 2014Strategic Report

HOME CARE

Underlying sales growth (%)
Effect of acquisitions (%)
Effect of disposals (%)
Effect of exchange rates (%)
Turnover growth (%)(a)

2014
vs 2013

2013
vs 2012

5.8
1.8
–
(4.8)
2.4

8.0
0.1
–
(8.6)
(1.2)

(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)
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 to USG due to changes in prices.

The relationship between the two measures is set out below:

Underlying volume growth (%)
Effect of price changes (%)
Underlying sales growth (%)

2014
vs 2013

2013
vs 2012

1.0
1.9
2.9

2.5
1.8
4.3

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 frequency of occurrence.

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

The reconciliation of FCF to net profit is as follows:

Net profit
Taxation
Share of net profit of joint ventures/associates
and other income from non-current investments
Net finance costs
Depreciation, amortisation and impairment
Changes in working capital
Pensions and similar obligations less payments
Provisions less payments
Elimination of (profits)/losses on disposals
Non-cash charge for share-based compensation
Other adjustments

€ million
2014

€ million
2013

5,515
2,131

5,263
1,851

(143)
477
1,432
8
(364)
32
(1,460)
188
38

(127)
530
1,151
200
(383)
126
(725)
228
(15)

Cash flow from operating activities

7,854

8,099

Income tax paid
Net capital expenditure
Net interest and preference dividends paid

Free cash flow

(2,311)
(2,045)
(398)

(1,805)
(2,027)
(411)

3,100

3,856

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

Net cash flow (used in)/from investing activities
Net cash flow (used in)/from financing activities

(341)
(5,190)

(1,161)
(5,390)

Operating profit
Acquisition and disposal related cost
(Gain)/loss on disposal of group companies
Impairments and other one-off items

Core operating profit

Turnover
Operating margin
Core operating margin

€ million
2014

€ million
2013

7,980
97
(1,392)
335

7,020

7,517
112
(733)
120

7,016

48,436

49,797

16.5%
14.5%

15.1%
14.1%

NET DEBT
Net debt is defined as the excess of total financial liabilities,
excluding trade and other payables, over cash, cash equivalents
and current financial assets, excluding trade and other 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 net debt to the GAAP measure total financial
liabilities is as follows:

Further details of non-core items can be found in note 3 on page 92
of the Governance and Financial Report.

CORE EARNINGS PER SHARE
The Group also refers to core earnings per share (core EPS).
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 on page 102 of the Governance and Financial
Report for reconciliation of core earnings to net profit attributable
to shareholders’ equity.

Total financial liabilities

Current financial liabilities
Non-current financial liabilities

€ million
2014

€ million
2013

(12,722)

(11,501)

(5,536)
(7,186)

(4,010)
(7,491)

Cash and cash equivalents as per balance sheet

2,151

2,285

Cash and cash equivalents as per
cash flow statement
Add bank overdrafts deducted therein

Other current financial assets

Net debt

1,910
241

2,044
241

671

760

(9,900)

(8,456)

Unilever Annual Report and Accounts 2014Strategic Report

Our principal risks

Our business is subject to risks and uncertainties. On the following pages we have identified risks that we regard as the most relevant
to our business. These are the risks that we see as material to Unilever’s business and performance at this time. There may be other
risks that could emerge in the future. Further details of risks and mitigating factors can be found on pages 49 to 53.

pages 49 to 53 of the Governance and Financial Report

PRINCIPAL RISK

DESCRIPTION OF RISK

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

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

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

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

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

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

SAFE AND HIGH QUALITY
PRODUCTS
The quality and safety of our products
are of paramount importance for our
brands and our reputation.

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

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.

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.

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

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

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

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

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

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.

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.

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

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

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

Unilever Annual Report and Accounts 2014Strategic ReportPRINCIPAL RISK

DESCRIPTION OF RISK

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

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

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

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.

LEGAL AND REGULATORY
Compliance with laws and
regulations is an essential part
of Unilever’s business operations.

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

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

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

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

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

In 2014, more than half of Unilever’s turnover came from emerging markets including Brazil,
India, Indonesia, Turkey, South Africa, China, Mexico and Russia. These markets offer greater
growth opportunities but also expose Unilever to economic, political and social volatility in
these markets.

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

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

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

Unilever may face liquidity risk, 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.

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.

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

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

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

Unilever Annual Report and Accounts 2014Strategic ReportSummary Remuneration report

CHAIRMAN’S LETTER

DEAR SHAREHOLDERS,
I am pleased to report that our Remuneration Policy was adopted
at the 2014 NV and PLC AGMs with strong levels of support and
remains unchanged for 2015.

REMUNERATION POLICY – AVAILABLE ON OUR WEBSITE
To simplify this year’s report we have chosen not to repeat our
Remuneration Policy, which is available on our website. To reflect
the reward decisions taken for 2015 by the Compensation
Committee we have updated the supporting information in the
remuneration policy table and other contextual information.

www.unilever.com/ara2014/downloads

BUSINESS PERFORMANCE AND REMUNERATION
OUTCOMES FOR 2014

ANNUAL BONUS – A YEAR OF RESILIENT PERFORMANCE
During the year Unilever faced an increasingly challenging
external environment. In addition to fierce competition, we also
saw weakening consumer demand across many parts of the
world and increasing external volatility. The business responded
to the combination of these events with resilience by heightening
focus on cost control and margin improvement. Although our
overall underlying sales growth lowered to 2.9% we continued to
outperform our markets, as we have done consistently since
Paul Polman’s appointment as CEO. Through rigorous control of
overheads, we delivered a core operating margin improvement of
0.4 percentage points despite adverse currency movements. With
the quality of these results in mind, the Committee exercised its
judgement to uplift the annual bonus outcome from 68% to 80%
of target and decided to pay a bonus of 132% of salary (66% of
maximum) to the CEO, Paul Polman, and a bonus of 88% of salary
(59% of maximum) to the CFO, Jean-Marc Huët. The Committee
believes that these awards fairly reflect the performance
delivered in 2014. This consistency in performance delivery, now
established over the last six years, shows that Unilever is building
a more resilient company. We are better able to withstand the
challenges of an increasingly uncertain business environment
because we are moving towards a business model with long-term
sustainability at its core.

GSIP AND MCIP – STRONG FINANCIAL PERFORMANCE
OVER THE LAST THREE YEARS
Over the past three years, Unilever has again delivered very
strong financial performance. Underlying sales growth during
this period was 4.7% per annum. Core operating margin
improvement over the period was an average of 0.37 percentage
points per year, demonstrating management’s drive for consistent
top and bottom line growth. Unilever has also generated very
strong operating cash in the period, with cumulative operating
cash flow of €15.5 billion. Total shareholder return (TSR) over this
three-year period was below the performance of our peers, and,
as a result, no part of the GSIP and MCIP awards related to TSR
will vest. The Committee believes the outcomes of the long-term
share incentive plans represent a fair reflection of Unilever’s
underlying performance over the last three years. On the basis
of this performance, the Committee determined that the GSIP
awards to the end of 2014 together with MCIP awards, which were
granted to Executive Directors for the first time in 2012, will vest
at 121% of initial award levels (ie 61% of maximum for GSIP and
81% of maximum awards for MCIP, which is capped at 150%).

EXECUTIVE DIRECTORS TURN DOWN SALARY INCREASES
FOR 2015
In our 2011 Directors’ Remuneration Report, the Committee
drew shareholders’ attention to our concern that the CEO’s salary
was positioned at the lower end of market practice compared
to similar sized UK and European companies. At that time the
Committee stated that it would look to make further increases,
as appropriate, to address this over the next few years. Since
then, largely at the CEO and CFO’s own insistence, we have
consistently awarded less of a salary increase than we believed
was merited by the performance of the Executive Directors.
Having held their salaries steady for longer than intended and
in view of the sustained track record of performance delivery,
the Committee recommended, and the Boards approved, salary
increases for the CEO and CFO with effect from January 2015.
In making these recommendations the Committee considered
the strong performance of Unilever and alignment, both to
increases in pay for the broader employee population and
externally. The CEO and CFO have turned down the salary
increases recommended by the Committee for 2015.

STRATEGIC LINKAGE OF REWARD TO BUSINESS
PERFORMANCE
As in previous years, the Committee continues to use
performance-based incentives to drive the business towards
delivering sustainable long-term value for shareholders. For
2015, the Committee has decided to focus on the importance of
cash generation in an environment of lower global growth rates
by replacing underlying volume growth with growth in free cash
flow (FCF) as a performance measure for the annual bonus,
in alignment with our strategy as set out earlier in this Report.
FCF is a widely reported metric used to evaluate Unilever’s
in-year performance. For our shareholders, cash is an important
driver of value creation, allowing us to pay attractive and
sustainable dividends while continuing to invest in the business.

The performance measures for our long-term share incentive
plans remain unchanged for the 2015-2017 performance cycle.
Even though FCF is our primary cash measure, we use operating
cash flow (OCF) as the cash measure in our long-term incentive
plans as it better represents underlying long-term performance
at constant exchange rates. To better describe long-term
management performance, OCF is also adjusted to exclude the
impact of cash inflows and outflows resulting from M&A activity
and the impact of pension contributions and interest costs on
external borrowings.

For reasons of commercial sensitivity, our practice is to disclose
the target ranges for performance measures together with the
outcomes of incentive plans at the end of the respective
performance period.

In 2015 the Committee plans to undertake a further review of our
remuneration framework to ensure that it continues to be fully
aligned with Unilever’s business strategy and enables us to
respond quickly to the rapidly changing markets in which we
operate. Specifically, we will be looking for opportunities to
simplify reward arrangements and also to strengthen the linkage
between executive pay and the creation of sustainable longer-
term shareholder value. To the extent that changes are proposed,
the Committee will consult with key shareholders to get their
feedback in advance of recommending changes to shareholders.

Paul Walsh
Chairman of the Compensation Committee

Unilever Annual Report and Accounts 2014Strategic ReportThe following sets out how Unilever’s Remuneration Policy, to be found at www.unilever.com/ara2014/downloads, was implemented in 2014.
Further details of remuneration can be found on pages 62 to 77 of the Governance and Financial Report.

SINGLE FIGURE OF REMUNERATION IN 2014 FOR EXECUTIVE DIRECTORS (AUDITED)
The table below shows a single figure of remuneration for each of our Executive Directors, for the years 2013 (restated to reflect the final
value of GSIP performance shares on the date of vesting) and 2014.

(A) Base salary (1)
(B) Fixed allowances and other benefits (2)
(C) Annual bonus

Long-term incentives

(D) MCIP matching shares – (required by UK law)
(E) GSIP performance shares – (required by UK law)

Long-term incentives (sub-total)
(F) Conditional supplemental pension (3)

Total remuneration paid – (required by UK law) (A+B+C+D+E+F)

(G) Share awards (required by Dutch law) (4)

Total remuneration paid – (required by Dutch law) (A+B+C+F+G)

Paul Polman
CEO (UK)
(€’000)

Jean-Marc Huët
CFO (UK)
(€’000)

2014

1,251
787
1,652
1,803
3,923
5,726
145

9,561

4,206

8,041

2013
(Restated)

1,189
700
1,864
n/a
3,798
3,798
138

7,689

4,069

7,960

2014

885
377
778
370
3,022
3,392
n/a

5,432

2,249

4,289

2013
(Restated)

841
594
879
n/a
2,630
2,630
n/a

4,944

2,652

4,966

Where relevant, amounts for 2014 have been translated into euros using the average exchange rate over 2014 (€1 = £0.8071), excluding
amounts in respect of long-term incentive plans which have been translated into euros using the exchange rate at vesting date (€1 =
£0.7383). Amounts for 2013 have been translated into euros using the average exchange rate over 2013 (€1 = £0.8492), excluding amounts
in respect of GSIP which have been translated into euros using the exchange rate at vesting date (€1 = £0.8351).

(1) Salary set in sterling and paid in 2014: CEO – £1,010,000 and CFO – £714,000.
(2) Includes the fixed allowance, medical insurance cover and actual tax return preparation costs, provision of death-in-service benefits and administration,
payment to protect against difference between employee social security obligations in country of residence versus UK (not applicable to Jean-Marc Huët)
and Paul Polman’s notional gain due to exercising his options under the Unilever 2005 Share Save Plan.

(3) Conditional supplemental pension provision agreed with Paul Polman on hiring, which is conditional on his remaining in employment with Unilever to age 60 and

subsequently retiring from active service or his death or total disability prior to retirement. This was £117,123 based on 12% of a capped salary of £976,028 for 2014.
(4) 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, a 98% adjustment factor for GSIP shares and MCIP matching shares awarded in 2014, 2013 and 2012.

SINGLE FIGURE OF REMUNERATION IN 2014 FOR NON-EXECUTIVE DIRECTORS (AUDITED)
The table below shows a single figure of remuneration for each of our Non-Executive Directors, for the years 2013 and 2014.

Non-Executive Director
Michael Treschow(c)
Laura Cha
Louise Fresco(d)
Ann Fudge
Charles Golden(e)
Byron Grote(f)
Mary Ma
Sunil Bharti Mittal(g)
Hixonia Nyasulu
Sir Malcolm Rifkind
John Rishton
Feike Sijbesma
Kees Storm(h)
Paul Walsh(i)
Total

2014

Benefits(b)
€’000
3
–
–
11
–
–
–
–
–
–
–
1
3
2
20

Fees(a)
€’000
654
101
113
101
42
125
107
–
107
101
107
15
196
113
1,882

Total
remuneration
€’000
657
101
113
112
42
125
107
–
107
101
107
16
199
115
1,902

2013

Benefits(b)
€’000
1
–
–
17
14
2
–
–
12
–
–
n/a
–
–
46

Fees(a)
€’000
637
62
106
103
101
127
66
32
102
103
66
n/a
191
119
1,815

Total
remuneration
€’000
638
62
106
120
115
129
66
32
114
103
66
n/a
191
119
1,861

(a) This includes fees received from both NV in euros and PLC in sterling for

both 2013 and 2014 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

(e) Chose not to put himself forward for re-election at the May 2014 AGMs.
(f) Chair, Audit Committee.
(g) Chose not to put himself forward for re-election at the May 2013 AGMs.
(h) Vice-Chairman and Chair of the Nominating and Corporate Governance

they are invited by Unilever.

Committee.

(i) Chair, Compensation Committee.

Unilever Annual Report and Accounts 2014Strategic Report
Shareholder Information

FINANCIAL CALENDAR

ANNUAL GENERAL MEETINGS

PLC

Date

Voting Record date

Voting and Registration date

1.30pm 29 April 2015

1.30pm 30 April 2015

1 April 2015

–

22 April 2015

28 April 2015

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).

Quarterly dividend announced with
the Q4 2014 results

Quarterly dividend announced with
the Q1 2015 results

Quarterly dividend announced with
the Q2 2015 results

Quarterly dividend announced with
the Q3 2015 results

PREFERENTIAL DIVIDENDS – NV

6% and 7%

Announced

NV NY and PLC ADR
ex-dividend date

NV and PLC
ex-dividend date

Record date

Payment date

20 January 2015

4 February 2015

5 February 2015

6 February 2015

11 March 2015

16 April 2015

22 April 2015

23 April 2015

24 April 2015

3 June 2015

23 July 2015

5 August 2015

6 August 2015

7 August 2015

9 September 2015

15 October 2015

28 October 2015

29 October 2015

30 October 2015

9 December 2015

Announced

Ex-dividend date

Record date

Payment date

23 July 2015

6 August 2015

7 August 2015

9 September 2015

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 can email us at
shareholder.services@unilever.com

SHARE REGISTRATION
THE NETHERLANDS
SGG Netherlands N.V.
Claude Debussylaan 24
1082 MD Amsterdam
Telephone
Telefax
Website
Email

+31 (0)20 522 25 55
+31 (0)20 522 25 00
www.sgggroup.com
registers@sgggroup.com

UK
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone
Telefax
Website
Email

+44 (0)870 600 3977
+44 (0)870 703 6101
www.investorcentre.co.uk/contactus
webcorres@computershare.co.uk

US
American Stock Transfer & Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
Toll-free number
Direct dial
Email

+1 (800) 937-5449
+1 718 921 8124
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 this year’s Annual Report and Accounts, and prior
years’ Annual Review and Annual Report and Accounts documents,
at www.unilever.com/investorrelations.

PLC shareholders can elect to receive their shareholder
communications such as the Annual Report and Accounts
and other shareholder documents electronically by registering
at www.unilever.com/shareholderservices.

PUBLICATIONS
The Strategic Report is only part of the Annual Report and Accounts
2014 and, together with the governance section of the Governance and
Financial Report, constitutes the report of the Directors within the
meaning of Section 2:391 of the Dutch Civil Code. Copies of the
Strategic Report, the Governance and Financial Report, and the public
documents referred to below can be accessed directly or ordered
through www.unilever.com/investorrelations.

UNILEVER ANNUAL REPORT AND ACCOUNTS 2014
The Unilever Annual Report and Accounts 2014 comprises the
Strategic Report and the Governance and Financial Report which is
available in English with figures in euros. It 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.

Unilever Annual Report and Accounts 2014Strategic Report

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

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially
from those expressed or implied by these forward-looking statements. Among other risks and uncertainties, the material or principal factors which cause
actual results to differ materially are: Unilever’s global brands not meeting consumer preferences; Unilever’s ability to innovate and remain competitive;
Unilever’s investment choices in its portfolio management; inability to find sustainable solutions to support long-term growth; customer relationships; the
recruitment and retention of talented employees; disruptions in our supply chain; the cost of raw materials and commodities; the production of safe and high
quality products; secure and reliable IT infrastructure; successful execution of acquisitions, divestitures and business transformation projects; economic
and political risks and natural disasters; financial risks; failure to meet high and ethical standards; and managing regulatory, tax and legal matters. Further
details of potential risks and uncertainties affecting the Group are described in the Group’s filings with the London Stock Exchange, Euronext Amsterdam and
the US Securities and Exchange Commission, including in the Group’s Annual Report on Form 20-F for the year ended 31 December 2014 and the Annual
Report and Accounts 2014. 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.

This document is not prepared in accordance with US GAAP and should not therefore be relied upon by readers as such. The Group’s Annual Report on
Form 20-F for 2014 is separately filed with the US Securities and Exchange Commission and is available on our corporate website www.unilever.com.

In addition, a printed copy of the Annual Report on Form 20-F is available, free of charge, upon request to Unilever, Investor Relations Department,
100 Victoria Embankment, London EC4Y 0DY, United Kingdom.

This report 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 Unilever 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 and Accounts 2014 or Annual Report on Form 20-F with the exception of the explanations and
disclaimers which can be accessed via KPMG’s website: www.kpmg.com/uk/auditscopeukco2014b, which is incorporated into the Auditor’s Report in the
Annual Report and Accounts 2014 as if set out in full.

Designed and produced by Unilever Communications in conjunction with Addison Group at www.addison-group.net.

Photography by Samuel Olusegun Ajayi, Angga Aria, Oliver Edwards, Igor Emmerich, Philip Gatward, Angelo Giampiccolo, Michael Heffernan, Frans Lemmens,
Atul Loke, Chris Moyse, Suwit Ngaokaew, Muhittin Tüylüce, Rian Ardi Wakito, Martin Wanyoike, Jessie Watford, Aht Yomyai, Yan Zhen, The Pack Shot Company
and from the Unilever image library and content hub.

Printed at Pureprint Group, ISO 14001. FSC® certified and CarbonNeutral®.

This document is printed on Amadeus 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.

FOR FURTHER INFORMATION ABOUT
UNILEVER, PLEASE VISIT OUR WEBSITE:
WWW.UNILEVER.COM

BRINGING SANITATION TO THE WORLD’S POOREST CONSUMERS

In India around 600 million people, like Saritadevi (pictured*), do not have access to a toilet in
their house, leaving them no choice but to use local fields. Unilever is committed to helping
25 million people gain improved access to a toilet by 2020, by promoting the benefits of using
clean toilets and making toilets accessible.

We are working with multiple partners, including UNICEF, to create sustainable approaches to
better sanitation by promoting good hygiene practices to improve the health and well-being of
communities and helping to create demand for access to toilets.

We are also working with Water & Sanitation for the Urban Poor (WSUP) to develop innovative
sanitation businesses and promote hygiene communications to millions of the poorest
consumers in Ghana, Bangladesh, Kenya and Zambia.

And we are providing support through the Domestos Toilet Academy, a market-based model that
improves sanitation in India and Vietnam. By the end of 2014 there were ten Domestos Toilet
Academies open, eight in India and two in Vietnam. The Academies train entrepreneurs to form
businesses supplying, installing and maintaining hygienic toilets. The initiative will train 250
entrepreneurs and supply 51,000 toilets by the end of 2015.

*The photograph of Saritadevi was taken for WSUP by Atul Loke.

UNILEVER N.V.
Head Office and Registered Office
Weena 455, PO Box 760
3000 DK Rotterdam
The Netherlands
T +31 (0)10 217 4000
F +31 (0)10 217 4798

Commercial Register Rotterdam
Number: 24051830

UNILEVER PLC
Head Office
100 Victoria Embankment
London EC4Y 0DY
United Kingdom
T +44 (0)20 7822 5252
F +44 (0)20 7822 5951

Registered Office
Unilever PLC
Port Sunlight
Wirral
Merseyside CH62 4ZD
United Kingdom

Registered in England and Wales
Company Number: 41424

MAKING
SUSTAINABLE
LIVING
COMMONPLACE

ANNUAL REPORT
AND ACCOUNTS 2014
GOVERNANCE AND
FINANCIAL REPORT

CONTENTS

GOVERNANCE

Corporate governance

Risks

Biographies

Report of the Audit Committee

Report of the Corporate Responsibility Committee

Report of the Nominating and Corporate
Governance Committee

Directors’ Remuneration Report

FINANCIAL STATEMENTS

Statement of Directors’ responsibilities

Independent auditors’ reports

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated balance sheet

Consolidated cash flow statement

Notes to the consolidated financial statements

1 Accounting information and policies

2 Segment information

3 Gross profit and operating costs

4 Employees

4A Staff and management costs
4B Pensions and similar obligations
4C Share-based compensation plans

5 Net finance costs

6 Taxation

6A Income tax
6B Deferred tax
6C Tax on other comprehensive income

7 Combined earnings per share

8 Dividends on ordinary capital

9 Goodwill and intangible assets

10 Property, plant and equipment

11 Other non-current assets

Inventories

93
93
93
98

100
100
100
102

102

103

105

106

107

Notes to the consolidated financial statements (continued)

13 Trade and other current receivables

14 Trade payables and other liabilities

Capital and funding
15A Share capital
15B Equity
15C Financial liabilities

Treasury risk management
16A Management of liquidity risk
16B Management of market risk
16C Derivatives and hedging

Investment and return
17A Financial assets
17B Credit risk

18 Financial instruments fair value risk

19 Provisions

20 Commitments and contingent liabilities

21 Acquisitions and disposals

22 Assets and liabilities held for sale

23 Related party transactions

Purchase of Estate shares convertible to Unilever PLC
shares in 2038

25 Remuneration of auditors

26 Events after the balance sheet date

Principal group companies and non-current
investments

Company accounts – Unilever N.V.

Notes to the Company accounts – Unilever N.V.

Further statutory and other information – Unilever N.V.

Responsibilities of KPMG Accountants N.V.

Company accounts – Unilever PLC

Notes to the Company accounts – Unilever PLC

Index

107

108

109
110
111
112

114
114
116
118

119
120
121

121

123

124

125

127

128

129

131

132

135

136

137

138

140

The Directors’ Report of Unilever PLC on pages 41-61, 78 (Statement of
Directors’ responsibilities), 103 (Dividends on ordinary capital), 114-119
(Treasury risk management) and 135 and 139 (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 section of the Governance
and Financial 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 NV Board
and signed on its behalf by Tonia Lovell – Group Secretary.

ANNUAL REPORT AND ACCOUNTS 2014

OUR ANNUAL REPORT AND ACCOUNTS 2014 IS IN TWO PARTS:

OUR STRATEGIC REPORT
The Strategic Report contains information about us, how we make money and how we run our business. It includes our strategy, business
model, markets and Key Performance Indicators, as well as our approach to sustainability and risk.
GOVERNANCE AND FINANCIAL REPORT
The Governance and Financial Report contains detailed corporate governance information, how we mitigate risk, our Committee reports
and how we remunerate our Directors, plus our Financial Statements and Notes.

ONLINE

You can find more information about Unilever online at www.unilever.com.
For the latest information on the USLP visit www.unilever.com/sustainable-living.
Our Strategic Report and Governance and Financial Report, along with other relevant documents, can be downloaded at
www.unilever.com/ara2014/downloads.

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. The Equalisation Agreement
regulates the mutual rights of the shareholders of NV and PLC.
Under the Equalisation 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 between NV and PLC.

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.

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.

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.

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. During
2014, Unilever continued to have two Executive Directors, the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), who are
also members of the Unilever Leadership Executive (ULE) and are
full-time employees of Unilever. The majority of the Directors are
Non-Executive Directors who essentially have a supervisory role.

A list of our current Directors, their roles on the Boards, their
dates of appointments and their other major appointments is set
out on page 54.

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 and 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. The ULE is chaired by and reports to the
CEO. The biographies of ULE members are on page 55.

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 can be found on pages 56 to 77. Attendance
tables can be found within each Committee Report.

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).

www.unilever.com/corporategovernance

BOARD EFFECTIVENESS

BOARD MEETINGS
A minimum of five 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 Annual
Report and Accounts. Other Board meetings and telephone
conferences are held to discuss matters that arise as well as
Group strategic issues. 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.

Unilever Annual Report and Accounts 2014GovernanceCORPORATE GOVERNANCE CONTINUED

In 2014 the Boards met physically in January, March, May, 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

As in 2011 Mr J. de Leeuw, an independent external consultant,
facilitated the 2014 Board evaluation. Mr J. de Leeuw has no other
connection with the Unilever Group. The Chairman’s Statement on
page 2 describes the key actions agreed by the Boards following
that evaluation.

control systems;

page 2 of the Strategic Report

• authorisation of major transactions;
• declaration of dividends;
• convening of shareholders’ meetings;
• nominations for Board appointments;
• review of Directors’ remuneration policy;
• review of the functioning of the Boards and their Committees; and
• review of corporate responsibility and sustainability,
in particular the Unilever Sustainable Living Plan.

ATTENDANCE
The following table shows the attendance of Directors at Board
meetings in 2014. If Directors are unable to attend a Board meeting
they have the opportunity beforehand to discuss any agenda items
with the Chairman. Attendance is expressed as the number of
meetings attended out of the number eligible to be attended.

Michael Treschow(a)
Kees Storm(b)
Paul Polman(c)
Jean-Marc Huët(c)
Laura Cha
Louise Fresco
Ann Fudge
Charles Golden(d)
Byron Grote
Mary Ma
Hixonia Nyasulu
Sir Malcolm Rifkind
John Rishton
Feike Sijbesma(e)
Paul Walsh

Main Board

7/7
6/7
7/7
7/7
7/7
7/7
7/7
3/3
7/7
7/7
7/7
6/7
7/7
1/1
7/7

(a) Chairman
(b) Vice-Chairman/Senior Independent Director
(c) Executive Director
(d) Retired from the Boards on 14 May 2014
(e) Appointed to the Boards with effect from 1 November 2014

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 2014 they met five
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
evaluation consists of individual interviews with the Directors
by the Chairman and also, every three years, by the external
evaluator. These interviews complement our annual process of
completion by all Directors of three full and confidential online
evaluation questionnaires on our Boards, CEO and Chairman.
The detailed Board questionnaire invites comments on a number
of key areas including Board responsibility, operations,
effectiveness, training and knowledge.

In addition to the evaluation of the Boards’ effectiveness, each
year the Chairman conducts a process of evaluating the
performance and contribution of each Director which includes
a one-to-one performance and feedback discussion with each
Director. The evaluation of the performance of the Chairman is
led by the Vice-Chairman/Senior Independent Director and the
Chairman leads the evaluation of the CEO, both using bespoke
questionnaires. 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.

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. These provisions of the Articles
cannot be changed without the permission, in the case of NV,
of the holders of the NV special ordinary shares and, in the case
of PLC, of the holders of the PLC deferred stock.

The report of the Nominating and Corporate Governance
Committee (NCGC) on pages 60 and 61 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
can be found in the ‘Appointment procedure for NV & PLC
Directors’ document under ‘download links’ 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.

www.unilever.com/boardsofunilever

DIRECTOR INDUCTION AND TRAINING
All Directors receive induction on joining the Boards and 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 and corporate
governance, regulatory developments and investor relations
matters. Details of the training provided to the Directors in 2014
can be found in the Chairman’s Statement on page 2.

page 2 of the Strategic Report

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.

Unilever Annual Report and Accounts 2014GovernanceThe Boards currently consider all our Non-Executive Directors
to be independent of Unilever. Furthermore, the Boards have
determined that Byron Grote’s current position of serving on the
audit committees of more than three public companies does not
impair his ability to effectively serve on the Audit Committee.

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 the 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 issued to all PLC Directors. Appropriate qualifying third
party directors’ and officers’ liability insurance was in place for all
Unilever Directors throughout 2014 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 which each 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 2014 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 ordinary shares numbered 1 to

2,400 known as special shares; and

• €81,454,014 split into two classes (6% and 7%) of cumulative

preference shares (financing preference shares)*.

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

VOTING RIGHTS
NV shareholders can cast one vote for each €0.16 nominal capital
they hold. Therefore, 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
2,400 special shares
161,060 6% cumulative
preference shares
29,000 7% cumulative
preference shares

1,714,727,700(a)
6,428,550

431,409,276(b)

77,678,313(c)

76.89
0.29

19.34

3.48

As at 31 December 2014:
(a) 141,560,629 shares were held in treasury and 12,368,368 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
14 May 2014 the Board 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 2014 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 Euronext stock exchange in Amsterdam 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
2015 NV AGM or the close of business on 30 June 2015 (the last
date by which NV must hold an AGM in 2015). Such authorities are
renewed annually and authority will be sought at NV’s 2015 AGM.

During 2014 Unilever group companies purchased 7,304,993 NV
New York Registry Shares, each representing one NV ordinary
share with a nominal value of €0.16 for €227.5 million to facilitate
grants made in connection with its employee compensation
programmes. This represents 0.426% of the called-up share
capital of NV. No NV 6% cumulative preference shares nor NV 7%
cumulative preference shares were purchased by Unilever group
companies during 2014. Further information on this and on NV
shares held by an employee share trust can be found in note 4 to
the consolidated accounts on pages 98 and 99.

NV SPECIAL ORDINARY SHARES
The 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 the members of the
Nominating and Corporate Governance Committee.

LISTINGS
NV has listings of shares and depositary receipts for shares on
Euronext Amsterdam and of New York Registry Shares on the
New York Stock Exchange.

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

Unilever Annual Report and Accounts 2014Governance
CORPORATE GOVERNANCE CONTINUED

Office issues depositary receipts in exchange for the NV ordinary
shares and NV 7% preference shares. These depositary receipts
are listed on Euronext Amsterdam, as are the NV ordinary and 7%
preference shares themselves.

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.

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 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 2014 were 1,331,829,935 NV ordinary shares
(77.67%) and 9,776 NV 7% cumulative preference shares (33.71%).

The members of the board at the Trust Office are Mr J H Schraven
(chairman), Mr P P de Koning, Ms C M S Smits-Nusteling and
Mr A A Olijslager. Prof Emeritus Dr L. Koopmans retired on
11 February 2015. The Trust Office reports periodically on its
activities. Further information on the Trust Office, including its
Articles of Association and Conditions of Administration, 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.

www.administratiekantoor-unilever.nl

PLC SHARES

SHARE CAPITAL
PLC’s issued share capital on 31 December 2014 was made up of:
• £40,760,420 split into 1,310,156,361 ordinary shares of 31/9p

each; and

• £100,000 of deferred stock of £1 each.

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

VOTING RIGHTS
PLC shareholders can cast one vote for each 31/9p nominal capital
they hold. 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:

In addition, at PLC’s 2014 AGM the PLC Board was authorised by a
resolution of PLC 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 2015 AGM and 30 June 2015. These authorities are renewed
annually and authority will be sought at PLC’s 2015 AGM.

During 2014 Unilever group companies purchased 6,058,733 PLC
American Depositary Receipt of shares, each representing one PLC
ordinary share with a nominal value of 31/9p for €201.07 million
to facilitate grants made in connection with its employee
compensation programmes. This represents 0.462% of the
called-up share capital of PLC. Further information on this and on
PLC shares held by an employee share trust can be found in note 4
to the consolidated accounts on pages 98 and 99.

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 the
members of the Nominating and Corporate Governance Committee.

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 2014 (apart from the Foundation Unilever N.V. Trust
Office, see pages 43 and 44, and shares held in treasury by NV,
see page 43), are ING Groep N.V. (ING), 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

ING

ASR

BlackRock

ordinary shares
7% cumulative
preference shares
6% cumulative
preference shares
ordinary shares
6% cumulative
preference shares
ordinary shares

5,653,749

20,665

74,088
3,169,339

46,000

66,568,832

0.33

71.26

46.0
0.18

28.56

3.88(a)

Total number of votes

% of issued capital

(a) Representing 2.98% capital interest and 3.71% voting rights in the NV

1,310,156,361 ordinary shares
£100,000 deferred stock

1,310,156,361(a)
3,214,285

99.76
0.24

(a) Of which 26,696,994 shares were held by PLC in treasury and 7,507,715

shares were held by NV group companies or by share trusts as at
31 December 2014. These shares are not voted on.

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 PLC’s
2014 AGM the PLC Directors were authorised to issue new shares,

share capital.

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 2015 and 25 February 2015 (the latest practicable
date for inclusion in this report). Between 1 January 2012 and
25 February 2015, ING, BlackRock and ASR have held more than
3% in the share capital of NV. Deutsche Bank, Bank of America
Corporation and UBS AG also held more than 3% in the share
capital of NV, however, during this period, and as notified, these
holdings reduced to below the 3% reporting threshold.

Unilever Annual Report and Accounts 2014Governance
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 share capital on
31 December 2014 (apart from deferred stock held by Naamlooze
Vennootschap Elma and United Holdings Limited, see page 44, and
shares held in treasury by PLC, see page 44), are BlackRock, Inc.
and the Leverhulme Trust as indicated in the table below.

Shareholder

Class of shares

Total number of
shares held

% of relevant
class

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 2014 the conferences
that were attended by Unilever representatives included broker
sponsored conferences in London, Paris, Brussels, San Francisco
and Singapore.

Naamlooze
Vennootschap
Elma
United Holdings
Limited
BlackRock
The Leverhulme
Trust

deferred shares

deferred shares
ordinary shares

ordinary shares

50,000

50,000
71,832,960

68,531,182

50
5.5

5.3

No disclosable changes in interests in the share capital of
PLC have been notified to PLC between 1 January 2015 and
25 February 2015 (the latest practicable date for inclusion in this
report). Between 1 January 2012 and 25 February 2015, Legal &
General Group plc, BlackRock and 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 this period, and as notified, these holdings
reduced to below the 3% reporting threshold.

Feedback from shareholders: we maintain a frequent dialogue
with our principal shareholders and regularly collect feedback.
In addition, in 2014 we asked a cross section of investors to
participate in a detailed perception study. 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.

www.unilever.com/investorrelations

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.

GENERAL MEETINGS
Both Unilever N.V. and Unilever 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.

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/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 (eg an Introduction to Unilever and AGM materials)
are generally made available on our website.

Principal shareholders: the Executive Directors’ investor relations
programme continued in 2014 with meetings in nine major cities
in Europe, North America and Asia. In all, they met more than 90
investors during these roadshows. In addition, the Chairman
maintained contact with principal shareholders with one to one
and group governance and strategy meetings in the UK and the
Netherlands in June and in the US 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
London offices in December 2014. It focused on ‘Driving Profitable
Growth and Agility’ and included presentations on brands, R&D
and supply chain. The event was attended by members of the
Unilever Leadership Executive and other senior management.
The slides shown and an audio-recording of the presentations

The 2014 AGMs were held in London and in Rotterdam in May and
the topics raised by shareholders included: Non-Executive
Directors’ shareholdings, Non-Executive Director succession
planning, the PLC Dividend Reinvestment Plan, the NV Cumulative
Preference shares, the termination of the certification of the
NV shares and how Unilever’s values are reflected across its
brand portfolio.

VOTING
Shareholders can vote in person or by proxy. Similar
arrangements apply to holders of depositary receipts issued
for NV shares and the holders of NV preference shares.
The Trustees of the PLC employee share trusts may vote or
abstain in any way they think fit and in doing so may take into
account both financial and non-financial interests of the
beneficiaries of the employee share trusts or their dependants.
Historically the Trustees tend not to exercise this right.

The shares held by NV and PLC in treasury are not voted on.
More information on the exercise of voting rights can be found
in NV’s and PLC’s Articles of Association and in the respective
Notices of Meetings, all of which can be found on our website.

www.unilever.com/corporategovernance

www.unilever.com/agm

Unilever Annual Report and Accounts 2014GovernanceCORPORATE GOVERNANCE CONTINUED

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 also requisition Extraordinary General Meetings 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.

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 41, 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.

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, and which are further set
out in the Directors’ Remuneration Report, 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 56 and 57, 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 2014 (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.

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 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.

Unilever Annual Report and Accounts 2014GovernanceAnti-takeover constructions and control over the company:
NV confirms that it has no anti-takeover constructions, in the
sense of constructions that are intended solely, or primarily to
block future hostile public offers for its shares (bpp IV.3.11).
Nor does NV have any constructions whose specific purpose
is to prevent a bidder, after acquiring 75% of the capital, from
appointing or dismissing members of the Board and subsequently
altering the Articles of Association. The acquisition through a
public offer of a majority of the shares in a company does not,
under Dutch law, preclude the continued right of the board of
the company to exercise its powers.

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.

www.unilever.com/corporategovernance

from that for which the remainder of the Directors’ Report is
prepared (which is the calendar year 2014).

Emissions of CO2 from manufacturing (tonnes),
1 October 2013 to 30 September 2014 (1 October 2012
to 30 September 2013)

Scope 1
Scope 2
Total Scope 1 & 2
Intensity ratio

929,360 tonnes CO2 (1,013,690 tonnes CO2)
919,803 tonnes CO2 (939,457 tonnes CO2)
1,849,163 tonnes CO2
91.93 kg CO2 per tonne of production+
(98.85 kg CO2 per tonne of production+)

+ (1,953,147 tonnes CO2

Emissions data includes material sources of Scope 1 and 2
emissions that have been subject to external assurance, ie
emissions of CO2 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.

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 2012 UK Corporate Governance Code
(UK Code), which is available on the Financial Reporting Council’s
(FRC) website. In 2014 PLC complied with all UK Code provisions.

Our GHG data does not include minor emissions sources that are
beyond our boundary of financial control or that are not material.
For example, emissions of CO2 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 (see below).

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 report on ‘Internal Control – Revised Guidance for Directors
on the UK Combined Code’ (The Turnbull guidance). It is Unilever’s
practice to bring acquired companies within the Group’s
governance procedures as soon as is practicable and in any event
by the end of the first full year of operation.

Greenhouse Gas (GHG) Emissions: As part of our Unilever
Sustainable Living Plan (USLP), we have set ambitious
eco-efficiency targets which include carbon dioxide (CO2)
emissions from energy used in manufacturing as well as water
and waste and targets for the new factories we are building.

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

Carbon emission factors are used to convert energy used in
manufacturing to emissions of CO2. Carbon emission factors for
fuels are provided by the Intergovernmental Panel on Climate
Change (IPCC).

Carbon emission factors for electricity reflect the country or
sub-region where each manufacturing site is located and are
provided by the International Energy Agency (IEA) and local
regulatory authorities, for example the United States
Environmental Protection Agency (US EPA). We have selected
an intensity ratio based on production; this aligns with our
long-standing reporting of manufacturing performance.

One of the three big goals of the USLP is to halve the
environmental footprint of the making and use of our products by
2020 (see page 11). This is expressed on a per consumer use basis
– ie a single use, portion or serving of a product and measures
the GHG emissions associated with the lifecycle of a product from
raw materials to manufacturing to consumer use and disposal.
To calculate this we consider emissions spanning Scopes 1, 2 and
3. See page 11 and our online Unilever Sustainable Living Report
2014 (to be published in May 2015) for further detail.

page 11 of the Strategic Report

www.unilever.com/sustainable-living

Progress During the Year: Total Scope 1 and 2 emissions during
the reporting period have demonstrated significant reduction
compared to the previous reporting period. They have also
decreased significantly compared to the 2008 baseline year of the
target to reduce GHG in manufacturing in the USLP (2008 baseline).

Absolute emissions reduced by 5.3% compared to the previous
12 months (a reduction of 7.0% per tonne of production) and by
over 930,000 tonnes+ (37% per tonne of production+) compared
to the 2008 baseline. Some of the biggest contributors to our
reductions in CO₂ emissions from energy used in manufacturing
during the reporting year were:

• energy savings through adoption of a wide range of

•

technologies, behaviours and the sharing of best practice.
Energy use reduced by 7.2% per tonne of production during the
reporting period compared to the previous 12 months; and
investment in cost-effective renewable energy technologies.
At the end of the calendar year, the number of manufacturing
sites that use either renewable fuels or other renewable
energy generated on site increased to 50 out of our total of 247.

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

The GHG data relates to emissions during the 12-month period
from 1 October 2013 to 30 September 2014. This period is different

www.unilever.com/ara2014/downloads

Unilever Annual Report and Accounts 2014Governanceplan 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
56 and 57. 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 2014 to any of the persons falling within
the scope of the SEC requirements. Our Code of Business
Principles can be found on our website.

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 2014 were effective, and that
subsequently until 3 March 2015, the date of the approval of the
Annual Report and Accounts 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 will be reported on
separately and will form part of Unilever’s Annual Report on
Form 20-F.

CORPORATE GOVERNANCE CONTINUED

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.

The Directors’ Reports of the United Kingdom operating
companies contain more details about how they have
communicated with their employees during 2014.

Equal Opportunities and Diversity: In accordance 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 also made
to retrain and support employees who become disabled while
working within the Group.

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.

www.sec.gov

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

Unilever Annual Report and Accounts 2014GovernanceRISKS

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 double
the size of our business while reducing our environmental footprint
and increasing our positive social impact. Our available capital and
other resources are applied to underpin our priorities. We aim to
maintain a strong single A credit rating on a long-term basis.

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 ensures 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 an 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.
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 Code
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 both managing 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 compliance programmes which run during 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
56 to 57.

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 46, 47 and 48.

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. We have also
commented below on certain mitigating actions that we believe
help us to manage these risks. However, we may not be successful
in deploying some or all of these mitigating actions. If the
circumstances in these risks occur or are not successfully
mitigated, 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.

Unilever Annual Report and Accounts 2014GovernanceRISKS CONTINUED

DESCRIPTION OF RISK

WHAT WE ARE DOING TO MANAGE THE RISK

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

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

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

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

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

We continuously monitor external market trends and collate
consumer, customer and shopper insight in order to develop
category and brand strategies.

Our strategy focuses on investing in markets and segments which
we identify as attractive because we have already built, or are
confident that we can build, competitive advantage.

Our Research and Development function actively searches for ways
in which to translate the trends in consumer preference and taste
into new technologies for incorporation into future products.

Our innovation management process deploys tools, technologies
and resources to convert category strategies into projects and
category plans, develop products and relevant brand
communication and successfully roll out new products
to our consumers.

Our Compass strategy and our business plans are designed to
ensure that resources are prioritised towards those categories
and markets having the greatest long-term potential for Unilever.

Our acquisition activity is driven by our portfolio strategy with
a clear, defined evaluation process.

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

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

The Unilever Sustainable Living Plan sets clear long-term
commitments to improve health and well-being, reduce
environmental impact and enhance livelihoods. Underpinning
these are targets in areas such as hygiene, nutrition, sustainable
sourcing, fairness in the workplace, opportunities for women and
inclusive business as well as greenhouse gas emissions, water and
waste. These targets and more sustainable ways of operating are
being integrated into Unilever’s day-to-day business.

Progress towards the Unilever Sustainable Living Plan is monitored
by the Unilever Leadership Executive and the Boards. The Unilever
Sustainable Living Plan Council, comprising six external specialists
in sustainability, guides and critiques the development of our strategy.

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

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

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

We build and maintain trading relationships across a broad
spectrum of channels ranging from centrally managed
multinational customers through to small traders accessed
via distributors in many developing countries.

We develop joint business plans with our key customers that include
detailed investment plans and customer service objectives and we
regularly monitor progress.

We have developed capabilities for customer sales and outlet design
which enable us to find new ways to improve customer performance
and enhance our customer relationships.

Unilever Annual Report and Accounts 2014GovernanceDESCRIPTION OF RISK

WHAT WE ARE DOING TO MANAGE THE RISK

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

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

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

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

Resource committees have been established and implemented
throughout our business. These committees have responsibility
for identifying future skills and capability needs, developing career
paths and identifying the key talent and leaders of the future.

We have an integrated management development process which
includes regular performance reviews underpinned by a common
set of leadership behaviours, skills and competencies.

We have targeted programmes to attract and retain top talent
and we actively monitor our performance in retaining talent
within Unilever.

We have contingency plans designed to enable us to secure
alternative key material supplies at short notice, to transfer
or share production between manufacturing sites and to use
substitute materials in our product formulations and recipes.

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.

These contingency plans also extend to an ability to intervene
directly to support a key supplier should it for any reason find itself
in difficulty or be at risk of negatively affecting a Unilever product.

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.

We have policies and procedures designed to ensure the health
and safety of our employees and the products in our facilities, and
to deal with major incidents or crises including business continuity
and disaster recovery.

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.

Commodity price risk is actively managed through forward buying
of traded commodities and other hedging mechanisms. Trends are
monitored and modelled regularly and integrated into our
forecasting process.

Our product quality processes and controls are comprehensive,
from product design to customer shelf. They are verified annually,
and regularly monitored through performance indicators that drive
continuous improvement activities. Our key suppliers are externally
certified and the quality of material received is regularly monitored
to ensure that it meets the rigorous quality standards that our
products demand.

In the event of an incident relating to the safety of our consumers
or the quality of our products, incident management teams are
activated in the affected markets under the direction of our product
quality, science, and communications experts, to ensure timely and
effective market place action.

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

Hardware that runs and manages core operating data is fully
backed up with separate contingency systems to provide real
time back-up operations should they ever be required.

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

We maintain a global system for the control and reporting of
access to our critical IT systems. This is supported by an annual
programme of testing of access controls.

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.

We have policies covering the protection of both business
and personal information, as well as the use of IT systems and
applications by our employees. Our employees are trained to
understand these requirements.

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.

We have standardised ways of hosting information on our public
websites and have systems in place to monitor compliance with
appropriate privacy laws and regulations, and with our own policies.

Unilever Annual Report and Accounts 2014Governance
RISKS CONTINUED

DESCRIPTION OF RISK

WHAT WE ARE DOING TO MANAGE THE RISK

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

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

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

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

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

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

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

In 2014, more than half of Unilever’s turnover came from emerging
markets including Brazil, India, Indonesia, Turkey, South Africa,
China, Mexico and Russia. These markets offer greater growth
opportunities but also expose Unilever to economic, political
and social volatility in these markets.

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

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

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

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

Unilever may face liquidity risk, 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.

All acquisitions, disposals and global restructuring projects
are sponsored by a member of the Unilever Leadership Executive.
Regular progress updates are provided to the Unilever
Leadership Executive.

Sound project disciplines are used in all merger, acquisitions,
restructuring and outsourcing projects and these projects are
resourced by dedicated and appropriately qualified personnel.
The performance of third party outsourced providers is kept under
constant review, with potential disruption limited to the time and
cost required to install alternative providers.

Unilever also monitors the volume of change programmes under
way in an effort to stagger the impact on current operations and
to ensure minimal disruption.

The breadth of Unilever’s portfolio and our geographic reach
help to mitigate our exposure to any particular localised risk
to an extent. Our flexible business model allows us to adapt
our portfolio and respond quickly to develop new offerings
that suit consumers’ and customers’ changing needs during
economic downturns.

We regularly update our forecast of business results and cash
flows and, where necessary, rebalance investment priorities.

We have continuity planning designed to deal with crisis
management in the event of political and social events and
natural disasters.

We believe that many years of exposure to emerging markets
have given us experience operating and developing our business
successfully during periods of economic, political or social change.

Currency exposures are managed within prescribed limits and by
the use of forward foreign exchange contracts. Further, operating
companies borrow in local currency except where inhibited by
local regulations, lack of local liquidity or local market conditions.
We also hedge some of our exposures through the use of foreign
currency borrowing or forward exchange contracts.

Our interest rate management approach aims to achieve an optimal
balance between fixed and floating rate interest exposures on
expected net debt.

We seek to manage our liquidity requirements by maintaining
access to global debt markets through short-term and long-term
debt programmes. In addition, we have high committed credit
facilities for general corporate purposes.

Group treasury regularly monitors exposure to our banks, tightening
counter-party limits where appropriate. Unilever actively manages
its banking exposures on a daily basis.

Unilever Annual Report and Accounts 2014GovernanceDESCRIPTION OF RISK

WHAT WE ARE DOING TO MANAGE THE RISK

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.

We regularly assess and monitor counter-party risk in our
customers and take appropriate action to manage our exposures.

Our pension investment standards require us to invest across
a range of equities, bonds, property, alternative assets and cash
such that the failure of any single investment will not have a material
impact on the overall value of assets.

The majority of our assets, including those held in our ‘pooled’
investment vehicle, Univest, are managed by external fund
managers and are regularly monitored by pension trustees
and central pensions and investment teams.

Further information on financial instruments and capital
and treasury risk management is included in note 16 on pages
114 to 119.

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

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

LEGAL AND REGULATORY
Compliance with laws and regulations is an essential part
of Unilever’s business operations.

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

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

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

Our Code of Business Principles and our Code Policies govern the
behaviour of our employees, suppliers, distributors and other third
parties who work with us.

Our processes for identifying and resolving breaches of our Code of
Business Principles and our Code Policies are clearly defined and
regularly communicated throughout Unilever. Data relating to such
breaches is reviewed by the Unilever Leadership Executive and by
relevant Board committees and helps to determine the allocation
of resources for future policy development, process improvement,
training and awareness initiatives.

Unilever is committed to complying with the laws and regulations
of the countries in which we operate. In specialist areas the relevant
teams at global, regional or local levels are responsible for setting
detailed standards and ensuring that all employees are aware
of and comply with regulations and laws specific and relevant
to their roles.

Our legal and regulatory specialists are heavily involved in
monitoring and reviewing our practices to provide reasonable
assurance that we remain aware of and in line with all relevant
laws and legal obligations.

We have a Tax Risk Framework in place which sets out the
controls established to assess and monitor tax risk for direct
and indirect taxes.

Unilever Annual Report and Accounts 2014GovernanceBIOGRAPHIES

BOARD OF DIRECTORS

MICHAEL TRESCHOW
Chairman

KEES STORM
Vice-Chairman and Senior
Independent Director

PAUL POLMAN
Chief Executive Officer
Executive Director

JEAN-MARC HUËT
Chief Financial Officer
Executive Director

Nationality Swedish Age 71, Male
Appointed Chairman May 2007
Committee membership: Nominating
and Corporate Governance;
Compensation
Key areas of experience: Consumer,
science & technology
Current external appointments:
ABB Group (NED); Eli Lilly and Company
(European Advisory Board member)
Previous relevant experience:
Telefonaktiebolaget L M Ericsson
(Chairman); AB Electrolux (Chairman);
Confederation of Swedish Enterprise
(Chairman); AB Electrolux (CEO)

Nationality Dutch Age 72, Male
Appointed May 2006
Committee membership:
Nominating and Corporate Governance
(Chairman); Compensation
Key areas of experience: Finance
Current external appointments:
Anheuser-Busch InBev S.A. (Chairman);
Baxter International, Inc. (Board
member); Pon Holdings B.V.
(Vice-Chairman, Supervisory Board);
Confederation of Netherlands Industry
and Employers (VNO-NCW) (Member)
Previous relevant experience: AEGON
N.V. (Chairman, Executive Board)

Nationality Dutch Age 58, Male
Appointed CEO January 2009
Appointed Director October 2008
Key areas of experience:
Finance, consumer, sales & marketing
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
Previous relevant experience:
Procter & Gamble Co. (Group president,
Europe); Nestlé S.A. (CFO); Alcon Inc
(Director)

Nationality Dutch Age 45, Male
Appointed CFO February 2010
Appointed Director May 2010
Key areas of experience:
Finance, consumer
Current external appointments:
Delta Topco Limited (NED); Heineken
N.V. (Supervisory Board member)
Previous relevant experience:
Bristol-Myers Squibb Company (EVP and
CFO); Mead Johnson Nutrition (NED);
Royal Numico NV (CFO); Goldman Sachs
International (Investment Banking)

LAURA CHA
Non-Executive Director

PROFESSOR LOUISE FRESCO
Non-Executive Director

ANN FUDGE
Non-Executive Director

DR BYRON GROTE
Non-Executive Director

Nationality Chinese Age 65, Female
Appointed May 2013
Committee membership: Corporate
Responsibility
Key areas of experience:
Finance, government, legal & regulatory
affairs
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 adviser)
Previous relevant experience:
Securities and Futures Commission,
Hong Kong. China Securities Regulatory
Commission

Nationality Dutch Age 63, Female
Appointed May 2009
Committee membership:
Corporate Responsibility (Chairman)
Key areas of experience:
Science & technology, academia
Current external appointments:
Wageningen UR (President of the
Executive Board)
Previous relevant experience:
Agriculture Department of the UN’s Food
and Agriculture Organisation (Assistant
director-general for agriculture)

Nationality American Age 63, Female
Appointed May 2009
Committee membership: Compensation
Key areas of experience: Consumer,
sales & marketing
Current external appointments:
Novartis AG (NED); General Electric Co.
(NED); US Programs Advisory
Panel of Gates Foundation (Chairman)
Previous relevant experience:
Marriott International (NED); Young &
Rubicam (Chairman and CEO)

Nationality American/British
Age 66, Male
Appointed May 2006
Committee membership:
Audit (Chairman)
Key areas of experience: Finance
Current external appointments:
Anglo American plc (NED); Standard
Chartered Bank (NED); Akzo Nobel N.V.
(Supervisory Board member)
Previous relevant experience: BP plc
(CFO); UK Business – Government
Forum on Tax and Globalisation
(Member); UK Government’s Public
Services Productivity Panel (Vice-
Chairman)

MARY MA
Non-Executive Director

HIXONIA NYASULU
Non-Executive Director

SIR MALCOLM RIFKIND
Non-Executive Director

JOHN RISHTON
Non-Executive Director

Nationality Chinese Age 62, Female
Appointed May 2013
Committee membership: Audit
Key areas of experience:
Finance, consumer, science &
technology
Current external appointments:
Boyu Capital (Chairman); MXZ
Investment Limited (Director); Lenovo
Group Limited (NED); Securities and
Futures Commission in Hong Kong
(NED); Stelux Holdings International
Limited (NED)
Previous relevant experience:
TPG Capital (Partner); TPG China
(Co-Chairman)

Nationality South African
Age 60, Female
Appointed May 2007
Committee membership: Audit
Key areas of experience:
Sales & marketing
Current external appointments: Sasol
Oil (Pty) Limited (Director); Sequel
Property Investments (Beneficiary)
Previous relevant experience: Sasol
Ltd (Chairman); Ithala Development
Finance Corporation (Chairman);
Nedbank Limited (Deputy Chairman);
AVI Ltd (NED)

Nationality British Age 68, Male
Appointed May 2010
Committee membership: Nominating
and Corporate Governance
Key areas of experience: Government,
legal & regulatory affairs
Current external appointments:
Adam Smith International (NED);
Alliance Medical Holdings Limited
(NED); Member of UK Parliament
Previous relevant experience:
Queen’s Counsel; Served in
Cabinets of Margaret Thatcher
and John Major, last position
being that of UK Foreign Secretary;
Continental Farmers Group plc (NED)

Nationality British Age 57, Male
Appointed May 2013
Committee membership: Audit
Key areas of experience:
Finance, sales & marketing
Current external appointments:
Rolls-Royce Holdings plc (CEO);
AeroSpace and Defence Trade
Organisation (ASD) (Board member)
Previous relevant experience:
Royal Ahold N.V. (CEO, President and
CFO); ICA AB (NED); Allied Domecq plc
(NED); British Airways plc (CFO)

FEIKE SIJBESMA
Non-Executive Director

PAUL WALSH
Non-Executive Director

DIRECTORS’ KEY AREAS OF EXPERTISE

Nationality Dutch Age 55, Male
Appointed November 2014.
Key areas of experience:
Finance, consumer, science &
technology
Current external appointments:
Royal DSM N.V. (CEO and Chairman);
De Nederlandsche Bank (Member);
CEFIC (European Chemical Industry
Council) (Board member)
Previous relevant experience:
Supervisory board of DSM Netherlands
(Chairman); Dutch Genomics Initiative
(NGI) (Member); University Utrecht
(Board member); Dutch Cancer Institute
(NKI/AVL) (Board member)

Nationality British Age 59, Male
Appointed May 2009
Committee membership: Compensation
(Chairman)
Key areas of experience: Finance,
consumer, sales & marketing
Current external appointments:
Compass Group plc (Chairman); FedEx
Corporation Inc. (NED); Avanti
Communications Group plc (NED); Ontex
(Chairman); United Spirits Limited (NED);
RM2 (NED)
Previous relevant experience:
Diageo plc (CEO); Centrica plc (NED)

Finance
Consumer
Science & technology
Sales & marketing
Academic / Gov. / Legal / Regulatory Affairs

9
7
4
5
3

Unilever Annual Report and Accounts 2014GovernanceUNILEVER LEADERSHIP EXECUTIVE (ULE)

FOR PAUL POLMAN AND JEAN-MARC HUËT SEE PAGE 54

DOUG BAILLIE
Chief Human Resources
Officer

Nationality British Age 59, Male
Appointed Chief HR Officer in
February 2011
Appointed to ULE as President
of Western Europe in May 2008
Joined Unilever 1978
Previous Unilever posts include:
Hindustan Unilever Limited (CEO);
South Asia (Group VP); Africa, Middle
East and Turkey (Group VP)
Current external appointments:
Synergos (Board member)

DAVID BLANCHARD
Chief R&D Officer

KEVIN HAVELOCK
President, Refreshment

ALAN JOPE
President, Personal Care

Nationality British Age 50, Male
Appointed to ULE February 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 British Age 57, Male
Appointed to ULE November 2011
Joined Unilever 1985
Previous Unilever posts include:
FRALIB France (Président Directeur
Général); Unilever Arabia (Chairman);
Unilever UK (Chairman); Unilever USA
(President)
Current External Appointments: Pepsi/
Lipton JV (Co-Chairman)

Nationality British Age 50, 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

NITIN PARANJPE
President, Home Care

ANTOINE DE SAINT-AFFRIQUE
President, Foods

PIER LUIGI SIGISMONDI
Chief Supply Chain Officer

Nationality Dutch Age 46, 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:
Enactus (Worldwide Board member);
USA Grocery Manufacturing Association
(Board member)

Nationality Indian Age 51, 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)
Current external appointments:
Bhavishya Alliance Child Nutrition
Initiatives (Director)

Nationality French Age 50, Male
Appointed to ULE November 2011
First joined Unilever 1989 until 1997;
re-joined Unilever 2000
Previous Unilever posts include: Skin
category (EVP); Unilever Central and
Eastern Europe (EVP);
Current external appointments:
Conseiller du Commerce Extérieur de la
France; Essilor International (NED)

Nationality Italian Age 49, Male
Appointed to ULE September 2009
Previous posts include: Nestlé Mexico.
(VP, Operations and R&D); Nestlé S.A.;
A T Kearney (VP, Operations)
Current external appointments: Rexel
S.A. (NED)

RITVA SOTAMAA
Chief Legal Officer

Nationality Finnish Age 51, Female
Appointed to ULE February 2013
Previous posts include: Siemens
AG – Siemens Healthcare (GC);
General Electric Company – GE
Healthcare (various positions including
GE Healthcare Systems (GC));
Instrumentarium Corporation (GC)

KEITH WEED
Chief Marketing and
Communications Officer

Nationality British Age 53, 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: Sun
Products Corporation (NED);
Collectively Limited (Chairman);
Business in the Community
International Board (Board member);
World Economic Forum Consumer
Industry (Board member)

JAN ZIJDERVELD
President, Europe

Nationality Dutch Age 50, 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 (Board member); FoodDrinkEurope
(Board member); Pepsi/Lipton JV (Board
member); ECR Europe (Efficient
Consumer Response) (Board member
and Co-Chairman)

Key:
NED Non-Executive Director
EVP Executive Vice President
SVP Senior Vice President
VP
Vice President
GC General Counsel

Unilever Annual Report and Accounts 2014Governance

REPORT OF THE
AUDIT COMMITTEE

COMMITTEE MEMBERS AND ATTENDANCE

Byron Grote
Chairman of the Audit Committee

Mary Ma
Hixonia Nyasulu
John Rishton

ATTENDANCE

7 / 8

8 / 8
8 / 8
8 / 8

This table shows the membership of the Committee together with their
attendance at meetings during 2014. If Directors are unable to attend
a meeting, they have the opportunity beforehand to discuss any agenda
items with the Committee Chairman. Attendance is expressed as the
number of meetings attended out of the number eligible to be attended.

HIGHLIGHTS OF 2014

• Review of the Annual Report & Accounts
• Oversight of transition to the new

external auditors

• Review of management’s improvements to

reporting and internal control arrangements
• Review of Unilever’s major change programmes
• Review of IT security and data privacy

PRIORITIES FOR 2015

• Ongoing assessment of new regulatory

requirements for audit committees with respect
to reporting and governance

• Review of Unilever’s major change programmes
• Review of non-financial KPIs
• Review of IT security and resilience
• Impact of new global tax regulations

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 Byron Grote. The other members
are Mary Ma, Hixonia Nyasulu and John Rishton. For the purposes
of the US Sarbanes-Oxley Act of 2002 Byron Grote 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, Group
Controller, Chief Legal Officer, Group Secretary and the external
auditor. 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 auditor, 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 their
nomination for shareholder approval; and approval of their
fees, refer to note 25 on page 128;

• The performance of the internal audit function; and
• Approval of Unilever Leadership Executive (ULE) expense

policy and 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 their remit. In 2014, sessions
on corporate governance and reporting updates and cyber
security were held.

HOW THE COMMITTEE HAS DISCHARGED ITS RESPONSIBILITIES
During the year, the Committee’s principal activities were as follows:

FINANCIAL STATEMENTS
The Committee reviewed 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,
prior to their publication. They also reviewed the Annual Report
and Accounts and Annual Report on Form 20-F. These reviews
incorporated the accounting policies and significant judgements
and estimates underpinning the financial statements as disclosed
within note 1 on pages 88 and 89. 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 page 90;

• Direct tax provisions and contingencies, refer to note 6 on pages

100 to 102;

• Indirect tax provisions and contingencies, refer to note 19 on

page 123.

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 auditor and further information can
be found on page 80. 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 Board the Committee considered whether
the 2014 Annual Report and Accounts was fair, balanced and
understandable and whether it provided the necessary
information for shareholders to assess the Group’s performance,
business model and strategy. The Committee were satisfied that,
taken as a whole, the 2014 Annual Report and Accounts is fair,
balanced and understandable.

Unilever Annual Report and Accounts 2014GovernanceRISK 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 2014 corporate risks for which the Audit Committee had
oversight and the proposed 2015 corporate risks identified
by the ULE;

• management’s improvements to reporting and internal financial

control arrangements;

• processes related to cyber security, information management

and privacy;

• 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 2014 the Committee oversaw the independent assurance
work that is performed on a number of our Unilever Sustainable
Living Plan (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 fully 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 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.

audit contract by one year, and recommended to the Boards the
re-appointment of the external auditors. On the recommendation
of the Committee, the Directors will be proposing the re-
appointment of KPMG at the AGMs in April 2015.

Both Unilever and KPMG have safeguards in place to avoid the
possibility that the 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 gaining feedback from key
stakeholders at all levels across Unilever.

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 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.

Several types of engagements are prohibited, including:
• bookkeeping or similar services;
• systems design and implementation related to financial

information or risk management;

• valuation services;
• actuarial services;
•
internal audit;
• broker, dealer, investment adviser or investment bank

services;

• legal services;
• design and/or implementation of risk management processes

and systems; and

• staff secondments to a management function.

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 Group Controller. These authorities are
reviewed regularly and, where necessary, updated in the light of
internal developments, external developments and best practice.

EVALUATION OF THE AUDIT COMMITTEE
As part of the external Board evaluation carried out in 2014,
the Boards evaluated the performance of the Committee. The
Committee also carried out an assessment of its own
performance. Each concluded that the Committee is performing
effectively. Nevertheless, the Committee agreed that to enhance
its effectiveness it would seek opportunities for all Committee
members to visit a key accounting and reporting centre.

EXTERNAL AUDITORS
As a result of the tender performed in 2013, shareholders approved
the appointment of KPMG as the Group’s external auditor at the
2014 AGMs in May and throughout the year the Committee oversaw
and helped facilitate a smooth transition from the former auditors.
The Committee has approved the extension of the current external

Byron Grote
Chairman of the Audit Committee
Mary Ma
Hixonia Nyasulu
John Rishton

Unilever Annual Report and Accounts 2014GovernanceREPORT OF THE CORPORATE
RESPONSIBILITY COMMITTEE

COMMITTEE MEMBERS AND ATTENDANCE

Louise Fresco
Chairman of the Corporate
Responsibility Committee

Laura Cha
Charles Golden

ATTENDANCE

4 / 4

4 / 4
2 / 2

HIGHLIGHTS OF 2014

• Scrutiny of Unilever’s Code of Business

Principles and Unilever’s new Responsible
Sourcing Policy

• Review of progress on the Unilever Sustainable

Living Plan

• Product quality and food safety

PRIORITIES FOR 2015

• Compliance with Code of Business Principles,

particularly by third parties

• The Unilever Sustainable Living Plan:

progress on delivering the Plan

• Product quality and safety
• Corporate reputation

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 key element of the Committee’s role
is the need to identify any external developments which are likely
to have an influence upon Unilever’s standing in society and to
bring these to the attention of the Boards.

The Committee currently comprises two Non-Executive
Directors: Louise Fresco, who chairs the Committee, and Laura
Cha. The Chief Marketing & Communications Officer attends the
Committee’s meetings. Charles Golden retired as a Non-
Executive Director of Unilever at the 2014 AGMs in May.

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 (formerly
called the Unilever Sustainable Development Group) – 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 help to
keep the Boards informed of current and emerging trends
and any potential risks arising from sustainability issues.

During 2014 the Committee reviewed its terms of reference of the
Committee 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 our 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 2014. Following the Committee’s terms of reference,
Unilever’s corporate risks and the ‘3+1’ goals set for individual
committees, the Committee works to a structured agenda,
enabling members to focus in detail on the responsibilities
assigned to them.

The agenda covers the Code of Business Principles (the Code) and
litigation as well as 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.

CODE OF BUSINESS PRINCIPLES
The Committee is responsible for the oversight of the Code and
associated Code Policies which set out the standards of conduct
we expect of our employees.

The Committee ensures that the Code and Code Policies
remain fit for purpose and are appropriately applied. The
Audit Committee also considers the Code as part of its remit
to review risk management.

Unilever Annual Report and Accounts 2014GovernanceThe Committee maintains close scrutiny of the mechanisms
for compliance with 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 completion
of investigations into non-compliance with the Code and Code
Policies and progress on training programmes as well as any
trends which may emerge from reports of Code non-compliance.

The Committee also discussed Unilever’s ambitions to achieve
systemic change in areas that support its business priorities.
Unilever has defined three areas where it has the scale and
resources to create transformational change. It is deepening
its efforts to work towards eliminating deforestation from supply
chains; championing sustainable agriculture and the development
of smallholder farmers; and improving hygiene through
handwashing, safe drinking water and sanitation.

FURTHER ITEMS
Other discussions during the year focused on obesity, progress on
alternatives to animal testing and consumer confidence in the use
of chemicals. The systems and processes in place for managing
issues such as these were also scrutinised as they are essential
in helping to maintain Unilever’s good reputation.

EVALUATION OF THE CORPORATE RESPONSIBILITY
COMMITTEE
As part of the external Board evaluation carried out in 2014,
the Boards evaluated the performance of the Committee.
The Committee also carried out an assessment of its own
performance. Each concluded that the Committee is performing
effectively. The Committee agreed that the structure of its
meetings and its focus on priority topics were working well and
should be continued.

Louise Fresco
Chairman of the Corporate Responsibility Committee
Laura Cha

Further details on the USLP can be found in Unilever’s online Sustainable
Living Report 2014 to be published in May 2015.

www.unilever.com/sustainable-living

Third parties’ compliance with the Code is essential for the
protection of the reputation of Unilever and its brands. This
was a priority for the Committee in 2014 and remains high
on its agenda for 2015.

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 on ‘legal
proceedings’ please see note 20 on page 125.

SAFETY
The Committee reviews a scorecard analysis of progress
on occupational safety and product safety and quality at each
meeting. These quarterly scorecards are complemented by
regular in-depth discussions to reassure committee members
that systems and processes remain robust.

Occupational safety, particularly road safety, remains a high
priority for Unilever and the Committee noted considerable
effort has been made to counter a slight dip in performance
at the beginning of 2014.

Having discussed Unilever’s policies and processes for product
safety, including incident management, members considered
that Unilever adopts a systematic approach that focuses
on prevention.

UNILEVER SUSTAINABLE LIVING PLAN
The USLP is at the heart of Unilever’s Vision to double the size of its
business while reducing its environmental footprint and increasing
its positive social impact. By making sustainability integral to how
Unilever does business, the USLP provides the differentiator in
Unilever’s business model. Given its strategic importance, the
Committee monitors progress on the USLP and reviews any
potential risks that could affect Unilever’s reputation.

One of the Committee’s ongoing priorities is to ensure that delivery
of the USLP is maintained through appropriate business strategies.

The USLP was launched at the end of 2010 and much has been
learned in implementing the plan since then. In 2014 Unilever
reviewed its strategy and approach to focus its attention on the
areas that matter most to the business and where its contribution
can achieve the greatest impact on society.

An important outcome of this review is the expansion of the
Enhancing Livelihoods pillar of the USLP to embrace commitments
on fairness in the workplace, opportunities for women and inclusive
business. The promotion of human rights is an important
component in these new commitments and the Committee studied
the implications of the UN Guiding Principles on Human Rights.
It also welcomed the launch of Unilever’s new Responsible
Sourcing Policy as a crucial step in promoting human rights with
Unilever’s suppliers (see page 8).

Unilever Annual Report and Accounts 2014GovernanceREPORT OF THE NOMINATING AND
CORPORATE GOVERNANCE COMMITTEE

COMMITTEE MEMBERS, MEMBERSHIP STATUS
AND ATTENDANCE

Kees Storm
Chairman of the Nominating and
Corporate Governance Committee

Sir Malcolm Rifkind
Michael Treschow

ATTENDANCE

7/7

7/7
7/7

HIGHLIGHTS OF 2014

• Director and Unilever Leadership
Executive Succession Planning

• External Board evaluation

PRIORITIES FOR 2015

• Recommendations for new Non-Executive

Directors

• Planning for Chairman succession
• Monitoring of emerging Corporate Governance

developments

• Active participation in relevant Corporate

Governance consultations

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. 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 the Committee’s terms of reference
to ensure they remained in line with relevant corporate
governance guidelines and to determine whether its
responsibilities are properly described. The amended terms
became effective on 1 January 2015.

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 2014
(or part thereof) were the Chief Executive Officer, the Chief HR
Officer and the Group Secretary.

In 2014 the Committee met seven times. At the start of the year
the Committee considered the results of the Committee’s annual
self-evaluation for 2013 and used these to help create an annual
plan for meetings for 2014.

APPOINTMENT AND RE-APPOINTMENT OF DIRECTORS
Re-appointment: Non-Executive Directors normally serve for
a maximum of nine 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. All
existing Executive and Non-Executive Directors, unless they are
retiring, submit themselves for evaluation by the Committee every
year. An Executive Director stops holding executive office on
ceasing to be a Director. The Chairman will inform the Committee
of the outcomes of his discussions with each Director on individual
performance. Based upon the evaluation of the Boards, its
Committees and the continued good performance of individual
Directors, the Committee recommends to each Board a list of
Directors for re-election at the relevant company’s AGMs. In 2014,
Charles Golden decided not to put himself forward for re-election
at the 2014 AGMs in May 2014. The Committee proposed the
nomination of all other Directors. Directors are appointed by
shareholders by a simple majority vote at the AGMs.

Appointment: Where a vacancy arises on the Boards, the
Committee may seek the services of specialist recruitment firms
and other external experts to assist in finding individuals with
the appropriate skills and expertise. The Committee reviews
candidates presented by the recruitment firm, or recommended
by Directors and members of the Unilever Leadership Executive
(ULE), and all members of the Committee are involved in the
interview process before making their recommendations to the
Boards for approval. The Committee also recommends to the
Boards candidates for election as Chairman and Vice-Chairman/
Senior Independent Director.

When recruiting the Committee will take into account the profile
of Unilever’s Boards of Directors set out in the ‘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 are able to allocate sufficient time to perform their
responsibilities effectively. With respect to composition and
qualities, the Boards should be in keeping with the size of Unilever,
its portfolio, culture and geographical spread and its status as a

Unilever Annual Report and Accounts 2014Governance

PROFILE OF UNILEVER’S BOARDS OF DIRECTORS

DESIRED EXPERTISE AND EXPERIENCE
In view of Unilever’s objectives and activities, it is important
that the Boards have sufficient financial literacy, have at least
one financial expert and are composed in such a way that the
following expertise and experience are present in one or
more of its members:
• Executive management experience and knowledge of
corporate governance issues at main board level with
a company comparable in size and international spread
of activities with multiple stock exchange listings;

• Understanding of human resources and remuneration

in large international companies;

• Experience in financial administration, accounting policies

and internal control;

• Risk management of multinationals with share listings;
• Understanding of the markets where Unilever is active;
• Experience in and understanding of the fast-moving

consumer goods (FMCG) market;

• Knowledge of marketing and commercial expertise;
• Awareness of corporate social responsibility issues; and
• Experience with R&D in those fields where Unilever

is active.

PROFILE
This profile guides the Nominating and Corporate
Governance Committee and the Boards on the occasion
of the nomination of Directors. It is reviewed and updated
by the Boards periodically.

listed company. The objective pursued by the Boards is to have a
variety of age, gender, expertise, social background and
nationality and, wherever possible, the Boards should reflect
Unilever’s consumer base and take into account the footprint and
strategy of the Group.

In 2014, the Committee engaged the services of Russell Reynolds
Associates, an executive search agency, to assist with the
recruitment of a new Non-Executive Director. Russell Reynolds
Associates, who also assist Unilever with the recruitment of
senior executives, helped to identify Feike Sijbesma as a potential
candidate. The Committee recommended to the Boards that Feike
Sijbesma be nominated as a new Non-Executive Director at the
2014 AGMs. In May 2014 the AGMs resolved to appoint Feike and
his appointment took effect on 1 November 2014. Feike is a
leading business figure and brings significant additional expertise
to the Boards, including in the important areas of food, nutrition
and sustainability.

Succession planning: 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.

The Committee, on behalf of the Boards, continued during 2014
to consider succession planning for the Boards given that Byron
Grote and Kees Storm (Vice-Chairman/Senior Independent
Director) are expected to retire at the AGMs in May 2015 and
Michael Treschow (the Chairman), and Hixonia Nyasulu are
expected to retire in May 2016. The Committee actively engaged
with the Boards in 2014 on potential Non-Executive Director
candidates and on the profile of a future Chairman.

In addition, during 2014, the Committee consulted with the Chief
Executive Officer on the selection criteria and appointment
procedures for senior management changes including changes
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 gender is only
one part of diversity, and 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 40% of our Non-Executive
Directors are women.

EVALUATION
As part of the external Board evaluation carried out in 2014,
the Boards evaluated the performance of the Committee.
The Committee also carried out an assessment of its own
performance, Each concluded that the Committee is performing
effectively. Nevertheless, the Committee agreed that, to enhance
its effectiveness, it would give fuller feedback to the Boards on the
appointment process of Non-Executive Directors and arrange for
the external recruitment firm used to present to the Boards.

Kees Storm
Chairman of the Nominating and Corporate
Governance Committee
Sir Malcolm Rifkind
Michael Treschow

Unilever Annual Report and Accounts 2014GovernanceDIRECTORS’ REMUNERATION
REPORT

COMMITTEE MEMBERS AND ATTENDANCE

CHAIRMAN’S LETTER

Paul Walsh
Chairman of the Compensation Committee (previously called
the Compensation and Management Resources Committee)

5 / 5

ATTENDANCE

Ann Fudge
Kees Storm
Michael Treschow

5 / 5
4 / 5
5 / 5

This table shows the attendance of Directors at Committee meetings held
in the year ended 31 December 2014. If Directors are unable to attend a
meeting, they have the opportunity beforehand to discuss any agenda
items with the Committee Chairman. Attendance is expressed as the
number of meetings attended out of the number eligible to be attended.

HIGHLIGHTS OF 2014

• No changes have been made to the remuneration

policy during the year.

• The Committee approved the implementation
and roll-out of the new global employee share
plan ‘SHARES’ for employees below
management level.

• The Committee reviewed the remuneration
framework and concluded that it continues
to serve Unilever well, particularly in light
of the strong level of shareholder support
for Unilever’s remuneration policy at the
2014 AGMs.

• Review of the global reward structure for

Unilever’s ‘Top 100’ executive management
population below Executive Director level, two
years after implementation, has proven that
it is delivering effectively against the objectives
that had been set for it.

PRIORITIES FOR 2015

• Further review and shaping of Unilever’s future
reward framework to ensure that it remains
aligned with strategy and long-term shareholder
value creation.

• Review of relative competitive position of reward

levels for Unilever’s ‘Top 100’ executive
management population.

• Review of progress in implementing SHARES.

FORMAT OF THE DIRECTORS’ REMUNERATION REPORT
Our Directors’ Remuneration Report is split into the
following sections:

• Chairman’s letter – page 62 to 63
• Remuneration Principles – page 63 to 64
• Annual Remuneration Report – page 65 to 77

DEAR SHAREHOLDERS,
I am pleased to report that our Remuneration Policy was adopted
at the 2014 NV and PLC AGMs with strong levels of support and
remains unchanged for 2015.

www.unilever.com/ara2014/downloads

BUSINESS PERFORMANCE AND REMUNERATION
OUTCOMES FOR 2014

Annual bonus – a year of resilient performance
During the year Unilever faced an increasingly challenging
external environment. In addition to fierce competition, we also
saw weakening consumer demand across many parts of the
world and increasing external volatility. The business responded
to the combination of these events with resilience by heightening
focus on cost control and margin improvement. Although our
overall underlying sales growth lowered to 2.9% we continued to
outperform our markets, as we have done consistently since
Paul Polman’s appointment as CEO. Through rigorous control of
overheads, we delivered a core operating margin improvement of
0.4 percentage points despite adverse currency movements. With
the quality of these results in mind, the Committee exercised its
judgement to uplift the annual bonus outcome from 68% to 80%
of target and decided to pay a bonus of 132% of salary (66% of
maximum) to the CEO, Paul Polman, and a bonus of 88% of salary
(59% of maximum) to the CFO, Jean-Marc Huët. The Committee
believes that these awards fairly reflect the performance
delivered in 2014. This consistency in performance delivery, now
established over the last six years, shows that Unilever is building
a more resilient company. We are better able to withstand the
challenges of an increasingly uncertain business environment
because we are moving towards a business model with long-term
sustainability at its core.

GSIP and MCIP – strong financial performance over the last
three years
Over the past three years, Unilever has again delivered very
strong financial performance. Underlying sales growth during
this period was 4.7% per annum. Core operating margin
improvement over the period was an average of 0.37 percentage
points per year, demonstrating management’s drive for consistent
top and bottom line growth. Unilever has also generated very
strong operating cash in the period, with cumulative operating
cash flow of €15.5 billion. Total shareholder return (TSR) over this
three-year period was below the performance of our peers, and,
as a result, no part of the GSIP and MCIP awards related to TSR
will vest. The Committee believes the outcomes of the long-term
share incentive plans represent a fair reflection of Unilever’s
underlying performance over the last three years. On the basis
of this performance, the Committee determined that the GSIP
awards to the end of 2014 together with MCIP awards, which were
granted to Executive Directors for the first time in 2012, will vest
at 121% of initial award levels (ie 61% of maximum for GSIP and
81% of maximum awards for MCIP, which is capped at 150%).

Unilever Annual Report and Accounts 2014GovernanceREMUNERATION PRINCIPLES

SUPPORTING THE DELIVERY OF OUR STRATEGY THROUGH
REMUNERATION ARRANGEMENTS
Our business vision is to double the size of Unilever while
reducing our environmental footprint and increasing our positive
social impact through a focus on our brands, our operations and
our people, and the Unilever Sustainable Living Plan (USLP).
Remuneration is one of the key tools that we have as a business
to help us to motivate our people to achieve our goals.

Our remuneration arrangements are designed to support our
business vision and the implementation of our strategy. The key
elements of our remuneration package for Executive Directors
are summarised below:

FIXED
ELEMENTS

PERFORMANCE-RELATED
ELEMENTS

Base salary

Fixed allowance
and other
benefits

Annual bonus

Longer-term:
MCIP

Longer-term:
GSIP

STRATEGIC LINKAGE OF REWARD TO BUSINESS
PERFORMANCE
As in previous years, the Committee continues to use
performance-based incentives to drive the business towards
delivering sustainable long-term value for shareholders. For
2015, the Committee has decided to focus on the importance of
cash generation in an environment of lower global growth rates
by replacing underlying volume growth with growth in free cash
flow (FCF) as a performance measure for the annual bonus, in
alignment with our strategy as set out in the Strategic Report
(www.unilever.com/ara2014/downloads). FCF is a widely reported
metric used to evaluate Unilever’s in-year performance. For our
shareholders, cash is an important driver of value creation,
allowing us to pay attractive and sustainable dividends while
continuing to invest in the business.

Paul Walsh
Chairman of the Compensation Committee

Unilever Annual Report and Accounts 2014GovernanceDIRECTORS’ REMUNERATION
REPORT CONTINUED

THE PACKAGE HAS BEEN DESIGNED BASED ON THE FOLLOWING KEY PRINCIPLES:

PAYING FOR
PERFORMANCE

The focus of our package is on variable pay based on annual and long-term performance. Performance-
related elements are structured so that target levels of reward are competitive, but Executive Directors
can only earn higher rewards if they exceed the ongoing standards of performance that Unilever requires.

ALIGNING
PERFORMANCE
MEASURES
WITH STRATEGY

DELIVERING
SUSTAINABLE
PERFORMANCE

ALIGNMENT
WITH
SHAREHOLDER
INTERESTS

The performance measures for our annual and long-term plans have been selected to support our
business strategy and the ongoing enhancement of shareholder value through a focus on increasing
sales, improving margin, cash generation and returns for shareholders.

Acknowledging that success is not only measured by delivering financial returns, we also consider
the quality of performance in terms of business results and leadership, including corporate social
responsibility and progress against the USLP, when determining rewards.

To ensure that remuneration arrangements fully support our sustainability agenda, the personal
performance goals under the annual bonus include USLP targets.

The majority of the package for our Executive Directors is delivered in Unilever shares to ensure that
the interests of executives are aligned with shareholders’ interests. This is further supported by
significant shareholding requirements, ensuring that a substantial portion of each Executive Director’s
personal wealth is linked to Unilever’s share price performance.

Non-Executive Directors are also encouraged to build up their personal holding of Unilever shares
to ensure alignment with shareholders’ interests.

PAYING
COMPETITIVELY

The overall remuneration package offered to Executive Directors should be sufficiently competitive to
attract and retain highly experienced and talented individuals, without paying more than is necessary.

PREVENTING
INAPPROPRIATE
RISK-TAKING

The Committee believes that Unilever’s risk management process provides the necessary control to
prevent inappropriate risk-taking. When the Committee reviews the structure and levels of performance-
related pay for Executive Directors and other members of the Unilever Leadership Executive (ULE), it
considers whether these might encourage behaviours that are incompatible with the long-term interests
of Unilever and its shareholders or that may raise any environmental, social or governance risks. Where
necessary, the Committee would take appropriate steps to address this.

Unilever Annual Report and Accounts 2014GovernanceANNUAL REMUNERATION REPORT

The following sets out how Unilever’s Remuneration Policy, which is available on our website, will be implemented in 2015 and how it
was implemented in 2014.

www.unilever.com/ara2014/downloads

IMPLEMENTATION OF THE REMUNERATION POLICY IN 2015 FOR EXECUTIVE DIRECTORS

ELEMENTS OF REMUNERATION

FIXED ELEMENTS
OF REMUNERATION

AT A GLANCE

DESCRIPTION

BASE SALARY

Salary effective from 1 January 2015:

• CEO £1,010,000 (unchanged from

2014)

• CFO £714,000 (unchanged from 2014)

FIXED ALLOWANCE

Fixed allowance for 2015:

• CEO – £250,000
• CFO – £220,000

The CFO’s allowance has been reduced
from £260,000 in 2014 to reflect the final
stage of the phasing-out of his annual
housing allowance.

In its 2011 Report, the Committee signalled its concern that the CEO’s
salary was positioned at the lower end of market practice compared to
similar sized UK and European companies. The Committee expressed
its intention to make further increases, as appropriate, to address this
over the next few years. Having held their salaries steady for longer
than intended and in view of the sustained track record of performance
delivery, the Committee recommended, and the Boards approved,
salary increases for the CEO and CFO with effect from January 2015.
In making these recommendations the Committee considered the
strong performance of Unilever and alignment, both to increases in
pay for the broader employee population and externally. The CEO and
CFO have turned down the salary increases recommended by the
Committee for 2015.

A fixed allowance not linked to base salary is provided as a simple,
competitive alternative to the provision of itemised benefits and pensions.

OTHER BENEFIT
ENTITLEMENTS

• Amounts for other benefits are not

known until the year end.

In line with Unilever’s Remuneration Policy, Executive Directors will be
provided with death, disability and medical insurance cover and actual
tax return preparation costs in 2015.

www.unilever.com/ara2014/downloads

In line with the commitments made to the current CEO on recruitment
and included in the Remuneration Policy, Unilever also pays the CEO’s
social security obligations in his country of residence to protect him
against the difference between employee social security obligations
in his country of residence versus the UK.

Conditional supplemental pension
The CEO also receives a conditional supplemental pension accrual to
compensate him for the arrangements forfeited on leaving his previous
employer. The CEO will receive a contribution to his supplemental
pension of 12% of the lower of his actual base salary over the year and
his 2011 base salary (£920,000) plus 3% per annum. The cap for 2015
has been kept at £976,028 with a maximum contribution of £117,123.

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.

PERFORMANCE ELEMENTS OF REMUNERATION
The actual targets for the annual bonus and the three business-focused performance measures for the MCIP and GSIP awards to be
made in 2015 have not been disclosed up front. The Boards deem this to be commercially sensitive information as targets could reveal
information about Unilever’s business plan and budgeting process to competitors, which could be damaging to Unilever’s business
interests and therefore to shareholders. Where appropriate, targets will be disclosed in the Directors’ Remuneration Report following
the end of the respective performance period.

Performance measures are selected to align with Unilever’s clearly stated growth ambition and our long-term business strategy.
Unilever’s primary business objective is to generate a sustainable improvement in business performance through increasing
underlying sales while steadily improving core operating margins and cash flow.

The measures chosen for the annual and long-term incentives support the delivery of this objective. 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 use of a performance measure based on total shareholder return measures Unilever’s
success relative to peers.

Unilever Annual Report and Accounts 2014GovernanceDIRECTORS’ REMUNERATION
REPORT CONTINUED

PERFORMANCE
ELEMENTS OF
REMUNERATION

ANNUAL BONUS

AT A GLANCE

DESCRIPTION

• CEO – target 120% of base salary,
maximum 200% of base salary
• CFO – target 100% of base salary,
maximum 150% of base salary

The performance measures for 2015 will be:

Underlying sales
growth (⅓)

Free cash flow (⅓)

Core operating
margin
improvement (⅓)

In addition, when determining annual bonus awards, the Committee will
also consider personal performance and the quality of results in terms
of both business results and leadership, including corporate social
responsibility and progress against the delivery of USLP goals.

The Committee determined that free cash flow would replace underlying
volume growth as a performance measure for 2015. This change will
assist Unilever in focusing on cost reduction and improving cash
generation, as well as top-line growth, in a challenging market
environment. Underlying volume growth will remain a factor that is
considered by the Committee as part of the quality of results assessment.

Matching shares awarded under the MCIP in 2015 will be subject to the
same measures as GSIP awards made in the year. Further details of the
performance measures are disclosed below.

The Committee considers that using the same performance measures
across both the MCIP and GSIP is appropriate, as the performance
measures used reflect our key strategic goals and maintain the
alignment of our incentive plans to delivering our clearly stated growth
ambitions. Given that we use four different performance measures, the
Committee believes that the proportion of remuneration linked to each
performance measure is not excessive.

MCIP 2015

• Out of their annual bonus awards,

Executive Directors are required to
invest 25% of their gross bonus and
may invest up to 60% of their gross
bonus in the MCIP (investment shares
which are held in the individual’s name)

• They are awarded an equal number

of MCIP matching shares

• Maximum vesting for matching shares

is 150% of the initial award

• The maximum award of matching
shares for the CEO and CFO (as a
percentage of base salary at grant),
assuming maximum bonus, maximum
deferral under the MCIP, would be
180% of base salary and 135% of base
salary respectively

GSIP 2015 AWARDS

• Target award 200% of base salary

Performance targets are assessed over a three-year period.

for the CEO and 175% of base salary
for CFO

• Maximum vesting of 200% initial award
• Maximum vesting of 400% of base

salary for the CEO and 350% of base
salary for the CFO

Performance measures for 2015 awards:

Underlying
sales growth
(25%)(a)

Core operating
margin
improvement
(25%)(a)

Cumulative
operating cash
flow (25%)(a)

Relative total
shareholder
return (25%)(b)

Both performance conditions
must reach threshold
performance, before any
payout in respect of either
measure is made.

(a) For the three business-focused measures, 25% of target awards vest for achieving threshold performance. 200% of target awards vest (capped at 150%

under the MCIP) for maximum performance.

(b) 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 is as follows:

Avon
Beiersdorf
Campbell Soup
Coca-Cola

Colgate-Palmolive
Danone
General Mills
Estée Lauder

Henkel
Kao
Kellogg’s
Kimberly-Clark

L’Oréal
Nestlé
PepsiCo
Procter & Gamble

Reckitt Benckiser
Shiseido

The TSR comparator group consists of 18 companies (19 including Unilever). No shares in the portion of the award subject to TSR vest if Unilever is ranked
below position 10 in the peer group at the end of the three-year period, 50% vests if Unilever is ranked 10th, 100% vests if Unilever is ranked 7th and 200%
(150% under the MCIP) vests if Unilever is ranked 3rd or above. Straight-line vesting occurs between these points. The Committee may change the TSR
vesting levels set out above if the number of companies in the TSR comparator group changes.

Unilever Annual Report and Accounts 2014Governance

ULTIMATE REMEDY/MALUS
Grants under the GSIP and MCIP 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 will only adjust the value of a vesting GSIP and MCIP award upwards after obtaining shareholder consent.
With effect from the 2015 GSIP and MCIP awards, the Committee may apply malus to reduce an award or determine that it 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 or conduct by the individual
that results in significant losses or serious reputational damage to Unilever. With effect from the 2015 annual bonus (based on 2014
performance), the annual bonus will also be subject to malus on the same grounds as apply for GSIP and MCIP awards.

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 Share Matching Plan, the GSIP and the MCIP. 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.

In 2014, 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 2014 FOR EXECUTIVE
DIRECTORS (AUDITED)
The table below shows a single figure of remuneration for each of our Executive Directors, for the years 2013 (restated to reflect final value
of GSIP performance shares on the date of vesting) and 2014.

(A) Base salary
(B) Fixed allowances and other benefits
(C) Annual bonus

Long-term incentives

(D) MCIP matching shares –
(required by UK law)
(E) GSIP performance shares –
(required by UK law)

Long-term incentives (sub-total)
(F) Conditional supplemental pension

Total remuneration paid – (required by UK law) (A+B+C+D+E+F)

(G) Share awards (required by Dutch law)

Total remuneration paid – (required by Dutch law) (A+B+C+F+G)

Paul Polman
CEO (UK)
(€’000)

Jean-Marc Huët
CFO (UK)
(€’000)

2014

1,251
787
1,652

1,803

3,923
5,726
145

9,561

4,206

8,041

2013
(Restated)

1,189
700
1,864

n/a

3,798
3,798
138

7,689

4,069

7,960

2014

885
377
778

370

3,022
3,392
n/a

5,432

2,249

4,289

2013
(Restated)

841
594
879

n/a

2,630
2,630
n/a

4,944

2,652

4,966

Where relevant, amounts for 2014 have been translated into euros using the average exchange rate over 2014 (€1 = £0.8071), excluding
amounts in respect of long-term incentive plans which have been translated into euros using the exchange rate at vesting date
(€1 = £0.7383). Amounts for 2013 have been translated into euros using the average exchange rate over 2013 (€1 = £0.8492), excluding
amounts in respect of GSIP which have been translated into euros using the exchange rate at vesting date (€1 = £0.8351).

We do not grant our Executive Directors any personal loans or guarantees.

ELEMENTS OF SINGLE FIGURE REMUNERATION 2014

(A) BASE SALARY (AUDITED)
Salary set in sterling and paid in 2014:
• CEO – £1,010,000
• CFO – £714,000

Unilever Annual Report and Accounts 2014GovernanceDIRECTORS’ REMUNERATION
REPORT CONTINUED

(B) FIXED ALLOWANCE AND OTHER BENEFITS (AUDITED)
For 2014 this comprises:

Fixed allowance
Medical insurance cover and actual tax return preparation costs
Provision of death-in-service benefits and administration
Unilever 2005 Share Save Plan(2)
Payment to protect against difference between employee social security obligations in country of residence
versus UK
Total

Paul Polman
CEO (UK)

Jean-Marc Huët
CFO (UK)

(£)(1)

2014

250,000
54,637
10,901
11,868

307,899
635,305(3)

(£)(1)

2014

260,000
35,765
8,174
n/a

n/a
303,939

(1) The numbers in this table are quoted in sterling and have been translated into euros for the single figure of remuneration table above using the average

exchange rate over 2014 of €1 = £0.8071.

(2) On 25 November 2014 Paul Polman exercised his 1,042 options under the Unilever 2005 Share Save Plan. The option price at grant was £14.92 and the closing

share price on the exercise date was £26.31 so his notional gain on exercise was £11,868.

(3) In 2013, the Dutch government applied an additional crisis tax charge of 16% over 2013 taxable income of employees above €150,000. This tax charge for

Unilever N.V. for Paul Polman over 2013 was €148,969. This tax is an expense to the employer and therefore not included in the table above and is no longer
applicable in 2014.

(C) ANNUAL BONUS (AUDITED)
Annual bonus 2014 actual outcomes
• CEO – £1,333,200 (which is 66% of maximum, 132% of base salary)
• CFO – £628,320 (which is 59% of maximum, 88% of base salary)

This includes cash and shares invested under the MCIP. See below for details.

Performance against targets:

PERFORMANCE

Performance metrics

Threshold

Target

Maximum

Underlying sales growth (⅓)

Underlying volume growth (⅓)

2.9%

1.0%

Result
vesting
(% of target)

30%

40%

Core operating margin improvement
compared to prior year (⅓)

0 percentage
points

0.4 percentage
points

0.6 percentage
points

133%

Overall performance ratio (based on
actual performance bonus formula)

Actual performance ratio
(after Committee discretion)

200%

68%

80%

2014 has been a year of resilient performance in the face of stiff competition and a deteriorating economic environment in many of the
markets in which Unilever operates.

At the beginning of the year, the Committee set stretching performance targets, against which management has made solid progress
despite declining growth rates during the year across many of the markets in which Unilever sells its products. Underlying sales growth
was 2.9% and underlying volume growth was 1.0%. Although these results are towards the lower end of the performance range, Unilever
has continued to grow ahead of its markets. Improvement in core operating margin compared with 2013 was 0.4 percentage points.
The Committee considered this to be an outstanding performance, especially given unfavourable movements in exchange rates over the
course of 2014. To achieve this result, underlying core operating margin growth at constant exchange rates has been 0.8 percentage points
reflecting strong discipline in controlling costs.

In view of the high quality of results achieved over the course of the year, the Committee exercised its judgement to raise the overall
Group bonus score from 68% to 80% of target (40% of maximum). The Committee considered this to be a fairer representation of the
performance delivered by the executive team during 2014. In the past five years, including 2014, the Committee has exercised its
discretion to adjust the formulaic outcome of the annual bonus calculation downwards three times and upwards twice.

In determining bonus outcomes for Paul Polman, the Committee also considered his strong personal performance and leadership in
driving Unilever to a more agile and resilient business, as well as his personal leadership in driving towards a more responsible long-term
sustainable business model, taking the needs of multiple stakeholders into account, driving diversity and making Unilever the choice for
talent in the majority of its markets. As a consequence of that review, Paul Polman was awarded a personal performance multiplier of
138%. This resulted in Paul Polman receiving a bonus of 132% of his base salary. This is calculated as follows:

Unilever Annual Report and Accounts 2014GovernanceTarget bonus: 120% of
base salary = £1,212,000

Unilever’s 2014
performance ratio = 80%

Personal performance
multiplier = 138%

£1,333,200
(132% of base salary)

In determining bonus outcomes for Jean-Marc Huët, the Committee also considered his personal performance and leadership, including
the management of Unilever’s financial risk exposure and driving enterprise wide efficiencies. As a consequence of that review, Jean-Marc
Huët was awarded a personal performance multiplier of 110%. This resulted in Jean-Marc Huët receiving a bonus of 88% of his base
salary. This is calculated as follows:

Target bonus: 100% of
base salary = £714,000

Unilever’s 2014
performance ratio = 80%

Personal performance
multiplier = 110%

£628,320
(88% of base salary)

MCIP 2015 AWARDS (BASED ON 2014 ANNUAL BONUS OUTCOMES)
On 13 February 2015, Paul Polman invested 60% (£799,920) and Jean-Marc Huët invested 25% (£157,080) of their 2014 bonus in MCIP
investment shares. Paul Polman elected to invest fully in NV shares. Jean-Marc Huët elected to receive a 50/50 mix of PLC/NV shares.

They each received a corresponding award of performance-related MCIP matching shares (awarded in the same form as the investment
shares). MCIP matching awards are subject to the same performance measures as GSIP awards. Further information on matching
awards is set out on page 65 to 66.

(D) MCIP – UK LAW REQUIREMENT (AUDITED)
2014 OUTCOMES
This includes MCIP matching shares granted on 17 February 2012 (based on the percentage of 2011 bonus that Executive Directors had
invested in Unilever shares) based on performance in the three-year period to 31 December 2014 which vested on 17 February 2015.

The values included in the single figure table for 2014 are calculated by multiplying the number of shares granted on 17 February 2012
(including additional shares in respect of accrued dividends through to 31 December 2014) by the level of vesting (121% of target awards).
The share prices on the date of vesting of NV €37.04 and PLC £28.01 have been translated into euros using the exchange rate on the date
of vesting: €1 = £0.7383.

The award was based on the same performance targets as the GSIP and performance against targets is outlined in section E below.

(E) GSIP – UK LAW REQUIREMENT (AUDITED)
2014 OUTCOMES
This includes GSIP performance shares granted on 17 February 2012, based on performance in the three-year period to 31 December
2014 which vested on 17 February 2015.

The values included in the single figure table for 2014 are calculated by multiplying the number of shares granted on 17 February 2012
(including additional shares in respect of accrued dividends through to 31 December 2014) by the level of vesting (121% of target
awards). The share prices on the date of vesting of NV €37.04 and PLC £28.01 have been translated into euros using the exchange rate
on the date of vesting: €1 = £0.7383.

The award was equally based on the performance measures outlined in the table below.

Performance against targets:

Performance metrics

Threshold

Underlying sales growth (pa) (25%)

Core operating margin improvement (25%)

Cumulative operating cash flow (25%)

Total shareholder return (25%)*

Overall vesting

0 percentage
points

€12.0bn

14th

10th

PERFORMANCE

Maximum

Result
vesting
(% of target)

4.7%

119%

0.37 percentage
points

0.4 percentage
points

185%

€15.5bn

€16.0bn

178%

3rd

121%

*Comparator group of 19 companies including Unilever. The comparator group is the same as disclosed on page 66.

25% of target awards vest for threshold performance under the three business focused performance measures. 50% of target awards vest for threshold
performance under the TSR performance measure.

Unilever Annual Report and Accounts 2014Governance

DIRECTORS’ REMUNERATION
REPORT CONTINUED

At the outset of the 2012-2014 performance period, the Committee set demanding performance ranges for the long-term incentive
plans, as shown in the table above. Over the past three years, Unilever has delivered very strong financial performance against these
ranges. Underlying sales growth during the period was 4.7% per annum and core operating margin improvement of 0.37 percentage
points per annum over the period demonstrate management’s commitment to delivering consistent top and bottom line growth.
Unilever has also generated very strong operating cash flow of €15.5 billion over the period. Total shareholder return over the period
was below the performance of our peers, consequently no part of this element of the award will vest. The Committee considers that
these outcomes are a fair reflection of Unilever’s performance over the period and determined that GSIP awards granted to Executive
Directors in 2012 will vest at 121% of the initial award level (ie 61% of maximum). The Committee also determined that MCIP awards
granted to Executive Directors in 2012 will vest at 121% of initial award levels (vesting capped at 150% – ie 81% of maximum awards).

The 2011 GSIP performance shares figure, included in the single figure remuneration in respect of 2013, has been restated to reflect
the actual number of shares that vested and the market value of the shares on the date of vesting of 14 March 2014 (PLC £23.69 and NV
€27.70) and have been translated into euros using the exchange rate on the date of vesting: €1 = £0.8351. The figure included in the 2013
Directors’ Remuneration Report was estimated based on the average share price for the period from 1 October 2013 to 31 December
2013 as the vesting date was post the publication of the 2013 Annual Report and Accounts. The actual values at the vesting date were:
Paul Polman €3,798,141 (estimated as €3,849,000) and Jean-Marc Huët €2,630,022 (estimated as €2,665,000).

(F) CONDITIONAL SUPPLEMENTAL PENSION (AUDITED)
CEO: Paul Polman
Conditional supplemental pension provision agreed with Paul Polman on hiring, which is conditional on his remaining in employment
with Unilever to age 60 and subsequently retiring from active service or his death or total disability prior to retirement. This was
£117,123 based on 12% of a capped salary of £976,028 for 2014.

CFO: Jean-Marc Huët
Jean-Marc Huët does not receive a conditional supplemental pension.

(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, a 98% adjustment factor for GSIP shares and MCIP matching shares awarded in 2014, 2013 and 2012.

OTHER IMPLEMENTATION INFORMATION FOR 2014

SCHEME INTERESTS AWARDED IN THE YEAR (AUDITED)

PLAN

BASIS OF AWARD

MCIP
Conditional
matching
share award
made on 14
February 2014

Based on the level of
2013 bonus paid in 2014
invested by the CEO
and CFO.

The following numbers
of matching shares
were awarded on 14
February 2014 (a):

MAXIMUM FACE
VALUE OF
AWARDS

CEO:

£1,400,994(b)

CFO:

£277,562(b)

CEO:

PLC – 0

NV – 41,775

CFO:

PLC – 4,036

NV – 4,036

Maximum vesting
results in 150% of
target awards vesting.

PERFORMANCE
PERIOD

1 January 2014 –
31 December 2016

THRESHOLD
VESTING (% OF
TARGET AWARD)

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 awards vest
for threshold
performance.

DETAILS OF
PERFORMANCE
MEASURES

Subject to four equally
weighted performance
measures (c):

• Underlying
sales growth
• Core operating

margin improvement

• Operating cash

flow and
• Relative total

shareholder return

Further details are set
out on page 65 to 66.

Unilever Annual Report and Accounts 2014GovernancePLAN

BASIS OF AWARD

MAXIMUM FACE
VALUE OF
AWARDS

THRESHOLD
VESTING (% OF
TARGET AWARD)

PERFORMANCE
PERIOD

DETAILS OF
PERFORMANCE
MEASURES

As opposite

GSIP
Conditional
share award
made on 14
February 2014

CEO:

£4,007,095(b)

CFO:

£2,478,622(b)

The CEO received a
target award of 200%
of base salary.

CEO:

PLC – 43,700

NV – 43,700

The CFO received a
target award of 175%
of base salary.

CFO:

PLC – 27,031

NV – 27,031

Maximum vesting
results in 200% of
target awards vesting,
which translates to a
maximum vesting of
400% of base salary for
the CEO and 350% of
base salary for the CFO.

(a) Under MCIP, 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 matching shares. Matching shares will be awarded in the same form as the investment shares (ie in PLC or NV shares or a
50/50 mix). On 14 February 2014, the CEO invested 60% (£949,905) and the CFO invested 25% (£186,533) of their 2013 bonus in MCIP investment shares. The
CEO elected to invest fully in NV shares. The CFO elected to receive a 50/50 mix of PLC/NV shares.

(b) The face values included in this table are calculated by multiplying the number of shares granted on 14 February 2014 by the share price on that day of PLC

£23.49 and NV €27.70 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 2014 of €1 = £0.8071.

(c) The actual targets for the three business-focused performance measures for the 2014 MCIP and GSIP awards have not been disclosed up front as the Boards
deem this to be commercially sensitive information as targets could reveal information about Unilever’s business plan and budgeting process to competitors,
which could be damaging to Unilever’s business interests and therefore to shareholders. Targets will be disclosed in the Directors’ Remuneration Report
following the end of the relevant performance period.

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
2014 and the interest in NV and PLC ordinary shares of Executive Directors and their connected persons as at 31 December 2014.

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 or by a member of his (immediate) family (‘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 acquired under a restricted stock arrangement will qualify on a net of tax basis.
• Shares awarded on a conditional basis by way of the GSIP, or the MCIP, will not qualify until the moment of vesting (ie once the

precise number of shares is fixed after the three-year vesting period 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’ INTERESTS IN SHARES AND SHARE OWNERSHIP (AUDITED)

Share ownership
guideline as % of
base salary

Have guidelines
been met?

Actual share
ownership (as a %

Shares held as at

1 January 2014(b)

Shares held as at
31 December 2014(b)

of base salary)(a)

PLC

CEO: Paul Polman

CFO: Jean-Marc Huët

400

300

yes

2004

310,572

266,546

486,191

287,296

871

86,620

86,853

118,050

118,559

(a) Calculated based on the minimum shareholding requirements and methodology set out above and the base salaries as included for the CEO and CFO in the single figure.
(b) NV shares are ordinary €0.16 shares and PLC shares are ordinary 3⅟9p shares.

Unilever Annual Report and Accounts 2014GovernanceDIRECTORS’ REMUNERATION
REPORT CONTINUED

On 13 February 2015, Paul Polman and Jean-Marc Huët invested 60% and 25% respectively of their annual bonus earned in respect of
2014 and paid in 2015 in the MCIP. This resulted in 29,128 NV investment shares for Paul Polman and 2,839 NV and 2,839 PLC investment
shares for Jean-Marc Huët. They each received a corresponding award of performance-related NV and PLC shares under the terms of
the MCIP.

The 17 February 2012 MCIP and GSIP grants vested on 17 February at 121%. In accordance with Unilever’s Remuneration Policy
(www.unilever.com/ara2014/downloads) Paul Polman elected for share choice and chose to receive his shares in the form of 100% NV
shares. Therefore, on vesting his PLC awards were cancelled and converted as 24,744 NV shares for MCIP and 53,847 NV shares for
GSIP, resulting in a total vesting for his MCIP award of 48,675 NV shares and 105,926 NV shares for his GSIP award. For Jean-Marc Huët
this resulted in 4,914 NV shares and 4,960 PLC shares under MCIP and 40,125 NV shares and 40,496 PLC shares under GSIP.

The voting rights of the Directors who hold interests in the share capital of NV and PLC are the same as for other holders of the class
of shares indicated. None of the Directors’ (Executive and Non-Executive) or other executive officers’ shareholdings amounts 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 amount 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 and is
therefore treated as interested in those shares.

INFORMATION IN RELATION TO OUTSTANDING SHARE INCENTIVE AWARDS
As at 31 December 2014, Paul Polman held awards over a total of 392,921 shares which are subject to performance conditions.
Jean-Marc Huët held awards over a total of 202,142 shares which are subject to performance conditions. There are no awards of shares
without performance conditions and no awards in the form of options.

SHARE MATCHING PLAN (AUDITED)

Paul Polman

Jean-Marc Huët

Balance of
conditional shares
at 1 January 2014

Conditional
shares vested

in 2014(a)

Balance of
conditional shares at
31 December 2014

Share type

No. of shares

Price at award

No. of shares

NV
PLC

9,932(b)
9,932(b)

5,047(c)
5,047(c)

9,932
9,932

5,047
5,047

€21.59
£18.35

0
0

(a) Each award of matching shares is conditional and vests three years after the date of the award subject to continued employment and maintenance of the

underlying bonus shares. These awards were not subject to further performance conditions.

(b) Awarded on 14 March 2011 and vested on 14 March 2014.
(c) Awarded on 14 March 2011 and vested on 14 March 2014.

There are no further outstanding awards under this plan and no further awards will be granted.

MANAGEMENT CO-INVESTMENT PLAN (AUDITED)
The following conditional shares were granted during 2014 and were outstanding at 31 December 2014 under the MCIP:

Paul Polman

Jean-Marc Huët

Balance of
conditional shares
at 1 January 2014

Share
type

NV
PLC

Original award

42,719(b)
42,912(b)

9,218(c)
9,259(c)

Conditional shares

awarded in 2014(a)

Performance period
1 January 2014 to
31 December 2016

41,775
0

4,036
4,036

Price at
award

€27.70
–

€27.70
£23.49

Dividend shares
accrued during

the year(d)

2,688
1,688

447
480

Balance of
conditional shares
at 31 December 2014

87,182
44,600

13,701
13,775

(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 65 to 66). 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 a 50/50 mix. Executive Directors receive a corresponding number of performance-related
matching shares. Matching shares will be awarded in the same form as the investment shares (ie in PLC or NV shares or a 50/50 mix). On 14 February 2014,
Paul Polman and Jean-Marc Huët invested in the MCIP 60% and 25% respectively of their annual bonus earned during 2013 and paid in 2014 and received a
corresponding award of matching shares which will vest, subject to performance, on 14 February 2017.

(b) This includes 17,772 NV and PLC shares granted on 17 February 2012 and 641 NV shares and 706 PLC shares from reinvested dividends accrued in 2012 and 664
NV shares and 727 PLC shares from reinvested dividends accrued in 2013. These shares were subject to performance conditions over the three-year period to
31 December 2014 and 121% of the award vested on 17 February 2015. This also includes 22,999 NV and PLC shares granted on 18 February 2013 and 643 NV
shares and 708 PLC shares from reinvested dividends accrued in 2013. These shares will vest, subject to performance conditions, on 18 February 2016.

(c) This includes 3,649 NV and PLC shares granted on 17 February 2012 and 132 NV shares and 145 PLC shares from reinvested dividends accrued in 2012 and 136
NV shares and 149 PLC shares from reinvested dividends accrued in 2013. These shares were subject to performance conditions over the three-year period to
31 December 2014 and 121% of the award vested on 17 February 2015. This also includes 5,157 NV and PLC shares granted on 18 February 2013 and 144 NV
shares and 159 PLC shares from reinvested dividends accrued in 2013. These shares will vest, subject to performance conditions, on 18 February 2016.

(d) Reflects reinvested dividend equivalents accrued during 2014 and subject to the same performance conditions as the underlying matching shares.

Unilever Annual Report and Accounts 2014Governance

GLOBAL SHARE INCENTIVE PLAN (AUDITED)
The following conditional shares were granted during 2014 and were outstanding at 31 December 2014 under the GSIP:

Balance of
conditional shares
at 1 January 2014

Conditional shares

awarded in 2014(a)

Share
type

NV
PLC

Original award

134,444(b)
135,378(b)

93,319(c)
93,979(c)

Performance period
1 January 2014 to
31 December 2016

43,700
43,700

27,031
27,031

Price at
award

€27.70
£23.49

Dividend shares
accrued during

Vested in

the year(d)

2014(e)

Additional
shares
earned in
2014

Price at
vesting

4,702
5,054

3,178
3,416

67,362
68,111

46,645
47,165

14,735
14,899

€27.70
£23.69

€27.70
10,203
10,319 £23.69

Paul Polman

Jean-Marc Huët

Balance of
conditional shares
at 31 December 2014

No. of shares

130,219
130,920

87,086
87,580

(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 65

to 66). The 2014 award was made on 14 February 2014 (vesting 14 February 2017).

(b) This includes a grant of 47,173 of each of NV and PLC shares made on 14 March 2011 (128% of which vested on 14 March 2014), a grant of 38,676 of each

of NV and PLC shares made on 17 February 2012 (121% of the award vested on 17 February 2015), a grant of 39,698 of each of NV and PLC shares made on
18 February 2013 (vesting 18 February 2016) and 8,897 NV shares and 9,831 PLC shares from reinvested dividends accrued in prior years in respect of awards.
(c) This includes a grant of 32,665 of each of NV and PLC shares made on 14 March 2011 (128% of which vested on 14 March 2014), a grant of 29,798 of each of NV

and PLC shares made on 17 February 2012 (121% of the award vested on 17 February 2015), a grant of 24,556 of each of NV and PLC shares made on
18 February 2013 (vesting 18 February 2016) and 6,300 NV shares and 6,960 PLC shares from reinvested dividends accrued in prior years in respect of awards.

(d) Reflects reinvested dividend equivalents accrued during 2014 and subject to the same performance conditions as the underlying GSIP shares.
(e) The 14 March 2011 grant vested on 14 March 2014 at 128%. In accordance with Unilever’s Remuneration Policy (www.unilever.com/ara2014/downloads),

Executive Directors are able to choose whether they receive any shares that are due to vest under GSIP in PLC or NV shares or keep the 50/50 mix.
Paul Polman elected for share choice and chose to receive his shares in the form of 100% NV shares. Therefore, upon vesting, his 14 March 2011 PLC award
was cancelled and converted and delivered to him as 69,755 NV shares (resulting in a total vesting for the 14 March 2011 grant of 137,117 NV shares).

On 13 February 2015, Paul Polman received an award of 36,497 NV and 36,497 PLC performance-related shares and Jean-Marc Huët
received an award of 22,576 NV and 22,576 PLC performance-related shares under the GSIP.

SHARE SAVE PLAN (AUDITED)
The Unilever PLC 2005 Share Save Plan is a UK tax-qualified, all-employee, savings-related share option scheme under which
employees can save up to a limit of £250 per month with an option to buy PLC shares at the end of a five-year vesting period (subject
to continued employment).

Balance of options at

Share type

1 January 2014(a)

Granted in
2014

Balance of
options at

31 December 2014(b)

First
exercisable date

Final expiry date

Paul Polman

PLC

1,042

–

01/10/2014

01/04/2015

(a) Option price at grant was £14.92.
(b) Paul Polman exercised his 1,042 options on 25 November 2014.

There are no further outstanding awards under this plan and no further awards will be granted.

EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
Starting dates of our Executive Directors’ service contracts:
CEO: 1 October 2008 (signed on 7 October 2008);
CFO: 1 February 2010 (signed on 19 March 2010).
Both service contracts shall end upon termination and are available to shareholders to view at the AGMs or on request from the Group Secretary.

Service contracts 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 Remuneration Policy which is
available on our website.

www.unilever.com/ara2014/downloads

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.

Unilever Annual Report and Accounts 2014Governance

DIRECTORS’ REMUNERATION
REPORT CONTINUED

IMPLEMENTATION OF THE REMUNERATION POLICY IN 2015 FOR NON-EXECUTIVE DIRECTORS

The Non-Executive Director fee levels were reviewed in 2014 and no changes were made to the sterling reference with the exception of
the Vice Chairman position. With effect from the 2015 NV and PLC AGMs the fees of the Vice Chairman will be based on the modular fee
structure set out below, including a fee of £30,000 for the Vice Chairman’s responsibilities. The Non-Executive Directors’ fees are set at
a reference point in sterling (£) and then 50% is paid in sterling (£) by PLC and 50% is paid in euros (€) by NV at a £/€ exchange rate
which is reviewed periodically to ensure that the balance between the fees remains appropriate. We reviewed the exchange rate used
in this calculation in 2014 and updated the amount paid by NV in euros to reflect the movement in exchange rates since 2011 when the
balance was last set. The table below outlines the updated 2015 fees.

Role

Chairman

Vice Chairman

Basic Non-Executive Director fee

Membership of the Nominating and Corporate Governance, Compensation
and Management Resources or Corporate Responsibility Committee

Membership of the Audit Committee

Chairman of the Nominating and Corporate Governance, Compensation
and Management Resources or Corporate Responsibility Committee

Chairman of the Audit Committee

Reference
sterling total
fees(1)

£550,000

€352,474

£30,000

€19,226

£75,000

€48,065

£10,000

£15,000

€6,409

€9,613

£20,000

£30,000

€12,817

€19,226

and

PLC

£275,000

£15,000

£37,500

£5,000

£7,500

£10,000

£15,000

1 With the exception of the Vice Chairman, the overall fees are unchanged since 2012 and 50% of the overall fee is paid in euros and is converted to euros from

sterling using Unilever’s Controller’s department third quarter 2014 closing exchange rate €1 = £0.7802 at the date of the review.

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.

SINGLE FIGURE OF REMUNERATION IN 2014 FOR NON-EXECUTIVE DIRECTORS (AUDITED)
The table below shows a single figure of remuneration for each of our Non-Executive Directors, for the years 2013 and 2014.

Non-Executive Director

Michael Treschow(c)
Laura Cha
Louise Fresco(d)
Ann Fudge
Charles Golden(e)
Byron Grote(f)
Mary Ma
Sunil Bharti Mittal(g)
Hixonia Nyasulu
Sir Malcolm Rifkind
John Rishton
Feike Sijbesma
Kees Storm(h)
Paul Walsh(i)

Total

2014

2013

Fees(a)
€’000

Benefits(b)
€’000

Total
remuneration
€’000

Fees(a)
€’000

Benefits(b)
€’000

Total
remuneration
€’000

654
101
113
101
42
125
107
–
107
101
107
15
196
113

1,882

3
–
–
11
–
–
–
–
–
–
–
1
3
2

657
101
113
112
42
125
107
–
107
101
107
16
199
115

637
62
106
103
101
127
66
32
102
103
66
n/a
191
119

1,902

1,815

1
–
–
17
14
2
–
–
12
–
–
n/a
–
–

638
62
106
120
115
129
66
32
114
103
66
n/a
191
119

1,861

(a) This includes fees received from both NV in euros and PLC in sterling for both 2013 and 2014 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.
(d) Chair, Corporate Responsibility Committee.
(e) Chose not to put himself forward for re-election at the May 2014 AGMs.
(f) Chair, Audit Committee.
(g) Chose not to put himself forward for re-election at the May 2013 AGMs.
(h) Vice-Chairman and Chair of the Nominating and Corporate Governance Committee.
(i) Chair, Compensation Committee.

In 2013, the Dutch government applied an additional crisis tax charge of 16% over 2013 taxable income above €150,000. This tax charge
for Unilever N.V. for Michael Treschow over 2013 is €26,171. This tax is an expense to Unilever N.V. and therefore not included in the
table above and is no longer applicable in 2014.

We do not grant our Non-Executive Directors any personal loans or guarantees, nor are they entitled to any severance payments.

Unilever Annual Report and Accounts 2014GovernanceNON-EXECUTIVE DIRECTORS’ INTERESTS IN SHARES (AUDITED)
Non-Executive Directors are encouraged to build up a personal shareholding of at least one times 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 2014. There has been no change in these interests between 31 December 2014 and 25 February 2015, other than
Feike Sijbesma who purchased 1,500 NV shares on 20 January 2015 at a share price of €34.50.

Shares held at
1 January
2014

Shares
held at
31 December
2014

Share type

Shares held at
1 January
2014

Shares
held at
31 December
2014

Share type

Michael Treschow

Laura Cha

Louise Fresco

Ann Fudge

Charles Golden(a)

Byron Grote

Mary Ma

NV
PLC

NV NY
PLC ADRs

NV
PLC

15,158
15,000

Hixonia Nyasulu

Malcolm Rifkind

John Rishton

Feike Sijbesma(b)

Kees Storm

Paul Walsh

–
200

1,800
–

–
3,950

1,000
–

6,500
5,500

–
–

–
200

1,800
–

–
3,950

1,000
–

8,200
7,200

–
400

NV
PLC

600
750

–
2,700

1,700
–

n/a
n/a

7,500
–

–
2,000

600
750

–
3,000

3,340
–

2,500
–

7,500
–

–
2,000

(a) Chose not to put himself forward for re-election at May 2014 AGMs.
(b) Appointed at May 2014 AGMs with effect from 1 November 2014.

NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT
All Non-Executive Directors were reappointed to the Boards at the 2014 AGMs, with the exception of Feike Sijbesma who was appointed
for the first time with effect from 1 November 2014 and Charles Golden who chose not to put himself forward for re-election.

Non-Executive Director

Michael Treschow
Laura Cha
Louise Fresco
Ann Fudge
Charles Golden
Byron Grote
Mary Ma
Hixonia Nyasulu
Sir Malcolm Rifkind
John Rishton
Feike Sijbesma
Kees Storm
Paul Walsh

Date first
appointed to
the Board

Effective date
of current letter
of appointment*

16 May 2007
15 May 2013
14 May 2009
14 May 2009
09 May 2006
09 May 2006
15 May 2013
16 May 2007
12 May 2010
15 May 2013

14 May 2014
14 May 2014
14 May 2014
14 May 2014
n/a
14 May 2014
14 May 2014
14 May 2014
14 May 2014
14 May 2014
01 November 2014 01 November 2014
14 May 2014
14 May 2014

09 May 2006
14 May 2009

* The unexpired term for all Non-Executive Directors’ letters of appointment is the period up to the 2015 AGMs, as they all, unless they are retiring, submit

themselves for annual re-election.

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 pages 42 to
43 for further details).

Paul Polman is a non-executive director of The Dow Chemical Company and received an annual fee of €86,239 (US $115,000 based on
the average exchange rate over the year €1 = US $1.3335). In addition, he received a restricted award of 2,760 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 16 May 2016.

Jean-Marc Huët is a non-executive director of the unlisted company Delta Topco Limited and received an annual fee of €179,978 (US
$240,000). Furthermore, Jean-Marc Huët was appointed as a non-executive director of Heineken N.V. from 24 April 2014 and received
an annual fee of €51,510.

Unilever Annual Report and Accounts 2014GovernanceDIRECTORS’ REMUNERATION
REPORT CONTINUED

SIX-YEAR HISTORICAL TOTAL SHAREHOLDER RETURN
(TSR) PERFORMANCE
The table below includes:
• growth in the value of a hypothetical £100 holding over six

years’ FTSE 100 comparison based on 30-trading-day average
values; and

• growth in the value of a hypothetical €100 investment over six

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.

Dec 2008

Dec 2009

Dec 2010

Dec 2011

Dec 2012

Dec 2013

Dec 2014

g
n
d
l
o
h
€
/
£
l
a
c
i
t
e
h
t
o
p
y
h
f
o
e
u
l
a
V

220

200

180

160

140

120

100

Unilever NV

Unilever PLC

FTSE 100

AEX

CEO SINGLE FIGURE SIX-YEAR HISTORY
The table below shows the six-year history of the CEO single
figure of total remuneration:

PERCENTAGE CHANGE IN REMUNERATION OF DIRECTOR
UNDERTAKING THE ROLE OF CHIEF EXECUTIVE OFFICER
The table below shows the percentage change from 2013 to 2014
for base salary, bonus and benefits (excluding pension) for both
Paul Polman 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 2013 to 2014

Salary

Bonus

Benefits
(not including
pension)

CEO(a) (b)
UK and Dutch management (c)

5.2% -11.4%
6.7%
3.4%

12.4%
-8.0%

(a) Calculated using the data from the Executive Directors single figure table

on page 67.

(b) The CEO’s increase of salary of 5.2% as reflected in the table is due to

movements in the presentational currency, rather than a change in base
salary which was £1,010,000 in both 2013 and 2014. Movements in the
presentational currency also had a similar impact on benefits and bonus.
(c) While the table shows that the average base salary costs for all employees
increased by 3.4%, this is driven by a proportionately larger increase in the
total headcount during the year. The average increase was approximately
6.2% if the 2013 UK and Dutch management population remain constant.
The same applies for both benefits and bonus numbers where, on a
constant basis, the average benefit provision increased by approximately
22.8% rather than decreased by 8% and the bonuses increased by 21.8%
rather than 6.7%.

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.

2009

2010

2011

2012

2013

2014

RELATIVE IMPORTANCE OF SPEND ON PAY

CEO
Single figure of total
remuneration (€ ‘000) 3,859

6,292

6,010

7,852

7,740

9,561

82% 80% 68% 100% 78% 66%

-2.3%

0.6%

7.2%

€7,000m

€6,000m

€5,000m

€4,000m

€3,000m

€2,000m

€1,000m

€0m

n/a

47% 44% 55% 64% 61%

Core earnings(1)

Dividends paid to
Unilever shareholders

Total staff costs

n/a

81%

100% 100% n/a

n/a

2013

2014

(1) 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 102 for reconciliation of core earnings to net profit attributable
to shareholders' equity.

THE COMPENSATION COMMITTEE
During 2014, the Committee comprised four Non-Executive
Directors: Paul Walsh (Committee Chairman), Michael Treschow,
Ann Fudge and Kees Storm.

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

Annual bonus award
rates against maximum
opportunity

GSIP performance
shares vesting rates
against maximum
opportunity

MCIP performance
shares vesting rates
against maximum
opportunity

Share Matching Plan
vesting rates against
maximum opportunity*

* Shown in year of award.

Unilever Annual Report and Accounts 2014Governance

In the context of the external Board evaluation, carried out in 2014,
the Boards evaluated the performance of the Committee. The
Committee also carried out a self-assessment of its performance.
Both assessments concluded that the Committee is performing
effectively. Based on its self-assessment, the Committee decided
that to enhance the overall knowledge of the Board on the key
issues that the Committee is engaged with, it would add a specific
remuneration module to the induction program for Non-Executive
Directors and conduct a remuneration knowledge session for the
Boards.

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 Deloitte LLP to provide independent
advice on various matters it considered. During the year, Deloitte
also provided other services to Unilever primarily in relation to
the Directors’ Remuneration Report. The wider Deloitte firm has
also provided tax and consultancy services including expatriate
tax advice, tax compliance, transfer pricing, R&D and grant
claims, financial advisory and transformation, IT, HR and data
analytics consultancy and sourcing strategies advice to Unilever.

Deloitte 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.

CLARIFICATION STATEMENT
After publication of our Directors’ Remuneration Report 2013 the
Committee issued a clarification statement on our website at the
request of The Investment Association (previously: IMA and ABI).
The statement is available on our website. The statement
confirms that we will not make share awards higher than the
maximum awards stated in our Policy for existing 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 done 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 Remuneration
Policy. As stated in the Remuneration Policy in relation to new
hires, we will inform shareholders of any such buyout awards
when announcing the appointment.

www.unilever.com/ara2014/downloads

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:

www.remunerationconsultantsgroup.com

Voting outcome (% of votes)

For

Against

2014 Directors’ Remuneration Policy (2014 AGM)(a} PLC 97.51% 2.49%

2014 Directors’ Remuneration Policy (2014 AGM)(b) NV

98.37% 1.63%

2013 Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy)
(2014 AGM)(c)

PLC 99.14% 0.86%

(a) 7,606,237 votes were withheld (approximately 0.6% of share capital).
(b) 4,188,993 votes were withheld (approximately 0.27% of share capital).
(c) 25,507,949 votes were withheld (approximately 2.0% of share capital).

The Directors’ Remuneration Report is not subject to a shareholder
vote in the Netherlands.

The Directors’ Remuneration Report has been approved by the
Boards and signed on their behalf by Tonia Lovell, Group Secretary.

The Committee is satisfied that the Deloitte LLP 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 Deloitte LLP in relation to advice provided to the
Committee in the year up to 31 December 2014 were £23,500. 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. The Committee would like to
thank Deloitte for their assistance throughout 2014.

After a thorough interview process the Committee appointed
Tom Gosling of PwC to become the independent remuneration
advisor in 2015.

During the year, the Committee also sought input from the
Chief Executive Officer (Paul Polman), the Chief Human Resources
Officer (Doug Baillie) and the SVP 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).

Unilever Annual Report and Accounts 2014GovernanceSTATEMENT OF DIRECTORS’
RESPONSIBILITIES

ANNUAL ACCOUNTS
The Directors are required by Part 9 of Book 2 of the Civil Code
in the Netherlands and 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), UK
accounting standards (in the case of the PLC parent company
accounts) 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 48.

DIRECTORS’ RESPONSIBILITY STATEMENT
Each of the Directors confirms that, to the best of his or her
knowledge:
• The Annual Report and Accounts, taken as a whole, is fair,

balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s 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 UK accounting standards (in the
case of the PLC parent company accounts) 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 41 and 54.

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 in the Strategic Report on pages 2 to 35.
In addition, we describe in notes 15 to 18 on pages 109 to 123 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.

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 have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing this Annual
Report and Accounts.

INTERNAL AND DISCLOSURE CONTROLS AND
PROCEDURES
Please refer to pages 49 to 53 for a discussion of Unilever’s
principal risk factors and to pages 50 to 53 for commentary
on the Group’s approach to risk management and control.

Unilever Annual Report and Accounts 2014Financial statementsINDEPENDENT AUDITORS’ REPORTS

NETHERLANDS – KPMG ACCOUNTANTS N.V.

UNITED KINGDOM – KPMG LLP

TO: THE GENERAL MEETING OF UNILEVER N.V.

TO: THE MEMBERS OF UNILEVER PLC ONLY

For the purpose of these reports, the terms ‘we’ and ‘our’ denote KPMG Accountants N.V. in relation to the Netherlands responsibilities
and reporting obligations to the General Meeting of Unilever N.V. and KPMG LLP in relation to UK responsibilities and reporting obligations
to the members of Unilever PLC. The Unilever Group (‘the Group’) consists of Unilever PLC, Unilever N.V. and the entities they controlled during
the financial year. The reports of KPMG Accountants N.V. and KPMG LLP are presented in the left and right hand columns of this report
respectively. Where separate columns are not presented, the content of the reports of KPMG Accountants N.V. and KPMG LLP are identical.

The financial statements (‘the Financial Statements’) comprise:
• the consolidated financial statements of the Group (‘the Consolidated Financial Statements’);
• the parent company financial statements of Unilever N.V. (‘the N.V. Company Accounts’); and
• the parent company financial statements of Unilever PLC (‘the PLC Company Accounts’),

each of which are defined below.

OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT
1 OUR OPINIONS ON THE FINANCIAL STATEMENTS ARE UNMODIFIED

We have audited the consolidated financial statements of the Group for the year ended 31 December 2014 which comprise the
consolidated balance sheet as at 31 December 2014, the consolidated statements of income, comprehensive income, changes
in equity and cash flows for the year then ended and notes to the Consolidated Financial Statements, including a summary of the
significant accounting policies and other explanatory information. In addition, KPMG Accountants N.V. has audited the N.V. Company
Accounts (which comprise the company balance sheet as at 31 December 2014, the company profit and loss account for 2014 and
the notes comprising a summary of the significant accounting policies and other explanatory information) and KPMG LLP has
audited the PLC Company Accounts (which comprise the company balance sheet as at 31 December 2014 and the notes to the
PLC Company Accounts, including the summary of the significant accounting policies and other explanatory information).

In our opinion:
• the Consolidated Financial Statements give a true and fair

In our opinion:
• the Consolidated Financial Statements and the PLC

view of the financial position of the Group as at 31 December
2014 and of its result and its cash flows for the year then
ended in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS as
adopted by the EU) and with Part 9 of Book 2 of the
Netherlands Civil Code; and

• the N.V. Company Accounts give a true and fair view of the
financial position of Unilever N.V. as at 31 December 2014,
and of its result for 2014 in accordance with United Kingdom
accounting standards and Part 9 of Book 2 of the
Netherlands Civil Code.

Basis for our opinion
We conducted our audit in accordance with Dutch law,
including the Dutch Standards on Auditing. Our responsibilities
under those standards are further described in the ‘Auditor’s
responsibilities’ section of our report.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

Company Accounts give a true and fair view of the state of
the Group’s and of Unilever PLC’s affairs as at 31 December
2014 and of the Group’s profit for the year then ended;
• the Consolidated Financial Statements have been properly

prepared in accordance with International Financial
Reporting Standards as adopted by the European Union
(IFRS as adopted by the EU);

• the PLC Company Accounts have been properly prepared in
accordance with United Kingdom Accounting Standards; and

• both the Consolidated Financial Statements and the PLC

Company Accounts have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards
the Consolidated Financial Statements, Article 4 of the IAS
Regulation.

Separate opinion in relation to IFRS as issued by the
International Accounting Standards Board (IASB)
As explained in the accounting policies set out in the
Consolidated Financial Statements, the Group, in addition to
complying with its legal obligation to apply IFRS as adopted
by the EU, has also applied IFRS as issued by the IASB.
In our opinion, the Consolidated Financial Statements comply
with IFRS as issued by the IASB.

Unilever Annual Report and Accounts 2014Financial statementsINDEPENDENT AUDITORS’ REPORTS
CONTINUED

2 OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT

In arriving at our audit opinion above on the Financial Statements the risks of material misstatement that had the greatest effect
on our audit (key audit matters) were as set out below.

These are the matters that, in our professional judgment, had the greatest effect on: the overall audit strategy; the allocation of resources
in our audit; and directing the efforts of the engagement team. We have communicated these matters to the Audit Committee. Our
audit procedures relating to these matters were designed in the context and solely for the purposes of our audit of the Financial
Statements as a whole, and in forming our opinion thereon, and we do not express discrete opinions on these matters.

Revenue recognition
• The risk – Revenue is measured taking account of discounts, incentives and rebates earned by customers on the Group’s sales.
Due to the multitude and variety of contractual terms across the Group’s markets, the estimation of discounts, incentives and
rebates recognised based on sales made during the year is considered to be complex.

Revenue is recognised when the risks and rewards of the underlying products have been transferred to the customer.
There is a risk that revenue may be overstated because of fraud resulting from the pressure local management may feel to
achieve performance targets. The Group focuses on revenue as a key performance measure which could create an incentive
for revenue to be recognised before the risks and rewards have been transferred.

• Our response – Our audit procedures included considering the appropriateness of the Group’s revenue recognition accounting
policies including those relating to discounts, incentives and rebates and assessing compliance with the policies in terms of
applicable accounting standards. We tested the effectiveness of the Group’s controls over calculation of discounts, incentives
and rebates and correct timing of revenue recognition.

We assessed sales transactions taking place at either side of the balance sheet date as well as credit notes issued after the year
end date to assess whether that revenue was recognised in the correct period. We also developed an expectation of the current
year revenue balance based on trend analysis information taking into account historical weekly sales and returns information
and our understanding of each market. We then compared this expectation to actual results.

We also considered the adequacy of the Group’s disclosures (in note 2) in respect of revenue.

Indirect tax provisions and contingencies
• The risk – Provisions for indirect tax require the Directors to make judgments and estimates in relation to the issues and

exposures. In Brazil (one of the Group’s largest markets) the complex nature of the local tax regulations and jurisprudence
make this a particular area of significant judgment.

• Our response – Our procedures included using our own indirect tax and legal specialists to consider the level of provisions
required in light of the nature of the Group’s exposures, applicable regulations and the Group’s correspondence with the
authorities. We also assessed relevant historical and recent judgments passed by the court authorities in considering any
legal precedent or case law, as well as assessing legal opinions from third party lawyers. We also gained an understanding
of the Group’s provisioning methodology and challenged assumptions using the knowledge and experience of our own
specialists. In addition, we obtained formal confirmations from the Group’s external counsel, where appropriate.

We also considered the adequacy of the Group’s disclosures (in note 19) made in relation to indirect tax provisions and
contingencies.

Direct tax provisions and contingencies
• The risk – The Group has extensive international operations and in the normal course of business the Directors make

judgments and estimates in relation to tax issues and exposures. This is a key judgment due to the Group operating in a
number of tax jurisdictions, the complexities of transfer pricing and other tax legislation.

• Our response – Our audit procedures included testing the effectiveness of the Group’s controls around the recording and

continuous re-assessment of tax provisions.

Our own tax specialists performed an assessment of the Group’s correspondence with relevant tax authorities, to consider
the completeness of tax provisions for all relevant risks. We also challenged the assumptions used, taking into consideration
our own tax specialists’ knowledge and experience. In addition, we assessed relevant judgments passed by relevant authorities
in considering any need for a provision, as well as assessing relevant opinions from third parties.

We also considered the adequacy of the Group’s disclosures (in note 20) in respect of tax and uncertain tax positions.

For each risk noted above refer to related disclosure within the Report of the Audit Committee (page 56), accounting policies and
financial disclosures within the notes to the Consolidated Financial Statements.

Unilever Annual Report and Accounts 2014Financial statements3 OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT

Materiality
Based on our professional judgment the materiality for the Consolidated Financial Statements as a whole was set at €350 million,
determined with reference to a benchmark of Group profit before taxation (of which it represents 4.6%). We also take
misstatements into account that are in our opinion material for qualitative reasons.

We agreed with the Audit Committee to report to it any corrected and uncorrected identified misstatements exceeding €25 million
in addition to other identified misstatements that warranted reporting on qualitative grounds.

Scope of our audit
The Group operates through a significant number of legal entities, each of which is a reporting component. We performed audits for
Group reporting purposes of 13 components, as well as audits of revenue and the related accounts receivable balances at a further
5 components. The latter were not individually financially significant enough to require an audit for Group reporting purposes but
were included in the scope of our Group reporting work in order to provide further coverage over the Group’s revenue.

The Group has 5 centralised operating centres that perform accounting and reporting activities alongside related controls.
Together these operating centres process a substantial portion of the Group’s transactions. The outputs from the centralised
operating centres are included in the financial information of the component entities they service and therefore they are not
separate reporting components. Each of the operating centres is subject to specified audit procedures. Further audit procedures
are performed at each reporting component to cover matters not covered at the centralised operating centres. Together this
results in audits for Group reporting purposes on those reporting components.

The percentages of the Group’s Revenue, Profit before Taxation and Total Assets represented by the components within the scope
of our work and procedures performed at corporate level are as follows:

GROUP REVENUE

Audits for Group
Reporting
Purposes

51%

Audits of Account
Balance

12%

Out of Scope
Components 37%

GROUP PROFIT BEFORE TAXATION
Audits for Group
Reporting
Purposes

57%

Audits of Account
Balance

13%

Out of Scope
Components 30%

GROUP TOTAL ASSETS

Audits for Group
Reporting
Purposes

75%

Audits of Account
Balance

Out of Scope
Components 22%

The remaining 37% of Group Revenue and 30% of Group Profit before Taxation is represented by a significant number of out-of-
scope reporting components, none of which individually represents more than 2% of Group Revenue and/or Group Profit before
Taxation. A substantial portion of these out-of-scope components utilise the five operating centres and are therefore subject to
audit procedures performed at these operating centres. In addition, for these out-of-scope components, we performed analysis
(focusing specifically on revenue and operating margins) at the aggregated Group level to re-examine our assessment that there
are no significant risks of material misstatement within these components.

For the in-scope components the Group audit team instructed component auditors as to the significant areas to be covered,
including the significant risks detailed above and the information to be reported back. The Group audit team approved component
materiality levels, which ranged from €5 million to €275 million, having regard to the mix of size and risk profile of the Group
across the components. The work on all components was performed by component auditors.

The Group audit team visited component locations in the USA, the UK, the Netherlands, India, Indonesia, Switzerland, Brazil, South
Africa, Germany, Turkey, Russia, Singapore, China, Mexico and Argentina. Telephone and/or online meetings were also held with the
auditors of these components and the majority of all other components. The findings reported to the Group audit team were discussed
in more detail with component auditors, and any further work required by the Group audit team was then performed by the
component auditor.

Unilever Annual Report and Accounts 2014Financial statementsINDEPENDENT AUDITORS’ REPORTS
CONTINUED

4 OTHER REPORTING

Our report on the Report of the Directors and the other
information is unmodified
Pursuant to the legal requirement under Part 9 of Book 2 of
the Netherlands Civil Code:
• We have no deficiencies to report as a result of our

examination whether the Report of the Directors, to the
extent we can assess, has been prepared in accordance
with Part 9 of Book 2 of this Code, and whether the
information as required under Part 9 of Book 2 has been
annexed; and

• Further we report that the Report of the Directors, to the
extent we can assess, is consistent with the Consolidated
Financial Statements and the N.V. Company Accounts as
required by Article 2:391 sub 4 of the Netherlands Civil Code.

Engagement
We have been engaged by the General Meeting at 14 May 2014
as auditor of Unilever N.V. since the audit of year 2014 and we
are the statutory auditor since that date up until today.

Independence
We are independent of the Unilever Group in accordance with the
“Verordening inzake de onafhankelijkheid van accountants bij
assurance-opdrachten” (ViO) and other relevant independence
regulations in the Netherlands. Furthermore we have
complied with the “Verordening gedrags- en beroepsregels
accountants” (VGBA).

Our opinion on other matters prescribed by the Companies
Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and

• the information given in the Strategic Report and the

Directors’ Report for the financial year for which the Financial
Statements are prepared is consistent with the Consolidated
Financial Statements and the PLC Company Accounts.

We have nothing to report in respect of the matters on which
we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if,
based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains
a material inconsistency with either that knowledge or the
Consolidated Financial Statements and/or the PLC Company
Accounts, a material misstatement of fact, or that is
otherwise misleading.

In particular, we are required to report to you if:
• we have identified material inconsistencies between the

knowledge we acquired during our audit and the Directors’
statement that they consider that the Annual Report and
Financial Statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s performance, business
model and strategy; or

• the Report of the Audit Committee does not appropriately

address matters communicated by us to the Audit Committee.

Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by Unilever

PLC, or returns adequate for our audit have not been
received from branches not visited by us; or

• the PLC Company Accounts and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified

by law are not made; or

• we have not received all the information and explanations

we require for our audit.

Under the Listing Rules we are required to review:
• the Directors’ statement, set out on page 78, in relation to

going concern; and

• the part of the Corporate Governance Statement on pages 46

to 48 relating to the company’s compliance with the ten
provisions of the 2012 UK Corporate Governance Code
specified for our review.

We have nothing to report in respect of the above responsibilities.

Unilever Annual Report and Accounts 2014Financial statementsSCOPE AND RESPONSIBILITIES

Directors’ responsibilities
As explained more fully in the Directors’ Responsibilities
Statement (set out on page 78), the Directors are responsible
for the preparation of the Consolidated Financial Statements
and the PLC Company Accounts and for being satisfied that
they give a true and fair view.

Scope of an audit of financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.

This report is made solely to the Company’s members as a body
and is subject to important explanations and disclaimers
regarding our responsibilities which can be accessed on our
website via www.kpmg.com/uk/auditscopeukco2014b, and are
incorporated into this report as if set out in full and should be
read to provide an understanding of the purpose of this report,
the work we have undertaken and the basis of our opinions.

Directors’ and Audit Committee’s responsibilities
The Directors are responsible for:
• the preparation and fair presentation of the Consolidated

Financial Statements in accordance with IFRSs as adopted by
the EU and Part 9 of Book 2 of the Netherlands Civil Code, and
for the preparation of the Report of the Directors in accordance
with Part 9 of Book 2 of the Netherlands Civil Code;

• the preparation and fair presentation of the N.V. Company
Accounts in accordance with United Kingdom accounting
standards and Part 9 of Book 2 of the Netherlands Civil
Code; and

• such internal control as management determines is
necessary to enable the preparation of the Financial
Statements that are free from material misstatement,
whether due to fraud or error.

In preparing the Financial Statements, the Directors are
responsible for assessing the Group’s and Unilever N.V.’s ability
to continue as a going concern. Based on the financial reporting
frameworks mentioned, the Directors should prepare the
Consolidated Financial Statements and N.V. Company Accounts
using the going concern basis of accounting unless the Directors
either intend to liquidate the Group and/or Unilever N.V. or
to cease operations, or have no realistic alternative but to do
so. The Directors should disclose in the Financial Statements
events and circumstances that may cast significant doubt
on the Group’s and/or Unilever N.V.’s ability to continue as
a going concern.

The Audit Committee is responsible for overseeing the Group’s
financial reporting process.

Auditor’s responsibilities
Our responsibilities are set out on page 136, which are
incorporated into this report as if set out in full and should be read
to provide an understanding of the work we have undertaken.

Eric van Leeuwen
(External auditor)
KPMG Accountants N.V.
Amsterdam
3 March 2015

SIGNING

Paul Korolkiewicz
(Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants and Statutory Auditor
London
3 March 2015

Unilever Annual Report and Accounts 2014Financial statementsFINANCIAL STATEMENTS
UNILEVER GROUP

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December

Turnover

Operating profit

After (charging)/crediting non-core items

Net finance costs

Finance income
Finance costs
Pensions and similar obligations

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

Profit before taxation
Taxation

Net profit

Attributable to:
Non-controlling interests
Shareholders’ equity

Combined earnings per share
Basic earnings per share (€)
Diluted earnings per share (€)

Notes

€ million
2014

€ million
2013

€ million
2012

48,436

49,797

51,324

7,980

7,517

6,977

960

(477)

117
(500)
(94)

98
45

7,646
(2,131)

5,515

344
5,171

501

(530)

103
(500)
(133)

113
14

7,114
(1,851)

5,263

421
4,842

(73)

(535)

136
(526)
(145)

105
(14)

6,533
(1,697)

4,836

468
4,368

1.82
1.79

1.71
1.66

1.54
1.50

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 88 to 130, which form
an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December

Net profit

Other comprehensive income
Items that will not be reclassified to profit or loss:

Remeasurement of defined benefit pension plans net of tax

Items that may be reclassified subsequently to profit or loss:

Currency retranslation gains/(losses) net of tax(a)
Fair value gains/(losses) on financial instruments net of tax

Total comprehensive income

Attributable to:

Non-controlling interests
Shareholders’ equity

Notes

€ million
2014

€ million
2013

€ million
2012

5,515

5,263

4,836

15B

15B
15B

(1,250)

697

(497)

(25)
(85)

(999)
106

(316)
(125)

4,155

5,067

3,898

404
3,751

339
4,728

444
3,454

(a) Includes fair value gains/(losses) on net investment hedges and exchange differences in net investments in foreign operations of €412 million (2013: €(275)

million; 2012: €(160) million).

Unilever Annual Report and Accounts 2014Financial statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated statement of changes in equity

€ million
Called up
share
capital

€ million
Share
premium
account

€ million

Other
reserves

Retained
profit

31 December 2011

484

137

(6,004)

Profit or loss for the period
Other comprehensive income net of tax

Fair value gains/(losses) on financial instruments
Remeasurement of defined benefit pension plans
net of tax
Currency retranslation gains/(losses)

Total comprehensive income
Dividends on ordinary capital
Movements in treasury stock(a)
Share-based payment credit(b)
Dividends paid to non-controlling interests
Currency retranslation gains/(losses) net of tax
Other movements in equity

–

–
–

–
–
–
–
–
–
–

–

–
–

–
–
–
–
–
3
–

–

(125)

–
(249)

(374)
–
182
–
–
(1)
1

19,874

4,368

–

(497)
(43)

3,828
(2,696)
(130)
153
–
–
(65)

31 December 2012

484

140

(6,196)

20,964

Profit or loss for the period
Other comprehensive income net of tax

Fair value gains/(losses) on financial instruments
Remeasurement of defined benefit pension plans
net of tax
Currency retranslation gains/(losses)

–

–
–

–
–
–
–
–
–
–

–

–
–

–
–
–
–
–
(5)
3

–

106

–
(788)

(682)
–
112
–
–
–
20

4,842

–

697
(129)

5,410
(2,981)
(83)
242
–
–
(3,084)

31 December 2013

484

138

(6,746)

20,468

14,344

Profit or loss for the period
Other comprehensive income net of tax

Fair value gains/(losses) on financial instruments
Remeasurement of defined benefit pension plans
net of tax
Currency retranslation gains/(losses)

–

–
–

–
–
–
–
–
–
–

–

–
–

–
–
–
–
–
7
–

–

5,171

(85)

–
(290)

(375)
–
(235)
–
–
–
(182)

–

(85)

(1,253)
208

4,126
(3,196)
(217)
188
–
–
(809)

(1,253)
(82)

3,751
(3,196)
(452)
188
–
7
(991)

Total

14,491

4,368

(125)

(497)
(292)

3,454
(2,696)
52
153
–
2
(64)

15,392

4,842

106

697
(917)

4,728
(2,981)
29
242
–
(5)
(3,061)

€ million
Non-
controlling
interests

628

468

–

–
(24)

444
–
–
–
(464)
(4)
(47)

557

421

–

–
(82)

339
–
–
–
(307)
(5)
(113)

471

344

–

3
57

404
–
–
–
(342)
(2)
81

€ million

Total
equity

15,119

4,836

(125)

(497)
(316)

3,898
(2,696)
52
153
(464)
(2)
(111)

15,949

5,263

106

697
(999)

5,067
(2,981)
29
242
(307)
(10)
(3,174)

14,815

5,515

(85)

(1,250)
(25)

4,155
(3,196)
(452)
188
(342)
5
(910)

31 December 2014

484

145

(7,538)

20,560

13,651

612

14,263

(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.

Unilever Annual Report and Accounts 2014Financial statements

FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

CONSOLIDATED BALANCE SHEET

as at 31 December

Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Pension asset for funded schemes in surplus
Deferred tax assets
Financial assets
Other non-current assets

Current assets
Inventories
Trade and other current receivables
Current tax assets
Cash and cash equivalents
Other financial assets
Non-current assets held for sale

Total assets

Liabilities
Current liabilities
Financial liabilities
Trade payables and other current liabilities
Current tax liabilities
Provisions
Liabilities associated with assets held for sale

Non-current liabilities
Financial liabilities
Non-current tax liabilities
Pensions and post-retirement healthcare liabilities:

Funded schemes in deficit
Unfunded schemes

Provisions
Deferred tax liabilities
Other non-current liabilities

Total liabilities

Equity
Shareholders’ equity
Called up share capital
Share premium account
Other reserves
Retained profit

Shareholders’ equity
Non-controlling interests

Total equity

Total liabilities and equity

These financial statements have been approved by the Directors.

The Board of Directors
3 March 2015

Notes

€ million
2014

€ million
2013

9
9
10
4B
6B
17A
11

12
13

17A
17A
22

15C
14

19
22

15C

4B
4B
19
6B
14

15A

15B

14,642
7,532
10,472
376
1,286
715
657

13,917
6,987
9,344
991
1,084
505
563

35,680

33,391

4,168
5,029
281
2,151
671
47

12,347

48,027

5,536
12,606
1,081
418
1

19,642

7,186
161

2,222
1,725
916
1,534
378

14,122

33,764

484
145
(7,538)
20,560

13,651
612

14,263

48,027

3,937
4,831
217
2,285
760
92

12,122

45,513

4,010
11,735
1,254
379
4

17,382

7,491
145

1,405
1,563
892
1,524
296

13,316

30,698

484
138
(6,746)
20,468

14,344
471

14,815

45,513

Unilever Annual Report and Accounts 2014Financial statementsCONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December

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

Operating profit
Depreciation, amortisation and impairment
Changes in working capital:

Inventories
Trade and other receivables
Trade payables and other liabilities

Pensions and similar obligations less payments
Provisions less payments
Elimination of (profits)/losses on disposals
Non-cash charge for share-based compensation
Other adjustments

Cash flow from operating activities
Income tax paid

Net cash flow from operating activities

Interest received
Purchase of intangible assets
Purchase of property, plant and equipment
Disposal of property, plant and equipment
Acquisition of group companies, joint ventures and associates
Disposal of group companies, joint ventures and associates
Acquisition of other non-current investments
Disposal of other non-current investments
Dividends from joint ventures, associates and other non-current investments
(Purchase)/sale of financial assets

Net cash flow (used in)/from investing activities

Dividends paid on ordinary share capital
Interest and preference dividends paid
Acquisition of non-controlling interests
Purchase of Estate shares
Net change in short-term borrowings
Additional financial liabilities
Repayment of financial liabilities
Capital element of finance lease rental payments
Other movements on treasury stock
Other financing activities

Net cash flow (used in)/from financing activities

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes

Cash and cash equivalents at the end of the year

Notes

€ million
2014

€ million
2013

€ million
2012

5,515
2,131

(143)
477

7,980
1,432
8

(47)
82
(27)

(364)
32
(1,460)
188
38

7,854
(2,311)

5,543

123
(359)
(1,893)
207
(313)
1,741
(82)
69
162
4

(341)

(3,189)
(521)
–
(880)
338
5,174
(5,305)
(16)
(467)
(324)

5,263
1,851

(127)
530

7,517
1,151
200

168
(917)
949

(383)
126
(725)
228
(15)

8,099
(1,805)

6,294

100
(377)
(1,791)
141
(142)
1,053
(273)
302
136
(310)

(1,161)

(2,993)
(511)
(2,901)
–
350
4,219
(3,294)
(11)
24
(273)

4,836
1,697

(91)
535

6,977
1,199
822

(9)
1
830

(369)
(43)
(236)
153
13

8,516
(1,680)

6,836

146
(405)
(1,975)
237
(133)
246
(91)
88
128
1,004

(755)

(2,699)
(506)
–
–
(870)
1,441
(3,565)
(15)
48
(456)

(5,190)

(5,390)

(6,622)

12
2,044
(146)

1,910

(257)
2,217
84

2,044

(541)
2,978
(220)

2,217

17A

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.

Acquisition of non-controlling interests in 2013 includes various transactions to acquire non-controlling interests, primarily an outflow
of €2,515 million to increase the Group’s ownership of Hindustan Unilever Limited from 52% to 67%. Refer to note 15B.

Unilever Annual Report and Accounts 2014Financial statementsNOTES 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.

The company income statement for NV is included in the
consolidated financial statements. An abbreviated income
statement has been disclosed in the NV company accounts on
page 131 in accordance with Article 2:402 of the Dutch Civil Code.

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 Dutch Civil Code and the UK
Companies Act 2006 applicable to companies reporting under IFRS.
They are also in compliance with IFRS as issued by the International
Accounting Standards Board (IASB).

These financial statements are prepared under the historical cost
convention unless otherwise indicated.

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 128. 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 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 page 111).

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 continuously
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.

Unilever Annual Report and Accounts 2014Financial statements
The Group is currently assessing the impact of the following new
standards that are not yet effective and are yet to quantify the
potential impact.
• IFRS 9 ‘Financial Instruments’ reflects all phases of the

financial instruments project and replaces IAS 39 Financial
Instruments: Recognition and Measurement. The standard
introduces new requirements for classification and
measurement, impairment and hedge accounting. IFRS 9 is
effective for annual periods beginning on or after 1 January
2018. We expect the adoption of IFRS 9 to impact the
classification and measurement of financial assets but have no
impact on financial liabilities.

• IFRS 15 ‘Revenue from Contracts with Customers’ is applicable
to all entities and supersedes all existing revenue recognition
requirements under IFRS. It applies to all transactions to
provide goods and services except those in the scope of other
standards. Either full or modified retrospective application is
required for annual periods beginning on or after 1 January 2017.

1. ACCOUNTING INFORMATION AND POLICIES
CONTINUED

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;
• key assumptions used in discounted cash flow projections –

note 9;

• utilisation of tax losses and recognition of other deferred tax

assets – note 6B;

• likelihood of occurrence of provisions and contingencies,

including direct and indirect tax investigations and audits –
notes 19 and 20; and

• measurement of consideration and assets and liabilities
acquired as part of business combinations – note 21.

RECENT ACCOUNTING DEVELOPMENTS

ADOPTED BY THE GROUP
The following new and amended standards are relevant to the
Group and have been adopted for the first time in these financial
statements, with no material impact:
• Amendments to IAS 32 ‘Financial Instruments: Presentation’
provides additional guidance on when financial assets and
liabilities can be offset.

• Amendments to IAS 39 ‘Financial Instruments: Recognition
and Measurement’ provides relief from discontinuing hedge
accounting when a hedge derivative is novated.

• Amendment to IFRS 13 ‘Fair value measurement’ clarifies that
short term receivables and payables with no stated interest
rates can be measured at invoice amounts when the effect of
discounting is immaterial.

• IFRIC Interpretation 21 ‘Levies’ clarifies that an entity

recognises a liability for a levy when the activity that triggers
payment, as identified by relevant legislation, occurs.

NOT ADOPTED BY THE GROUP
All of the following new standards, amendments and
interpretations are effective from 1 January 2015 unless
otherwise stated. Standards have not yet been endorsed by the
EU unless otherwise stated.

The Group does not currently believe adoption of the following
new standards would have a material impact on the consolidated
results or financial position of the Group.
• IFRS 14 ‘Regulatory Deferral Accounts’ permits first time

adopters of IFRS to continue to account for amounts related
to rate regulation in accordance with their previous GAAP.
The standard does not apply to the Group.

• Amendments to IAS 19 ‘Employee Benefits’ simplifies the
accounting for contributions that are independent of the
number of years of employee service. These amendments
have been endorsed by the EU.

• Amendments to IAS 16 ‘Property, Plant and Equipment’ and
IAS 38 ‘Intangible Assets’ cover clarification of the principle
of the basis of depreciation and that revenue based
depreciation methods are no longer permitted. Effective
from 1 January 2016.

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

2. SEGMENT INFORMATION

SEGMENTAL REPORTING
Personal Care – including sales of skin care and hair care products, deodorants and oral care products.
Foods
Refreshment – including sales of ice cream, tea-based beverages and weight-management products.
Home Care

– including sales of soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines and spreads.

– including sales of home care products, such as powders, liquids and capsules, soap bars and a wide range

of cleaning products.

REVENUE RECOGNITION
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.

2014
Turnover

Operating profit
Non-core items

Core operating profit

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

Depreciation and amortisation
Impairment and other non-cash charges(a) (b)

2013
Turnover

Operating profit
Non-core items

Core operating profit

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

Depreciation and amortisation
Impairment and other non-cash charges(b)

2012
Turnover

Operating profit
Non-core items

Core operating profit

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

Depreciation and amortisation
Impairment and other non-cash charges(b)

€ million
Personal
Care

€ million

Foods

€ million
Refresh
ment

Notes

€ million

Home Care

Total

17,739

12,361

9,172

9,164

48,436

3,259
66

3,325

(1)

307
198

3,607
(1,302)

2,305

257
122

538
273

811

371
393

576
3

579

–

192
100

7,980
(960)

7,020

1,127
813

18,056

13,426

9,369

8,946

49,797

3,078
128

3,206

327
267

3,064
(687)

2,377

293
139

851
5

856

330
97

524
53

577

201
179

7,517
(501)

7,016

113

1,151
682

18,097

14,444

9,726

9,057

51,324

2,925
160

3,085

336
189

2,601
(73)

2,528

311
141

908
–

908

340
106

543
(14)

529

–

212
128

6,977
73

7,050

105

1,199
564

(a) See note 3 for further information.
(b) Other non-cash charges include charges to the income statement during the year in respect of the share-based compensation and provisions.

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 external customer and does not receive 10% or more
of its revenues from transactions with any single external customer.

Unilever Annual Report and Accounts 2014Financial statements
2. SEGMENT INFORMATION CONTINUED

Segment assets and liabilities are not provided because they are not received or reviewed by our chief operating decision-maker,
which is the 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, United States (being the largest country outside the home countries) and all other countries are:

2014

Turnover
Non-current assets(c)

2013

Turnover
Non-current assets(c)

2012

Turnover
Non-current assets(c)

€ million
Netherlands/
United
Kingdom

3,851
3,921

3,872
3,390

3,980
3,353

€ million

United
States

6,684
7,668

Others

Total

37,901
21,714

48,436
33,303

7,084
7,626

38,841
19,794

49,797
30,810

7,834
8,670

39,510
19,676

51,324
31,699

No other country had turnover or non-current assets (as shown above) greater than 10% of the Group total.

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. Sales between geographical areas are carried out at arm’s length and were
not material.

2014
Turnover

Operating profit
Non-core items

Core operating profit

€ million
Asia/

AMET/RUB(d)

€ million
The
Americas

€ million

Europe

Total

19,703

15,514

13,219

48,436

2,626
(15)

2,611

3,233
(959)

2,274

2,121
14

2,135

7,980
(960)

7,020

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

–

2013
Turnover

Operating profit
Non-core items

Core operating profit

20,085

16,206

13,506

49,797

2,765
(85)

2,680

2,859
(542)

2,317

1,893
126

2,019

7,517
(501)

7,016

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

(1)

113

2012
Turnover

Operating profit
Non-core items

Core operating profit

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

(d) Refers to Asia, Africa, Middle East, Turkey, Russia, Ukraine and Belarus.

20,357

17,088

13,879

51,324

2,637
30

2,667

2,432
(13)

2,419

(2)

1,908
56

1,964

6,977
73

7,050

105

Unilever Annual Report and Accounts 2014Financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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 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.

Turnover
Cost of sales(a)

of which: Distribution costs

Gross profit(a)
Selling and administrative expenses(a)

of which: Brand and Marketing Investment(a)

Research and Development

Operating profit

€ million
2014

48,436
(28,387)
(3,079)

20,049
(12,069)
(7,166)
(955)

€ million
2013

€ million
2012

49,797
(29,065)
(3,139)

20,732
(13,215)
(7,383)
(1,040)

51,324
(30,530)
(3,264)

20,794
(13,817)
(7,311)
(1,003)

7,980

7,517

6,977

(a) Advertising and Promotions are renamed to ‘Brand and Marketing Investment’ (BMI) after moving sales equipment costs from cost of sales to BMI and

moving cost of merchandisers and consumer engagement centres from Overheads to BMI.

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.

Acquisition and disposal related costs
Gain/(loss) on disposal of group companies
Impairments and other one-off items(b)

Non-core items before tax
Tax impact of non-core items

Non-core items after tax

Attributable to:

Non-controlling interests
Shareholders’ equity

€ million
2014

€ million
2013

€ million
2012

(97)
1,392
(335)

960
(423)

537

–
537

(112)
733
(120)

501
(266)

235

–
235

(190)
117
–

(73)
(14)

(87)

–
(87)

(b) 2014 includes an impairment charge of €305 million on assets related to the Slim.Fast business. These assets were subsequently sold (see note 21).
2014 includes €30 million charge for legal cases pertaining to a number of investigations by local competition regulators (2013: €120 million).

OTHER
Other significant cost items by nature within operating costs include:

Staff costs
Raw and packaging materials and goods purchased for resale
Amortisation of finite-life intangible assets and software
Depreciation of property, plant and equipment
Exchange gains/(losses):

On underlying transactions
On covering forward contracts

Lease rentals:

Minimum operating lease payments
Contingent operating lease payments
Less: Sub-lease income relating to operating lease agreements

Notes

9
10

€ million
2014

(6,054)
(19,816)
(180)
(947)
12

15
(3)

(535)

(544)
–
9

€ million
2013

€ million
2012

(6,194)
(20,149)
(167)
(984)
(35)

(48)
13

(489)

(523)
(5)
39

(6,303)
(20,998)
(213)
(986)
(118)

(96)
(22)

(558)

(558)
(8)
8

Unilever Annual Report and Accounts 2014Financial statements
4. EMPLOYEES

4A. STAFF AND MANAGEMENT COSTS

Staff costs

Wages and salaries
Social security costs
Other pension costs
Share-based compensation costs

Average number of employees during the year

Asia/AMET/RUB
The Americas
Europe

Key management compensation

Salaries and short-term employee benefits
Non-Executive Directors’ fees
Post-employment benefits
Share-based benefits

Of which:

Executive Directors
Non-Executive Directors
Other(a)

€ million
2014

€ million
2013

€ million
2012

(4,992)
(586)
(288)
(188)

(6,054)

’000
2014

99
42
32

173

(5,002)
(631)
(333)
(228)

(6,194)

’000
2013

97
43
34

174

(5,133)
(659)
(358)
(153)

(6,303)

’000
2012

94
43
35

172

€ million
2014

€ million
2013

€ million
2012

(28)
(2)
(1)
(19)

(50)

(15)
(2)
(33)

(50)

(30)
(2)
(1)
(17)

(50)

(15)
(2)
(33)

(50)

(28)
(2)
(2)
(10)

(42)

(12)
(2)
(28)

(42)

(a) Other includes all members of the Unilever Leadership Executive other than Executive Directors.

Key management personnel are defined as the members of the Unilever Leadership Executive (ULE) 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 62 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.

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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 97% of total pension
liabilities) and the plans providing other post-employment benefits.

Discount rate
Inflation
Rate of increase in salaries
Rate of increase for pensions in payment (where provided)
Rate of increase for pensions in deferment (where provided)
Long-term medical cost inflation

31 December 2014

31 December 2013

Principal
defined benefit
pension plans

Other post-
employment
benefit
plans

Pension
plans

18,313

–
–
–
–

17
17

–

–
–
–
–
1

–

7,383
2,904
2,433
2,046

7,075
3,541
2,336
1,198

18
706
1,230
936
693

272

–
–
–
–

5
2
–
3

–
–
–
–
1

–

Pension
plans

20,466

8,336
2,957
3,086
2,293

8,864
4,637
2,749
1,478

(1,182)
762
1,384
1,050
962

290

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 €71 million (0.3% of total plan assets) and €67 million (0.4% of total plan
assets) at 31 December 2014 and 2013 respectively. Property includes property occupied by Unilever amounting to €15 million at
31 December 2014 and 2013.

The pension assets above exclude the assets in a Special Benefits Trust amounting to €86 million (2013: €84 million) to fund pension
and similar liabilities in the United States (see also note 17A on page 120).

SENSITIVITIES
The sensitivity of the overall pension liabilities to changes in the weighted key assumptions are:

Discount rate
Inflation rate
Life expectancy
Long-term medical cost inflation(b)

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.

Change in assumption

Change in liabilities

Increase by 0.5%
Increase by 0.5%
Increase by 1 year
Increase by 1.0%

7%
+5%
+4%
+1%

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.

Unilever Annual Report and Accounts 2014Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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, as set out in the following table (including the current estimate
of contributions for 2015):

Company contributions to funded plans:

Defined benefit
Defined contributions

Benefits paid by the company in respect of unfunded plans:

Defined benefit

Group cash flow in respect of pensions and similar benefits

€ million
2015
Estimate

390
160

150

700

€ million
2014

€ million
2013

€ million
2012

386
115

151

652

453
121

141

715

435
116

170

721

The Group’s funding policy is to periodically review the contributions made to the plans while taking account of local legislation.

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 2014, 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 62 to 77 and
those for key management personnel shown in note 4A on page 93. 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:

Income statement charge

Performance share plans
Other plans

€ million
2014

€ million
2013

€ million
2012

(186)
(2)

(188)

(221)
(7)

(228)

(147)
(6)

(153)

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. 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 2014, 2013 and 2012 and changes during the years ended
on these dates is presented below:

Outstanding at 1 January
Awarded
Vested
Forfeited

Outstanding at 31 December

2014
Number of
shares

18,909,204
9,724,186
(9,347,225)
(1,817,874)

2013
Number of
shares

18,031,101
7,780,730
(5,823,102)
(1,079,525)

2012
Number of
shares

18,642,656
7,036,147
(6,277,057)
(1,370,645)

17,468,291

18,909,204

18,031,101

Unilever Annual Report and Accounts 2014Financial statements

4C. SHARE-BASED COMPENSATION PLANS CONTINUED

Share award value information
Fair value per share award during the year

2014

2013

2012

€27.80

€28.91

€25.02

ADDITIONAL INFORMATION
At 31 December 2014, shares and options in NV or PLC totalling 19,428,560 (2013: 23,326,247) 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 18,822,613 (2013: 16,615,696) ordinary shares of NV or PLC, and trusts
in Jersey and the United Kingdom hold 1,053,470 (2013: nil) NV or PLC shares. Shares acquired during 2014 represent 0.442% of the
Group’s called up share capital. The balance of shares held in connection with share plans at 31 December 2014 represented 0.7%
(2013: 0.5%) of the Group’s called up share capital.

The book value of €647 million (2013: €507 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 2014 was €656 million
(2013: €489 million).

At 31 December 2014, the exercise price of 167,479 PLC options (NV: nil) were above the market price of the shares. At 31 December
2013, the exercise price of 192,447 PLC options (NV: nil) were above the market price of the shares.

Shares held to satisfy options and related trusts are accounted for in accordance with IAS 32 ‘Financial Instruments: Presentation’
and SIC 12 ‘Consolidation of Special Purpose Entities’. 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 98.

Between 31 December 2014 and 25 February 2015 (the latest practicable date for inclusion in this report), 4,343,415 shares were
granted and 7,840,032 shares were vested or 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

Finance costs

Bank loans and overdrafts
Interest on bonds and other loans(a)
Dividends paid on preference shares
Net gain/(loss) on derivatives for which hedge accounting is not applied(b)

On foreign exchange derivatives
Exchange difference on underlying items

Finance income
Pensions and similar obligations

Notes

€ million
2014

€ million
2013

€ million
2012

(500)

(57)
(425)
(4)
(14)

(655)
641

117
(94)

(477)

(500)

(36)
(457)
(4)
(3)

368
(371)

103
(133)

(530)

(526)

(69)
(451)
(4)
(2)

(19)
17

136
(145)

(535)

(a) ‘Interest on bonds and other loans’ include 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 on page 119.

Unilever Annual Report and Accounts 2014Financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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.

Tax charge in income statement

Current tax
Current year
Over/(under) provided in prior years

Deferred tax
Origination and reversal of temporary differences
Changes in tax rates
Recognition of previously unrecognised losses brought forward

€ million
2014

€ million
2013

€ million
2012

(2,111)
68

(2,043)

(2,320)
232

(2,088)

(1,859)
(135)

(1,994)

(112)
4
20

(88)

177
7
53

237

164
81
52

297

(2,131)

(1,851)

(1,697)

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

Computed rate of tax(a)
Differences due to:

Incentive tax credits
Withholding tax on dividends
Adjustments to previous years
Expenses not deductible for tax purposes
Other

Effective tax rate

%
2014

(5)
2
–
1
3

%
2013

(4)
2
(4)
2
2

%
2012

(5)
2
–
2
1

(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.

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.

100

Unilever Annual Report and Accounts 2014Financial statements
6B. DEFERRED TAX CONTINUED

Movements in 2014 and 2013

Pensions and similar obligations
Provisions
Goodwill and intangible assets
Accelerated tax depreciation
Tax losses
Fair value gains
Fair value losses
Share-based payments
Other

€ million
As at
1 January
2014

440
672
(1,163)
(697)
147
(17)
(5)
173
10

(440)

€ million

Income
statement

(36)
(9)
(1)
(30)
3
6
5
(2)
(24)

(88)

Other

470
(6)
(128)
(26)
(27)
1
10
1
(15)

280

€ million
As at
31 December
2014

€ million
As at
1 January
2013

874
657
(1,292)
(753)
123
(10)
10
172
(29)

(248)

750
619
(1,436)
(623)
134
(21)
12
172
29

(364)

€ million

Income
statement

5
96
221
(66)
12
(3)
(17)
(8)
(3)

237

Other

(315)
(43)
52
(8)
1
7
–
9
(16)

(313)

€ million
As at
31 December
2013

440
672
(1,163)
(697)
147
(17)
(5)
173
10

(440)

At the balance sheet date, the Group has unused tax losses of €2,664 million (2013: €2,066 million) and tax credits amounting to
€441 million (2013: €390 million) available for offset against future taxable profits. Deferred tax assets have not been recognised in
respect of unused tax losses of €2,371 million (2013: €1,641 million) and tax credits of €441 million (2013: €390 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 €1,192 million (2013: €181 million) comprising
corporate income tax losses in the Netherlands which expire between now and 2023 and state and federal tax losses in the US which
expire between now and 2034.

Other deductible temporary differences of €67 million (2013: €72 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 €1,566 million (2013: €1,306 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 income 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:

Deferred tax assets and liabilities

Pensions and similar obligations
Provisions
Goodwill and intangible assets
Accelerated tax depreciation
Tax losses
Fair value gains
Fair value losses
Share-based payments
Other

€ million
Assets
2014

€ million
Assets
2013

€ million
Liabilities
2014

€ million
Liabilities
2013

€ million
Total
2014

€ million
Total
2013

564
515
127
(113)
88
14
(8)
85
14

368
532
58
(176)
142
10
(11)
96
65

310
142
(1,419)
(640)
35
(24)
18
87
(43)

1,286

1,084

(1,534)

72
140
(1,221)
(521)
5
(28)
7
77
(55)

(1,524)

874
657
(1,292)
(753)
123
(10)
10
172
(29)

(248)

440
672
(1,163)
(697)
147
(18)
(4)
173
10

(440)

Of which deferred tax to be recovered/(settled) after
more than 12 months

1,037

896

(1,586)

(1,563)

(549)

(667)

101

Unilever Annual Report and Accounts 2014Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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

Before
tax
2014

(110)
(1,710)
(16)

(1,836)

€ million
Tax
(charge)/
credit
2014

25
460
(9)

476

€ million

After
tax
2014

(85)
(1,250)
(25)

(1,360)

Before
tax
2013

121
942
(980)

€ million
Tax
(charge)/
credit
2013

(15)
(245)
(19)

(279)

€ million

After
tax
2013

106
697
(999)

(196)

Fair value gains/(losses) on financial instruments
Remeasurements of defined benefit pension plans
Currency retranslation gains/(losses)

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, a subsidiary of Unilever PLC purchased the shares convertible to ordinary shares in 2038 (see note 24). Due to the
repurchase, the average number of combined share units is not adjusted for these shares from 20 May 2014 to 31 December 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.

Combined earnings per share

Basic earnings per share
Diluted earnings per share
Core EPS

Calculation of average number of share units

Average number of shares: NV
PLC
Less shares held by employee share trusts and companies

Combined average number of share units
Add dilutive impact of Leverhulme shares
Add dilutive effect of share-based compensation plans

Diluted combined average number of share units

Calculation of earnings

Net profit
Non-controlling interests

Net profit attributable to shareholders’ equity

Calculation of core earnings

Net profit attributable to shareholders’ equity
Post-tax impact of non-core items

Core profit attributable to shareholders’ equity

102

€
2014

1.82
1.79
1.61

€
2013

1.71
1.66
1.58

€
2012

1.54
1.50
1.53

Millions of share units

2014

2013

2012

1,714.7
1,310.2
(184.4)

2,840.5
26.8
15.3

2,882.6

1,714.7
1,310.2
(186.8)

2,838.1
70.9
15.0

2,924.0

1,714.7
1,310.2
(196.1)

2,828.8
70.9
16.2

2,915.9

€ million
2014

€ million
2013

€ million
2012

5,515
(344)

5,171

5,263
(421)

4,842

4,836
(468)

4,368

Notes

€ million
2014

€ million
2013

€ million
2012

5,171
(537)

4,634

4,842
(235)

4,607

4,368
87

4,455

Unilever Annual Report and Accounts 2014Financial statements

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.

Dividends on ordinary capital during the year

NV dividends
PLC dividends

€ million
2014

€ million
2013

€ million
2012

(1,757)
(1,439)

(3,196)

(1,638)
(1,343)

(2,981)

(1,482)
(1,214)

(2,696)

Four quarterly interim dividends were declared and paid during 2014 totalling €1.12 (2013: €1.05) per NV ordinary share and £0.91
(2013: £0.89) per PLC ordinary share.

Quarterly dividends of €0.29 per NV ordinary share and £0.22 per PLC ordinary share were declared on 20 January 2015, to be payable
in March 2015. See note 26 ‘Events after the balance sheet date’ on page 128. Total dividends declared in relation to 2014 were €1.14
(2013: €1.08) per NV ordinary share and £0.90 (2013: £0.91) 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. On acquisition of new interests in group companies, Unilever
recognises any specifically identifiable intangible assets separately from goodwill. Intangible assets are initially measured at fair
value as at the date of acquisition.

Finite-life intangible assets mainly comprise patented and non-patented technology, know-how and software. These assets are
capitalised and 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. Indefinite-life intangibles mainly comprise
trademarks and brands. These assets are capitalised at cost but are not amortised. They are subject to a review for impairment
annually, or more frequently if events or circumstances indicate this is necessary. Any impairment is charged to the income
statement as it arises.

Internally produced intangibles generally are not capitalised unless it can be demonstrated that the recognition criteria are met.

RESEARCH AND DEVELOPMENT
Development expenditure 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 is
recognised in profit or loss as incurred.

103

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

9. GOODWILL AND INTANGIBLE ASSETS CONTINUED

Movements during 2014

Cost
1 January 2014
Acquisitions of group companies
Disposals of group companies
Reclassed to held for disposal
Additions
Disposals
Currency retranslation

31 December 2014

Accumulated amortisation and impairment
1 January 2014
Disposals of group companies
Amortisation/impairment for the year
Disposals
Currency retranslation

31 December 2014

Net book value 31 December 2014

Movements during 2013

Cost
1 January 2013
Acquisitions of group companies
Disposals of group companies
Reclassed to held for disposal
Additions
Disposals
Currency retranslation

31 December 2013

Accumulated amortisation and impairment
1 January 2013
Amortisation for the year
Disposals
Currency retranslation

31 December 2013

Net book value 31 December 2013

€ million

Goodwill

€ million
Indefinitelife
intangible
assets

€ million
Finitelife
intangible
assets

€ million

Software

Total

14,890
184
(207)
–
–
–
858

15,725

(973)
–
–
–
(110)

(1,083)

14,642

15,635
62
(62)
(3)
–
–
(742)

14,890

(1,016)
–
–
43

(973)

6,266
356
(587)
(11)
36
(2)
306

6,364

(227)
566
(305)
1
(47)

(12)

641
20
–
–
–
–
24

685

(613)
–
(2)
–
(29)

(644)

1,715
–
(1)
–
328
(9)
103

23,512
560
(795)
(11)
364
(11)
1,291

2,136

24,910

(795)
–
(178)
9
(33)

(997)

(2,608)
566
(485)
10
(219)

(2,736)

6,352

1,139

22,174

6,536
45
(13)
–
2
(5)
(299)

6,266

(238)
–
–
11

(227)

670
5
–
–
–
(10)
(24)

641

(641)
(4)
9
23

(613)

1,480
–
–
–
375
(54)
(86)

1,715

(708)
(163)
26
50

(795)

920

24,321
112
(75)
(3)
377
(69)
(1,151)

23,512

(2,603)
(167)
35
127

(2,608)

20,904

13,917

6,039

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. During the year an impairment of
€305 million has been recognised in relation to the assets related to the Slim.Fast business. These assets were subsequently sold
(see note 21). No other impairments were identified.

SIGNIFICANT CGUS
The goodwill and indefinite-life intangible assets held in the three CGUs relating to Foods across the geographical areas are considered
significant within the total carrying amounts of goodwill and indefinite-life intangible assets at 31 December 2014 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:

Foods Europe
Foods The Americas
Foods Asia/AMET/RUB

€ billion
2014

Goodwill

€ billion
2014
Indefinite
life
intangibles

€ billion
2013

Goodwill

€ billion
2013
Indefinite-
life
intangibles

5.9
3.7
1.6

1.6
1.5
0.4

5.8
3.6
1.4

1.6
1.3
0.4

Value in use has been calculated as the present value of projected future cash flows. A pre-tax discount rate of 7.4% (2013: 7.4%)
was used.

104

Unilever Annual Report and Accounts 2014Financial statements

9. GOODWILL AND INTANGIBLE ASSETS CONTINUED

For the significant CGUs, the following key assumptions were used in the discounted cash flow projections:

Longer-term sustainable growth rates
Average near-term nominal growth rates
Average operating margins

Foods

Europe

Foods
The
Americas

Foods
Asia/
AMET/RUB

0.5%
0.7%
1920%

1.7%
5.4%
2022%

3.1%
7.6%
1618%

The growth rates and margins used to estimate future performance are based on past performance and our experience of growth rates
and margins achievable in our key markets.

The projections covered 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 used are consistent with the prudent end of the range of assumptions from our annual planning and strategic
planning processes.

We have performed sensitivity analyses around the base assumptions and have concluded that no reasonable possible changes in key
assumptions would cause the recoverable amount of the significant CGUs to be less than the carrying value.

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
• Plant and equipment

40 years (or life of lease if less)
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.

Movements during 2014

Cost
1 January 2014
Acquisitions of group companies
Disposals of group companies
Additions
Disposals
Currency retranslation
Reclassification as held for sale

31 December 2014

Accumulated depreciation
1 January 2014
Disposals of group companies
Depreciation charge for the year
Disposals
Currency retranslation
Reclassification as held for sale

31 December 2014

Net book value 31 December 2014

Includes payments on account and assets in course of construction

(a) Includes €259 million (2013: €235 million) of freehold land.

The Group has commitment to capital expenditure of €640 million (2013: €669 million) – see note 20.

€ million
Land and
buildings

€ million
Plant and
equipment

€ million

Total

3,847
21
(50)
306
(109)
155
30

13,382
20
(191)
1,593
(619)
523
6

17,229
41
(241)
1,899
(728)
678
36

4,200

14,714

18,914

(1,254)
27
(102)
31
(52)
4

(6,631)
108
(845)
516
(243)
(1)

(7,885)
135
(947)
547
(295)
3

(1,346)

(7,096)

(8,442)

2,854

7,618

10,472(a)

253

1,499

1,752

105

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

10. PROPERTY, PLANT AND EQUIPMENT CONTINUED

Movements during 2013

Cost
1 January 2013
Acquisitions of group companies
Disposals of group companies
Additions
Disposals
Currency retranslation
Reclassification as held for sale
Other adjustments

31 December 2013

Accumulated depreciation
1 January 2013
Disposals of group companies
Depreciation charge for the year
Disposals
Currency retranslation
Reclassification as held for sale
Other adjustments

31 December 2013

Net book value 31 December 2013

Includes payments on account and assets in course of construction

11. OTHER NON-CURRENT ASSETS

€ million
Land and
buildings

€ million
Plant and
equipment

€ million

Total

4,006
14
(4)
281
(89)
(286)
(75)
–

3,847

(1,286)
3
(110)
66
63
14
(4)

(1,254)

2,593

191

13,503
36
(24)
1,583
(545)
(1,014)
(156)
(1)

13,382

(6,778)
17
(874)
454
436
117
(3)

(6,631)

6,751

1,315

17,509
50
(28)
1,864
(634)
(1,300)
(231)
(1)

17,229

(8,064)
20
(984)
520
499
131
(7)

(7,885)

9,344

1,506

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.

Interest in net assets of joint ventures
Interest in net assets of associates
Long-term trade and other receivables
Fair value of biological assets
Other non-financial assets(a)

(a) Other non-financial assets mainly relate to tax deposits paid.

€ million
2014

€ million
2013

52
42
265
42
256

657

57
38
207
34
227

563

106

Unilever Annual Report and Accounts 2014Financial statements11. OTHER NON-CURRENT ASSETS CONTINUED

Movements during 2014 and 2013

Joint ventures(a)
1 January
Additions
Dividends received/reductions
Share of net profit
Currency retranslation

31 December

Associates(b)
1 January
Additions
Dividends received/reductions
Share of net (loss)/profit
Currency retranslation

31 December

€ million
2014

€ million
2013

57
4
(123)
103
11

38
2
5
(5)
2

32
25
(100)
105
(5)

51
18
(42)
8
3

(a) Our principal joint ventures are Unilever Jerónimo Martins in Portugal, Pepsi Lipton International in the UK and the Pepsi/Lipton Partnership in the US.
(b) Associates as at 31 December 2014 primarily comprise our investments in Langholm Capital Partners. Other Unilever Ventures assets are included under

‘Other non-current non-financial assets’.

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 interest 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 127.

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.

Inventories

Raw materials and consumables
Finished goods and goods for resale

€ million
2014

€ million
2013

1,364
2,804

4,168

1,286
2,651

3,937

Inventories with a value of €76 million (2013: €204 million) are carried at net realisable value, this being lower than cost. During 2014,
€126 million (2013: €198 million) was charged to the income statement for damaged, obsolete and lost inventories. In 2014, €120 million
(2013: €155 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. Credit terms
for customers are determined in individual territories. 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.

107

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

13. TRADE AND OTHER CURRENT RECEIVABLES CONTINUED

Trade and other current receivables

Due within one year
Trade receivables
Prepayments and accrued income
Other receivables

€ million
2014

€ million
2013

2,827
540
1,662

5,029

2,852
516
1,463

4,831

Other receivables comprise financial assets of €425 million (2013: €588 million), including supplier and customer deposits, employee
advances and certain derivatives, and non-financial assets of €1,237 million (2013: €875 million), including tax deposits and
reclaimable sales tax.

Ageing of trade receivables

Total trade receivables
Less impairment provision for trade receivables

Of which:

Not overdue
Past due less than three months
Past due more than three months but less than six months
Past due more than six months but less than one year
Past due more than one year

Impairment provision for trade receivables

Impairment provision for trade and other receivables – current and noncurrent impairments

1 January
Charged to income statement
Reductions/releases
Currency retranslation

31 December

€ million
2014

€ million
2013

2,956
(129)

2,827

2,156
584
70
46
100
(129)

2,989
(137)

2,852

2,194
539
105
59
92
(137)

2,827

2,852

€ million
2014

€ million
2013

149
30
(36)
2

145

151
38
(30)
(10)

149

14. TRADE PAYABLES AND OTHER LIABILITIES

Trade payables and other liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequently
these liabilities are held at amortised cost, using the effective interest method.

We do not consider the fair values of trade and other payables to be significantly different from their carrying values.

Trade payables and other liabilities

Due within one year
Trade payables
Accruals
Social security and sundry taxes
Others

Due after more than one year
Accruals
Others

Total trade payables and other liabilities

Included in others are third party royalties, certain derivatives and dividends to non-controlling interests.

108

€ million
2014

€ million
2013

7,636
3,172
555
1,243

6,995
3,269
631
840

12,606

11,735

109
269

378

59
237

296

12,984

12,031

Unilever Annual Report and Accounts 2014Financial statements15. 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 98 and 99.

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 114 and on pages 118 to 119.

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 FX 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.

109

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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 (note 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

Unilever N.V.

NV ordinary shares of €0.16 each
NV ordinary shares of €428.57 each (shares numbered 1 to 2,400 – ‘Special Shares’)
Internal holdings eliminated on consolidation (€428.57 shares)

Unilever PLC

PLC ordinary shares of 31/9p each
PLC deferred stock of £1 each
Internal holding eliminated on consolidation (£1 stock)

Euro equivalent in millions (at £1.00 = €5.143)(c)

Unilever Group

Ordinary share capital of NV
Ordinary share capital of PLC

Issued,
called up
and

Authorised(a)

fully paid(b)

Authorised(a)

2014

2013

Issued,
called up
and

fully paid(b)
2013

€ million

480
1
–

481

274
1
(1)

274

480
1
–

481

274
1
(1)

274

£ million

40.8
0.1
(0.1)

40.8

€ million

210

€ million

274
210

484

40.8
0.1
(0.1)

40.8

€ million

210

€ million

274
210

484

(a) At 31 December 2014, Unilever N.V. had 3,000,000,000 (2013: 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 2014, 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 2013.

(c) Conversion rate for PLC ordinary shares nominal value to Euro 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 page 41.

A nominal dividend of 6% per annum is paid on the deferred stock of PLC, which is not redeemable.

110

Unilever Annual Report and Accounts 2014Financial statements

15B. EQUITY

BASIS OF CONSOLIDATION
Unilever is the majority shareholder of all material subsidiaries and has control in all cases. Information in relation to all of the Group’s
significant investments is provided on page 129 to 130.

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.

HUL Balance sheet as at 31 December

Non-current assets
Current assets
Current liabilities
Non-current liabilities

HUL Comprehensive income for the year ended 31 December

Turnover
Profit after tax
Total comprehensive income

HUL Cash flow for the year ended 31 December

Net increase /(decrease) in cash and cash equivalents

HUL Non-controlling interest

1 January
Share of (profit)/loss for the year ended 31 December
Other comprehensive income
Dividends paid to the non-controlling interest
Other changes in equity
Currency retranslation

31 December

€ million
2014

€ million
2013

636
1,093
(911)
(77)

432
1,002
(797)
(101)

3,529
445
519

3,341
429
384

(106)

(221)
(145)
1
130
–
(23)

(258)

(291)
(172)
(3)
92
108
45

(221)

UNILEVER’S INCREASED INTEREST IN HINDUSTAN UNILEVER LIMITED
On 18 July 2013, the Group acquired 14.78% of Hindustan Unilever Limited for a consideration of INR 192 billion (€2,515 million),
increasing the Group’s interest in Hindustan Unilever Limited from 52.48% to 67.26%. Accordingly €104 million previously shown as
attributable to non-controlling interests within equity became attributable to shareholders and the resulting loss on the acquisition
recorded in retained earnings was €2,411 million.

ANALYSIS OF RESERVES FOR THE GROUP

Other reserves as at 31 December

Fair value reserves

Cash flow hedges
Available-for-sale financial assets

Currency retranslation of group companies
Adjustment on translation of PLC’s ordinary capital at 31/9p = €0.16
Capital redemption reserve
Book value of treasury stock
Other(a)

(a) Relates to option on purchase of subsidiary for non-controlling interest.

€ million
Total
2014

€ million
Total
2013

€ million
Total
2012

(198)

(234)
36

(2,901)
(164)
32
(4,125)
(182)

(7,538)

(113)

(162)
49

(2,611)
(164)
32
(3,890)
–

(6,746)

(219)

(241)
22

(1,843)
(164)
32
(4,002)
–

(6,196)

Unilever acquired 7,304,993 (2013: 34,077) NV ordinary shares and 6,058,733 (2013: 330,000) 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 2014 was 153,928,997 (2013: 153,027,466) NV shares and 34,204,709 (2013: 31,845,853) PLC shares. Of these,
12,368,368 NV shares and 7,507,715 PLC shares were held in connection with share-based compensation plans (see note 4C on pages
98 and 99).

111

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

15B. EQUITY CONTINUED

Treasury stock – movements during the year

1 January
Purchases and other utilisations

31 December

Currency retranslation reserve – movements during the year

1 January
Currency retranslation during the year
Movement in net investment hedges and exchange differences in net investments in foreign operations
Recycled to income statement

31 December

OTHER COMPREHENSIVE INCOME RECONCILIATION

Fair value gains/(losses) on financial instruments – movement during the year

1 January
Movement during the year

31 December

€ million
2014

€ million
2013

(3,890)
(235)

(4,125)

(4,002)
112

(3,890)

€ million
2014

€ million
2013

(2,611)
(626)
412
(76)

(2,901)

(1,843)
(496)
(275)
3

(2,611)

€ million
2014

€ million
2013

(113)
(85)

(198)

(219)
106

(113)

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 102.

Actuarial gains/(losses) on pension schemes – movement during the year

1 January
Movement during the year

31 December

€ million
2014

€ million
2013

(1,107)
(1,250)

(2,357)

(1,804)
697

(1,107)

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 93 to
98 and note 6C on page 102.

Currency retranslation gains/(losses) – movement during the year

€ million
2014

€ million
2013

(3,006)

(2,007)

(290)
208
57

(788)
(129)
(82)

(3,031)

(3,006)

1 January
Currency retranslation during the year:

Other reserves
Retained profit
Non-controlling interest

31 December

15C. FINANCIAL LIABILITIES

Financial liabilities(a)(b)

Preference shares
Bank loans and overdrafts
Bonds and other loans

Finance lease creditors
Derivatives
Other financial liabilities

Notes

€ million
Current
2014

€ million
Non-current
2014

–
588
4,428

13
277
230

68
526
6,145

186
73
188

€ million
Total
2014

68
1,114
10,573

199
350
418

€ million
Current
2013

€ million
Non-current
2013

€ million
Total
2013

–
491
3,037

14
199
269

68
576
6,557

190
100
–

68
1,067
9,594

204
299
269

5,536

7,186

12,722

4,010

7,491

11,501

(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 €1 million (2013: €6 million) of secured liabilities.

112

Unilever Annual Report and Accounts 2014Financial statements15C. FINANCIAL LIABILITIES CONTINUED

ANALYSIS OF BONDS AND OTHER LOANS

Unilever N.V.
3.375% Bonds 2015 (€)
1.750% Bonds 2020 (€)
3.500% Notes 2015 (Swiss francs)
2.950% Notes 2017 (Renminbi)
1.150% Notes 2014 (Renminbi)
Commercial paper

Total NV

Unilever PLC
4.750% Bonds 2017 (£)
2.000% Notes 2018 (£)
4.000% Bonds 2014 (£)
Commercial Paper

Total PLC

Other group companies
Switzerland
Other

United States
4.250% Notes 2021 (US $)
5.900% Bonds 2032 (US $)
4.800% Notes 2019 (US $)
2.200% Notes 2019 (US $)
0.850% Notes 2017 (US $)
2.750% Notes 2016 (US $)
0.450% Notes 2015 (US $)
7.250% Bonds 2026 (US $)
6.625% Bonds 2028 (US $)
5.150% Notes 2020 (US $)
7.000% Bonds 2017 (US $)
5.600% Bonds 2097 (US $)
3.650% Notes 2014 (US $)
Commercial paper (US $)
Other

Other countries

Total other group companies

Total bonds and other loans

€ million
Total
2014

€ million
Total
2013

764(a)
746
291
40
–
2,739

4,580

511
317(b)
–
–

828

777
746
285
–
36
1,008

2,852

478
–
419
670

1,567

819
812
616
610
449
411
370
237
185
132
121
74
–
255
–

722
716
543
537
395
362
326
209
161
117
107
66
544
341
16

5,165

10,573

5,175

9,594

(a) Of which €14 million (2013: €28 million) relates to a fair value adjustment following the fair value hedge accounting of a fix-to-float interest rate swap.
(b) Of which €(2) million (2013: nil) 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.

113

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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 2013 and 2014.

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 2014. 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 2014 Unilever had undrawn revolving 364-day bilateral credit facilities in aggregate of US $6,550 million
(2013: US $6,400 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 2015.

114

Unilever Annual Report and Accounts 2014Financial statements16A. 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

Undiscounted cash flows

Notes

Due
within
1 year

Due
between
1 and
2 years

Due
between
2 and
3 years

Due
between
3 and
4 years

Due
between
4 and
5 years

Due
after
5 years

Total

€ million
Net
carrying
amount as
shown in
balance
sheet

2014
Non-derivative financial
liabilities:
Preference shares
Bank loans and overdrafts
Bonds and other loans
Finance lease creditors
Other financial liabilities
Trade payables excluding social
security and sundry taxes
Issued financial guarantees

Derivative financial liabilities:
Interest rate derivatives:

Derivative contracts – receipts
Derivative contracts –
payments

Foreign exchange derivatives:

Derivative contracts – receipts
Derivative contracts –
payments

Commodity derivatives:

Derivative contracts – receipts
Derivative contracts –
payments

(4)
(601)
(4,758)
(25)
(230)

(12,051)
(11)

(4)
(257)
(647)
(48)
–

(378)
–

(4)
(272)
(1,289)
(23)
–

–
–

(4)
–
(511)
(19)
–

–
–

(4)
–
(1,418)
(18)
–

–
–

(72)
–
(4,513)
(172)
(188)

(92)
(1,130)
(13,136)
(305)
(418)

(68)
(1,114)
(10,573)
(199)
(418)

–
–

(12,429)
(11)

(12,429)
–

(17,680)

(1,334)

(1,588)

(534)

(1,440)

(4,945)

(27,521)

(24,801)

289

229

230

(429)

(255)

(277)

9,957

(10,284)

405

(421)

(483)

(2)

–

(26)

(47)

(19)

347

(304)

–

765

(980)

10,306

(10,590)

405

(421)

(515)

(514)

Total

(18,163)

(1,360)

(1,635)

(493)

(1,440)

(4,945)

(28,036)

(25,315)

2013
Non-derivative financial
liabilities:
Preference shares
Bank loans and overdrafts
Bonds and other loans
Finance lease creditors
Other financial liabilities
Trade payables excluding social
security and sundry taxes
Issued financial guarantees

Derivative financial liabilities:
Interest rate derivatives:

Derivative contracts – receipts
Derivative contracts –
payments

Foreign exchange derivatives:

Derivative contracts – receipts
Derivative contracts –
payments

Commodity derivatives:

Derivative contracts – receipts
Derivative contracts –
payments

(4)
(515)
(3,333)
(25)
(269)

(11,104)
(12)

(4)
(42)
(1,607)
(24)
–

(296)
–

(4)
(256)
(571)
(43)
–

–
–

(4)
(274)
(1,186)
(22)
–

–
–

(4)
(1)
(165)
(18)
–

–
–

(72)
–
(5,326)
(180)
–

–
–

(92)
(1,088)
(12,188)
(312)
(269)

(11,400)
(12)

(68)
(1,067)
(9,594)
(204)
(269)

(11,400)
–

(15,262)

(1,973)

(874)

(1,486)

(188)

(5,578)

(25,361)

(22,602)

275

(312)

18,186

(18,415)

(89)

(269)

194

(256)

–

(62)

167

(207)

–

(40)

(914)

(1)

–

637

(776)

18,186

(18,415)

(89)

(371)

(395)

(1,486)

(188)

(5,578)

(25,732)

(22,997)

115

Total

(15,531)

(2,035)

Unilever Annual Report and Accounts 2014Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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

Due
within
1 year

1,506
(1,503)
(97)
(421)

1,088
(509)
(2)
(313)

Due
between
1 and 2
years

Due
between
2 and 3
years

Due
between
3 and 4
years

Due
between
4 and 5
years

Due
after
5 years

2
(2)
–
–

–
–
(111)
–

–
–
–
–

–
–
(2)
–

347
(304)
–
–

–
–
(1)
–

–
–
–
–

Total

1,855
(1,809)
(97)
(421)

1,088
(509)
(116)
(313)

€ million
Net
carrying
amount of
related
derivatives(a)

34
(100)
(15)

1
(41)
14

2014
Foreign exchange cash inflows
Foreign exchange cash outflows
Interest rate cash flows
Commodity contracts cash flows

2013
Foreign exchange cash inflows
Foreign exchange cash outflows
Interest rate cash flows
Commodity contracts cash flows

(a) See note 16C on page 118.

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 2014, the Group had
hedged its exposure to future commodity
purchases for €197 million (2013: €318
million) with commodity derivatives.

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 2014 would have led to
an €18 million gain on the commodity
derivatives in the cash flow hedge reserve
(2013: €32 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.

The Group manages currency exposures
within prescribed limits, mainly through the
use of forward foreign currency exchange
contracts.

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.

Operating companies manage foreign
exchange exposures within prescribed limits.
Local compliance is monitored centrally.

116

Unilever Annual Report and Accounts 2014Financial statements

16B. MANAGEMENT OF MARKET RISK CONTINUED

POTENTIAL IMPACT OF RISK

MANAGEMENT POLICY AND
HEDGING STRATEGY

SENSITIVITY TO THE RISK

At 31 December 2014, the unhedged
exposure to the Group from companies
holding financial assets and liabilities other
than in their functional currency amounted
to €76 million (2013: €44 million).

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.

A 10% strengthening of the euro against key
currencies to which the Group is exposed
would have led to approximately an
additional €8 million gain in the income
statement (2013: €4 million gain). A 10%
weakening of the euro against these
currencies would have led to an equal but
opposite effect.

A 10% strengthening of the euro against
all other currencies would have led to a
€946 million negative retranslation effect
(2013: €313 million negative retranslation
effect). A 10% weakening of the euro against
those currencies would have led to a
€1,157 million positive retranslation effect
(2013: €382 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.

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.

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.

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 2014 would have led to
an additional €26 million of finance costs
(2013: €7 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 2014 would have led to
an additional €39 million credit in equity
from derivatives in cash flow hedge
relationships (2013: €36 million credit).
A 1.0 percentage point decrease in floating
interest rates on a full-year basis would
have led to an additional €42 million debit in
equity from derivatives in cash flow hedge
relationships (2013: €39 million debit).

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 €7.0 billion (2013:
€0.8 billion), of which €4.0 billion (2013: €0)
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
net investment hedges with a nominal value
of €2.7 billion (2013 €3.9 billion). Most of
these hedges were US $/€ contracts.

At 31 December 2014, the net exposure of
the net investments in foreign currencies
amounts to €10.4 billion (2013 €3.4 billion).

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 2014, interest
rates were fixed on approximately 70% of
the expected net debt for 2015, and 67%
for 2016 (87% for 2014 and 79% for 2015
at 31 December 2013).

The average interest rate on short-term
borrowings in 2014 was 1.2% (2013: 1.0%).

(a) See the split in fixed and floating-rate interest in the following table.

117

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

16B. MANAGEMENT OF MARKET RISK CONTINUED

The following table shows the split in fixed and floating rate interest exposures, taking into account the impact of interest rate swaps
and cross-currency swaps:

Cash and cash equivalents
Current other financial assets
Current financial liabilities
Non-current financial liabilities

Net debt
Of which:
Fixed rate (weighted average amount of fixing for the following year)
Floating rate

€ million
2014

€ million
2013

2,151
671
(5,536)
(7,186)

2,285
760
(4,010)
(7,491)

(9,900)

(8,456)

(7,297)
(2,603)

(7,764)
(692)

(9,900)

(8,456)

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:

31 December 2014
Foreign exchange derivatives

Fair value hedges
Cash flow hedges
Hedges of net investments in foreign operations
Hedge accounting not applied

Cross-currency swaps

Hedge accounting not applied

Interest rate swaps
Fair value hedges
Cash flow hedges
Hedge accounting not applied

Commodity contracts
Cash flow hedges
Hedge accounting not applied

31 December 2013
Foreign exchange derivatives

Fair value hedges
Cash flow hedges
Hedges of net investments in foreign operations
Hedge accounting not applied

Cross-currency swaps

Hedge accounting not applied

Interest rate swaps
Fair value hedges
Cash flow hedges
Hedge accounting not applied

Commodity contracts
Cash flow hedges
Hedge accounting not applied

€ million

Trade
and other
receivables

€ million
Other
current
financial
assets

€ million
Trade
payables
and other
liabilities

€ million

Current
financial
liabilities

€ million
Non-
current
financial
liabilities

6
9
–
106

–

–
–
–

–
–

–
28
356(a)
(225)(a)

137

–
–
–

–
–

121

Total assets

296

417

2
16
–
48

–

–
–
–

16
–

Total assets

–
–
4
116

174

–
–
–

–
–

294

376

(1)
(3)
–
(44)

–

–
(100)
–

(15)
(1)

(164)

(6)
(15)
–
(32)

–

–
(41)
–

(2)
–

(96)

–
–
(23)
(196)

(58)

–
–
–

–
–

(277)

Total liabilities

–
–
(69)
(98)

(32)

–
–
–

–
–

(199)

Total liabilities

–
–
–
–

(71)

(2)
–
–

–
–

(73)

(514)

–
–
–
–

(100)

–
–
–

–
–

(100)

(395)

€ million

Total

5
34
333
(359)

8
–
(2)
(100)
–

(15)
(1)

(97)

(4)
1
(65)
34

–
(41)
–

14
–

(19)

(a) Swaps that hedge the currency risk on intra-group loans and offset €356 million within ‘Hedges of net investments in foreign operations’ are included within

‘Hedge Accounting not applied’.

118

Unilever Annual Report and Accounts 2014Financial statements

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.

€ million

Gross amounts of
recognised
financial assets

€ million
Gross amounts of
recognised
financial liabilities
set off in the
balance sheet

Related amounts not set off
in the balance sheet

€ million

Net amounts of
financial assets
presented in the
balance sheet

Financial
instruments

Cash collateral
received

Net amount

773

(356)

417

(246)

(24)

147

376

–

376

(82)

(5)

289

As at 31 December 2014

Derivative financial assets

As at 31 December 2013

Derivative financial assets

(B) FINANCIAL LIABILITIES
The following financial liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements.

€ million

Gross amounts of
recognised
financial
liabilities

€ million
Gross amounts of
recognised
financial liabilities
set off in the
balance sheet

€ million
Net amounts of
financial
liabilities
presented in the
balance sheet

Related amounts not set off
in the balance sheet

€ million

Financial
instruments

Cash collateral
pledged

Net amount

As at 31 December 2014

Derivative financial liabilities

870

(356)

514

(246)

As at 31 December 2013

Derivative financial liabilities

395

–

395

(82)

–

268

313

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:
(i) held-to-maturity investments;
(ii) loans and receivables;
(iii) available-for-sale financial assets; or
(iv) financial assets at fair value through profit or loss.

119

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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 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 Group’s cash resources
and other financial assets are shown below.

Financial assets(a)

Cash and cash equivalents
Cash at bank and in hand
Short-term deposits with maturity of less than three months
Other cash equivalents

Other financial assets

Held-to-maturity investments
Loans and receivables(b)
Available-for-sale financial assets(c)
Financial assets at fair value through profit or loss:

Derivatives
Other

€ million

Current
2014

€ million
Non-
current
2014

€ million

Total
2014

Current
2013

€ million
Non-
current
2013

1,390
540
221

2,151

17
180
157

296
21

671

–
–
–

–

72
28
514

–
101

715

1,390
540
221

2,151

89
208
671

296
122

1,386

834
1,360
91

2,285

72
100
274

294
20

760

–
–
–

–

3
4
486

–
12

505

€ million

Total
2013

834
1,360
91

2,285

75
104
760

294
32

1,265

Total

2,822

715

3,537

3,045

505

3,550

(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 €86 million (2013: €84 million) of assets in a trust to fund benefit obligations in the US (see also note 4B on page 97).

120

Unilever Annual Report and Accounts 2014Financial statements17A. FINANCIAL ASSETS CONTINUED

Cash and cash equivalents reconciliation to the cash flow statement

Cash and cash equivalents per balance sheet
Less: bank overdrafts

Cash and cash equivalents per cash flow statement

€ million
2014

€ million
2013

2,151
(241)

1,910

2,285
(241)

2,044

Approximately €1.7 billion (or 81%) 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 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 was €452 million (2013: €243 million). 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 2014 the
collateral held by Unilever under such arrangements amounted to €24 million (2013: €9 million), of which €24 million (2013: €5 million)
was in cash, and €nil (2013: €4 million) 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.

Fair values of financial assets and financial liabilities

Financial assets
Cash and cash equivalents
Held-to-maturity investments
Loans and receivables
Available-for-sale financial assets
Financial assets at fair value through profit or loss:

Derivatives
Other

Financial liabilities
Preference shares
Bank loans and overdrafts
Bonds and other loans
Finance lease creditors
Derivatives
Other financial liabilities

€ million
Fair
value
2014

€ million
Fair
value
2013

€ million
Carrying
amount
2014

€ million
Carrying
amount
2013

2,151
89
208
671

296
122

2,285
75
104
760

294
32

2,151
89
208
671

296
122

2,285
75
104
760

294
32

3,537

3,550

3,537

3,550

(108)
(1,119)
(11,417)
(224)
(350)
(418)

(114)
(1,067)
(10,162)
(217)
(299)
(269)

(68)
(1,114)
(10,573)
(199)
(350)
(418)

(68)
(1,067)
(9,594)
(204)
(299)
(269)

(13,636)

(12,128)

(12,722)

(11,501)

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 2013 and 2014.

121

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

18. FINANCIAL INSTRUMENTS FAIR VALUE RISK CONTINUED

FAIR VALUE HIERARCHY
The fair values shown above 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

Notes

Level 1
2014

Level 1
2013

Level 2
2014

Level 2
2013

Level 3
2014

Level 3
2013

Assets at fair value
Other cash equivalents
Available-for-sale financial assets
Financial assets at fair value
through profit or loss:

Derivatives(a)
Other

Liabilities at fair value
Derivatives(b)

17A
17A

16C
17A

16C

–
15

–
119

–

–
8

–
25

–

221
158

417
–

91
276

376
–

(514)

(395)

–
498

–
476

–
3

–

–
7

–

(a) Includes €121 million (2013: €82 million) derivatives, reported within trade receivables, that hedge trading activities.
(b) Includes €(164) million (2013: €(96) million) derivatives, reported within trade payables, that hedge trading activities.

€ million
Total fair
value
2014

€ million
Total fair
value
2013

221
671

417
122

91
760

376
32

(514)

(395)

There were no significant changes in classification of fair value of financial assets and financial liabilities since 31 December 2013.
There were also no significant movements between the fair value hierarchy classifications since 31 December 2013.

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.

Reconciliation of Level 3 fair value measurements of financial assets is given below:

Reconciliation of movements in Level 3 valuations

1 January
Gains and losses recognised in profit and loss
Gains and losses recognised in other comprehensive income
Purchases and new issues
Sales and settlements
Transfers into Level 3
Transfers out of Level 3

31 December

€ million
2014

€ million
2013

483
(3)
17
4
–
–
–

501

506
2
(5)
29
(49)
–
–

483

SIGNIFICANT UNOBSERVABLE INPUTS USED IN LEVEL 3 FAIR VALUES
The only individually material asset valued using Level 3 techniques is a particular unlisted investment with a carrying value at year end
of €189 million (2013: €190 million). A change in one or more of the inputs to reasonably possible alternative assumptions would not
change fair value significantly.

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 2013.

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 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.

122

Unilever Annual Report and Accounts 2014Financial statements18. FINANCIAL INSTRUMENTS FAIR VALUE RISK CONTINUED

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 €136 million (2013: €132 million)
of investments within Unilever Ventures Limited. These investments are governed and administered by a dedicated management
team. The remaining assets in this category are held across several locations and valuations are managed locally, with oversight
from corporate management.

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.

Provisions

Due within one year
Due after one year

Total provisions

€ million

Movements during 2014

Restructuring

1 January 2014
Income statement:

Charges
Releases

Utilisation
Currency translation

31 December 2014

236

216
(58)
(190)
11

215

Legal

167

89
(18)
(12)
2

228

€ million
2014

€ million
2013

418
916

379
892

1,334

1,271

€ million
Disputed
indirect taxes

€ million

Other

Total

686

404
(328)
(54)
(2)

706

182

47
(30)
(20)
6

185

1,271

756
(434)
(276)
17

1,334

The provision for legal includes provisions related to competition cases (see also note 20).

The provision for disputed indirect taxes is comprised of a number of small disputed items. The largest elements relate to disputes
with Brazilian authorities. Due to the nature of the disputes, the timing of provision utilisation and any cash outflows is uncertain.
The majority of disputed items attract an interest charge.

No individual items within the remaining provisions are significant. Unilever expects that the issues relating to these restructuring,
legal and other provisions will be substantively resolved within five years.

123

Unilever Annual Report and Accounts 2014Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

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.

Long-term finance lease commitments

Buildings(a)
Plant and machinery

The commitments fall due as follows:

Within 1 year
Later than 1 year but not later than 5 years
Later than 5 years

(a) All leased land is classified as operating leases.

€ million
Future
minimum
lease
payments
2014

€ million

Finance
cost
2014

Present
value
2014

€ million
Future
minimum
lease
payments
2013

€ million

Finance
cost
2013

Present
value
2013

283
22

305

25
108
172

305

102
4

106

12
36
58

106

181
18

199

13
72
114

199

290
22

312

25
107
180

312

103
5

108

10
36
62

108

187
17

204

15
71
118

204

The table below shows the net book value of property, plant and equipment under a number of finance lease agreements.

Net book value

Cost
Accumulated depreciation

31 December 2014

Cost
Accumulated depreciation

31 December 2013

€ million

Buildings

€ million
Plant and
equipment

218
(69)

149

211
(57)

154

148
(124)

141
(119)

€ million

Total

366
(193)

173

352
(176)

176

The Group has sublet part of the leased properties under finance leases. Future minimum sublease payments of €38 million
(2013: €30 million) are expected to be received.

Long-term operating lease commitments

Land and buildings
Plant and machinery

Operating lease and other commitments fall due as follows:

Within 1 year
Later than 1 year but not later than 5 years
Later than 5 years

124

€ million
2014

€ million
2013

1,903
424

2,327

€ million
Other
commit-
ments
2014

1,034
950
41

2,025

1,328
459

1,787

€ million
Other
commit-
ments
2013

906
778
25

1,709

€ million

Operating
leases
2014

Operating
leases
2013

390
1,171
766

2,327

335
913
539

1,787

Unilever Annual Report and Accounts 2014Financial statements

20. COMMITMENTS AND CONTINGENT LIABILITIES CONTINUED

The Group has sublet part of the leased properties under operating leases. Future minimum sublease payments of €7 million
(2013: €12 million) are expected to be received.

Other commitments principally comprise commitments under contracts to purchase materials and services. They do not include
commitments for capital expenditure, which are reported in note 10 on page 105.

Contingent liabilities arise in respect of litigation against group companies, investigations by competition, regulatory and fiscal
authorities and obligations arising under environmental legislation. The estimated total of such contingent liabilities at
31 December 2014 was €1,406 million (2013: €719 million) of which €1,250 million (2013: €561 million) represents the maximum
exposure related to assessments in Brazil regarding a local corporate reorganisation in 2001, as explained further below. The Group
does not believe that any of these contingent liabilities will result in a material loss.

LEGAL PROCEEDINGS
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. In the second half of 2013 Unilever recognised provisions of €120 million related to these cases, disclosed within
non-core items. In the second half of 2014 these provisions were increased by a further €30 million.

Ongoing compliance with competition laws is of key importance to Unilever. It is Unilever’s policy to co-operate fully with competition
authorities whenever questions or issues arise. In addition, the Group continues to reinforce and enhance our internal competition law
compliance programme on an ongoing basis. As disclosed above, where specific issues arise provisions are made and contingent
liabilities disclosed to the extent appropriate.

During 2004 in Brazil, and in common with many other businesses operating in that country, one of our Brazilian subsidiaries received a
notice of infringement from the Federal Revenue Service. 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 Group believes that the likelihood of a successful challenge by the tax authorities is low, however, there can
be no guarantee of success in court.

In many markets, there is a high degree of complexity involved in the local tax regimes. In common with other businesses operating in this
environment, the Group is required to exercise judgement in the assessment of any potential exposures in these areas. Where appropriate,
the Group will make provisions or disclose contingencies in accordance with the relevant accounting principles.

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. 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. Any contingent
consideration payable is measured at fair value at the acquisition date. Subsequent changes in the fair value of contingent
consideration are recognised in net profit.

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.

2014
On 16 January 2014 the Group signed an agreement to sell 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.

125

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

21. ACQUISITIONS AND DISPOSALS CONTINUED

On 30 June 2014 the Group completed the sale of its global Ragu 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 will retain a minority stake in
the business.

On 2 December 2014 the Group acquired Talenti Gelato & Sorbetto for an undisclosed amount.

On 22 December 2014 the Group announced the purchase of the Camay brand globally and the Zest brand outside of North America and
the Caribbean from The Procter & Gamble Company. The transaction, for an undisclosed amount, is expected to close during the first
half of 2015 subject to necessary regulatory approvals.

2013
On 3 January 2013 the Group announced that it has signed a definitive agreement to sell its global Skippy business to Hormel Foods
for a total cash consideration of approximately US $700 million. The transaction completed on 31 January 2013, excluding the portion
operated out of China, which completed on 26 November 2013.

On 8 April 2013 Unilever Czech Republic signed an agreement to acquire the SAVO and other consumer brands from Bochemie.
This completed on 1 July 2013.

On 26 July 2013 Unilever signed an agreement to sell its Unipro bakery & industrial oils business in Turkey to AAK for an undisclosed
sum. This completed on 2 September 2013.

On 6 September 2013 Unilever announced that it has entered into a definitive agreement to acquire T2, a premium Australian tea
business, for an undisclosed amount. This completed on 3 October 2013.

On 1 October 2013 the Group completed the sale of its Wish-Bone and Western dressings brands to Pinnacle Foods Inc. for a total cash
consideration of approximately US $580 million.

On 19 November 2013 Unilever signed an agreement for the sale of its Soft & Beautiful, TCB and Pro-Line Comb-Thru brands to
Strength of Nature for an undisclosed amount. The sale excludes TCB’s business in Africa.

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:

Disposals

Goodwill and intangible assets
Other non-current assets
Current assets
Trade creditors and other payables

Net assets sold
(Gain)/loss on recycling of currency retranslation on disposal
Profit on sale attributable to Unilever

Consideration

Cash
Cash balances of businesses sold
Financial assets, cash deposits and financial liabilities of businesses sold
Non-cash items and deferred consideration

€ million
2014

€ million
2013

€ million
2012

229
106
50
(5)

380
(76)
1,392

1,696

1,727
(4)
–
(27)

189
43
59
(8)

283
–
733

1,016

1,030
–
–
(14)

29
35
38
(2)

100
–
117

217

229
–
(9)
(3)

The following table sets out the effect of acquisitions in 2014, 2013 and 2012 on the consolidated balance sheet. The fair values currently
established for all acquisitions made in 2014 are provisional. The goodwill arising on these transactions has been capitalised and is subject
to an annual review for impairment (or more frequently if necessary) in accordance with our accounting policies as set out in note 9 on
page 103. Any impairment is charged to the income statement as it arises. Detailed information relating to goodwill is given in note 9 on
pages 103 to 105.

Acquisitions

Net assets acquired
Goodwill arising in subsidiaries

Consideration

126

€ million
2014

€ million
2013

€ million
2012

240
184

424

55
62

117

10
10

Unilever Annual Report and Accounts 2014Financial statements

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.

Groups of assets held for sale
Goodwill and intangibles
Property, plant and equipment
Inventories
Trade and other receivables
Other

Non-current assets held for sale

Property, plant and equipment

Liabilities held for sale

Liabilities associated with assets held for sale

23. RELATED PARTY TRANSACTIONS

€ million
2014

€ million
2013

12
4
1
1
5

3
24
1
1
3

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

Trading and other balances due from joint ventures
Trading and other balances due from/(to) associates

€ million
2014

€ million
2013

105
–

130
–

JOINT VENTURES
Sales by Unilever group companies to Unilever Jerónimo Martins and Pepsi Lipton joint ventures were €106 million and €51 million in
2014 (2013: €92 million and €51 million) respectively. Sales from Unilever Jerónimo Martins and from Pepsi Lipton joint ventures to
Unilever group companies were €46 million and €54 million in 2014 (2013: €43 million and €52 million) respectively. Balances owed by/
(to) Unilever Jerónimo Martins and Pepsi Lipton joint ventures at 31 December 2014 were €112 million and €(6) million (2013: €117 million
and €(4) 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 €35 million in Langholm II, with an outstanding commitment at the end of 2014
of €40 million (2013: €42 million).

127

Unilever Annual Report and Accounts 2014Financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

24. 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, has been recorded in retained
earnings. Unilever intends to cancel 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.

Following a competitive tender process KPMG LLP and KPMG Accountants N.V. (together referred to as “KPMG”) were appointed as the
Group’s auditor for the year ended 31 December 2014 at the Annual General Meetings on 14 May 2014. PricewaterhouseCoopers LLP
and PricewaterhouseCoopers Accountants N.V. (together referred to as “PricewaterhouseCoopers”) served as Group auditor for the
years ended 31 December 2013 and 2012. Remuneration of the Group’s auditor in respect of 2014 was payable to KPMG while in respect
of 2013 and 2012 remuneration was payable to PricewaterhouseCoopers.

During the year the Group (including its subsidiaries) obtained the following services from the Group auditor and its associates:

Fees payable to the Group’s auditor for the audit of the consolidated and parent
company accounts of Unilever N.V. and Unilever PLC(a)
Fees payable to the Group’s auditor for the audit of accounts of subsidiaries of
Unilever N.V. and Unilever PLC pursuant to legislation(b)

Total statutory audit fees(c)

Audit-related assurance services
Other taxation advisory services
Services relating to corporate finance transactions
Other assurance services
All other non-audit services

€ million
2014

€ million
2013

€ million
2012

–(d)
–(d)
–
–(d)
–(d)

3
1
–
–
1

2
1
–
–
–

(a) Of which:
€1 million was payable to KPMG Accountants N.V. (PricewaterhouseCoopers Accountants N.V. 2013: €1 million; and 2012: €1 million) and €4 million was

payable to KPMG LLP (PricewaterhouseCoopers LLP 2013 €5 million; 2012: €6 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 in 2014 (2013 and 2012: PricewaterhouseCoopers International Limited).

(c) Amount payable to KPMG in respect of services supplied to associated pension schemes was less than €1 million individually and in aggregate

(PricewaterhouseCoopers 2013: €1 million; and 2012: €1 million).

(d) Amounts paid in relation to each type of service are less than €1 million individually and in aggregate.

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 20 January 2015 Unilever announced a quarterly dividend with the 2014 fourth quarter results of €0.2850 per NV ordinary share and
£0.2177 per PLC ordinary share.

On 3 February 2015 Unilever issued a €750 million 0.50% fixed rate bond which will mature in seven years.

128

Unilever Annual Report and Accounts 2014Financial statements

27. PRINCIPAL GROUP COMPANIES
AND NON-CURRENT INVESTMENTS
AS AT 31 DECEMBER 2014

The companies listed below and on page 130 are those which,
in the opinion of the Directors, principally affect the amount
of profit and assets shown in the Unilever Group financial
statements. The Directors consider that those companies not
listed are not significant in relation to Unilever as a whole.

Full information as required by Articles 2:379 and 2:414 of
the Dutch Civil Code has been filed by Unilever N.V. with the
Commercial Registry in Rotterdam. In this filing a list of Dutch
companies has been included for which NV has issued a
declaration of assumption of liability in accordance with Article
2:403 of the Dutch Civil Code.

Particulars of PLC group companies and other significant
holdings as required by the UK Companies Act 2006 will be
annexed to the next Annual Return of Unilever PLC.

Unless otherwise indicated, the companies are incorporated and
principally operate in the countries under which they are shown.

The aggregate percentage of equity capital directly or indirectly
held by NV or PLC is shown in the margin, except where it is 100%.
All these percentages are rounded to the nearest whole number.

The percentages of Unilever’s shareholdings held either directly
or indirectly by NV and PLC are identified in the tables according
to the following code:

NV 100%
PLC 100%
NV 55%; PLC 45%
NV 65%; PLC 35%
NV 15%; PLC 85%
NV 12%; PLC 88%
NV 64%; PLC 36%
NV 66%; PLC 34%
NV 6%; PLC 94%

a
b
c
d
e
f
g
h
i

Due to the inclusion of certain partnerships in the consolidated
group financial statements of Unilever, para 264(b) of the German
trade law grants an exemption from the duty to prepare individual
statutory financial statements and management reports in
accordance with the requirements for limited liability companies
and to have these audited and published.

GROUP COMPANIES

Argentina
Unilever de Argentina S.A.

Australia
Unilever Australia Ltd.

Belgium
Unilever Belgium NV/SA

Brazil
Unilever Brasil Ltda.

Canada
Unilever Canada Inc.

Ownership

Chile
Unilever Chile SA

China
Unilever Services (He Fei) Co Limited

France
Unilever France

Germany
Maizena Grundstücksverwaltung

GmbH & Co. OHG

Pfanni GmbH & Co. OHG Stavenhagen
Unilever Deutschland GmbH
Unilever Deutschland Holding GmbH
Unilever Deutschland Immobilien Leasing

GmbH & Co. OHG

Unilever Deutschland Produktions GmbH & Co. OHG
Unilever Deutschland IPR GmbH & Co. OHG

Greece
Elais Unilever Hellas SA

India
Hindustan Unilever Ltd.(i)

Indonesia
P.T. Unilever Indonesia Tbk

Italy
Unilever Italy Holdings Srl

Japan
Unilever Japan K.K.

Mexico
Unilever de México S. de R.L. de C.V.

The Netherlands
Mixhold B.V.
Unilever Finance International B.V.
Unilever N.V.(ii)
Unilever Nederland B.V.
UNUS Holding B.V.

Poland
Unilever Polska S.A.

Russia
OOO Unilever Rus

Singapore
Unilever Asia Private Limited

South Africa
Unilever South Africa (Pty) Limited

Spain
Unilever España S.A.

Sweden
Unilever Sverige AB

Switzerland
Unilever Americas Supply Chain Company AG
Unilever Finance International AG
Unilever Supply Chain Company AG
Unilever Schweiz GmbH

Thailand
Unilever Thai Trading Ltd.

Turkey
Unilever Sanayi ve Ticaret Türk A.S,.

Ownership

g
d
d
d

h
d
d

d
a

a
c

a
a
a
a

(i) As at 31 December 2014 Unilever PLC directly held 1,114,370,148 INR 1.00

ordinary shares of Hindustan Unilever Limited.
(ii) See ‘Basis of consolidation’ in note 1 on page 88.

129

Unilever Annual Report and Accounts 2014Financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED

27. PRINCIPAL GROUP COMPANIES
AND NON-CURRENT INVESTMENTS CONTINUED

Ownership

United Kingdom
Unilever UK Ltd.
Unilever PLC(ii)
Unilever U.K. Holdings Ltd.
Unilever UK & CN Holdings Ltd.

United States of America
Alberto – Culver USA, Inc.
Conopco, Inc.
Unilever Capital Corporation
Unilever United States, Inc.

(ii) See ‘Basis of consolidation’ in note 1 on page 88.

Joint ventures

Portugal
Unilever Jerónimo Martins, Lda

United States of America
Pepsi/Lipton Partnership

b
b

c
c
c
c

Ownership

In addition, we have revenues either from our own operations
or otherwise in the following locations: Albania, Algeria, Andorra,
Angola, Antigua, Armenia, Austria, Azerbaijan, Bahamas, Bahrain,
Bangladesh, Barbados, Belarus, Belize, Benin, Bolivia, Bosnia and
Herzegovina, Botswana, Brunei, Bulgaria, Burkina Faso, Burundi,
Cambodia, Cameroon, Cape Verde, Central African Republic, Chad,
Colombia, Comoros, Congo, Costa Rica, Côte d’Ivoire, Croatia, Cuba,
Cyprus, Czech Republic, Democratic Republic of Congo, Denmark,
Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El
Salvador, Equatorial Guinea, Eritrea, Estonia, Ethiopia, Fiji, Finland,
French Guiana, Gabon, Gambia, Georgia, Ghana, Grenada,
Guadeloupe, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti,
Honduras, Hong Kong, Hungary, Iceland, Iran, Iraq, Ireland, Israel,
Jamaica, Jordan, Kazakhstan, Kenya, Kiribati, Kuwait, Kyrgyzstan,
Lao People’s Democratic Republic, Latvia, Lebanon, Lesotho,
Liberia, Libya, Liechtenstein, Lithuania, Luxembourg, Macao,
Macedonia, Madagascar, Malawi, Malaysia, Mali, Malta, Martinique,
Mauritania, Mauritius, Micronesia (Federated States of), Moldova
(Republic of), Monaco, Mongolia, Montenegro, Morocco,
Mozambique, Myanmar, Namibia, Nepal, New Zealand, Nicaragua,
Niger, Nigeria, Norway, Oman, Pakistan, Palau, Palestine, Panama,
Papua New Guinea, Paraguay, Peru, Philippines, Portugal, Qatar,
Romania, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent
and the Grenadines, Samoa, San Marino, Saudi Arabia, Senegal,
Serbia, Seychelles, Sierra Leone, Slovakia, Slovenia, Solomon
Islands, Somalia, South Korea, South Sudan, Sri Lanka, Sudan,
Suriname, Swaziland, Syria, Taiwan, Tajikistan, Tanzania, Timor-
Leste, Togo, Tonga, Trinidad & Tobago, Tunisia, Turkmenistan,
Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan,
Vanuatu, Venezuela, Vietnam, Yemen, Zambia and Zimbabwe.

130

Unilever Annual Report and Accounts 2014Financial statements
COMPANY ACCOUNTS
UNILEVER N.V.

BALANCE SHEET
AS AT 31 DECEMBER

Intangible assets
Investments in subsidiaries
Debtors due after more than one year

Total non-current assets

Debtors due within one year
Deferred taxation
Cash at bank and in hand

Total current assets
Liabilities due within one year

Net current assets/(liabilities)

Total assets less current liabilities

Liabilities due after more than one year

Provisions for liabilities and charges (excluding pensions and similar obligations)

Net pension liability

Capital and reserves

Called up share capital
Share premium account
Legal reserves
Other reserves
Profit retained

Total capital employed

PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER

Income from fixed investments after taxation
Other income and expenses

Profit for the year

€ million
2014

€ million
2013

1,217
29,240
782

31,239

4,462
–
5

1,311
28,381
–

29,692

4,960
19
3

4,467
(26,181)

4,982
(24,561)

(21,714)

(19,579)

9,525

10,113

864

117

8,469

275
20
16
(3,325)
11,483

1,865

100

8,051

275
20
16
(3,237)
10,977

9,525

10,113

€ million
2014

€ million
2013

2,064
157

2,221

1,558
124

1,682

For the information required by Article 2:392 of the Dutch Civil Code, refer to pages 135 and 136. Pages 132 to 134 are part of the notes
to the Unilever N.V. company accounts.

The company accounts of Unilever N.V. are included in the consolidated accounts of the Unilever Group. Therefore, and in accordance
with Article 2:402 of the Dutch Civil Code, the profit and loss account only reflects the income from fixed investments after taxation and
other income and expenses after taxes. Under the terms of Financial Reporting Standard 1 (revised 1996) ‘Cash Flow Statements’ (FRS 1)
a cash flow statement is not included, as the cash flows are included in the consolidated cash flow statement of Unilever Group.

131

Unilever Annual Report and Accounts 2014Financial statements

NOTES TO THE COMPANY ACCOUNTS
UNILEVER N.V.

ACCOUNTING INFORMATION AND POLICIES

BASIS OF PREPARATION
The company accounts of Unilever N.V. comply in all material
respects with legislation in the Netherlands. As allowed by Article
2:362.1 of the Dutch Civil Code, the company accounts are
prepared in accordance with United Kingdom accounting
standards, unless such standards conflict with the Civil Code in
the Netherlands which would in such case prevail.

The accounts are prepared under the historical cost convention
unless otherwise indicated, in accordance with the accounting
policies set out below which have been consistently applied.

ADOPTION OF FRS 101 IN 2015
In 2012, the FRC, being the standard setting body in the UK,
published FRS 101 ‘Reduced Disclosure Framework’ which is
available to qualifying entities that prepare their annual report
and accounts under EU adopted IFRS (International Financial
Reporting Standards). This outlines a reduced disclosure
framework available to qualifying entities and all UK entities will
be required to adopt this or an alternative standard in 2015.

Unilever N.V. intends to prepare its accounts under FRS 101 for
the first time in 2015. The consolidated accounts for the Group will
continue to be prepared under full IFRS. The Board considers that
it is in the best interests of the Group for Unilever N.V. to adopt
FRS 101 ‘Reduced Disclosure Framework’.

A shareholder or shareholders holding in aggregate 5% or more
of the total allotted shares in Unilever N.V. may serve objections to
the use of the disclosure exemptions on Unilever N.V., in writing,
to its registered office (Weena 455, PO Box 760, 3000 DK
Rotterdam, The Netherlands) not later than 30 June 2015 and,
if so received, Unilever N.V. may not use these disclosure
exemptions.

ACCOUNTING POLICIES
The principal accounting policies are as follows:

INTANGIBLE ASSETS
Intangible assets are amortised in the profit and loss account over
their expected useful lives of up to a maximum of 20 years. These
assets are held at cost less accumulated amortisation. They are
subject to review for impairment in accordance with United
Kingdom Financial Reporting Standard 11 ‘Impairment of Fixed
Assets and Goodwill’ (FRS 11). Any impairment is charged to the
profit and loss account as it arises.

INVESTMENTS IN SUBSIDIARIES
Shares in group companies are stated at cost less any amounts
written off to reflect a permanent impairment. Any impairment
is charged to the profit and loss account as it arises. In
accordance with Article 2:385.5 of the Dutch Civil Code, Unilever
N.V. shares held by Unilever N.V. subsidiaries are deducted from
the carrying value of those subsidiaries. This differs from the
accounting treatment under UK GAAP, which would require these
amounts to be included within investments in subsidiaries.

FINANCIAL INSTRUMENTS
NV accounting policies under United Kingdom generally accepted
accounting principles (UK GAAP) namely FRS 25 ‘Financial
Instruments: Presentation’, FRS 26 ‘Financial Instruments:
Measurement’ and FRS 29 ‘Financial Instruments: Disclosures’
are the same as the Unilever Group’s accounting policies under
IFRS namely IAS 32 ‘Financial Instruments: Presentation’, IAS 39
‘Financial Instruments: Recognition and Measurement’ and
IFRS 7: ‘Financial Instruments: Disclosures’.

132

The policies are set out under the heading ‘Capital and funding’
in note 15 to the consolidated accounts on pages 109 and 110.
NV is taking advantage of the exemption for not providing all the
financial instruments disclosures, because IFRS 7 disclosures
are given in note 15 to note 18 to the consolidated accounts on
pages 109 to 123.

DEFERRED TAXATION
Full provision is made for deferred taxation on all significant
timing differences arising from the recognition of items for
taxation purposes in different periods from those in which they
are included in NV accounts. Full provision is made at the rates
of tax prevailing at the year end unless future rates have been
enacted or substantively enacted. Deferred tax assets and
liabilities have not been discounted.

OWN SHARES HELD
Own shares held by NV are accounted for in accordance with
Dutch law and UK GAAP, namely FRS 25 ‘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 other
reserves. In respect to option plans, disclosures are given in note
4C to the consolidated accounts on pages 98 and 99.

RETIREMENT BENEFITS
Unilever N.V. has accounted for pensions and similar benefits
under the United Kingdom Financial Reporting Standard 17
‘Retirement benefits’ (FRS 17). The operating and financing costs
of defined benefit plans are recognised separately in the profit
and loss account; service costs are systematically spread over
the service lives of employees, and financing costs are recognised
in the periods in which they arise. Variations from expected costs,
arising from the experience of the plans or changes in actuarial
assumptions, are recognised immediately in equity. The costs of
individual events such as past service benefit enhancements,
settlements and curtailments are recognised immediately in the
profit and loss account. The liabilities and, where applicable, the
assets of defined benefit plans are recognised at fair value in the
balance sheet. The charges to the profit and loss account for
defined contribution plans are NV contributions payable and
the assets of such plans are not included in NV’s balance sheet.

DIVIDENDS
Under Financial Reporting Standard 21 ‘Events after the Balance
Sheet Date’ (FRS 21), proposed dividends do not meet the
definition of a liability until such time as they have been approved
by shareholders at the Annual General Meeting. Therefore, we do
not recognise a liability in any period for dividends that have been
proposed but will not be approved until after the balance sheet
date. This holds for external dividends as well as intra-group
dividends paid to the parent company.

TAXATION
Unilever N.V. together with certain of its subsidiaries, is part of a
tax group for Dutch corporate income tax purposes. Unilever N.V.
is the head of the fiscal unity. The members of the fiscal unity are
jointly and severally liable for any taxes payable by this group. The
external payable to or receivable from the Dutch Tax Authorities,
is only included in the books of Unilever N.V. and this amount
relates to the fiscal unity comprising all entities except for
Unilever Nederland Holdings B.V., Univest Company B.V. and
Unilever Insurances N.V. The amounts for the other entities are
settled between Unilever N.V. and these entities via intercompany
transactions.

Unilever Annual Report and Accounts 2014Financial statementsPROVISIONS
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. Provisions are
measured on the basis of the best estimate of the amounts
required to settle the obligations at the balance sheet date. Unless
indicated otherwise, provisions are stated at the face value of the
expenditure expected to be required to settle the obligations.

FINANCIAL GUARANTEES
Where the Company enters into financial guarantee contracts to
guarantee the indebtedness of other companies within its group,
the company considers these to be insurance arrangements and
accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time as it
becomes probable that the Company will be required to make a
payment under the guarantee.

INTANGIBLE ASSETS

1 January
Additions(a)
Decreases(a)
Amortisation

31 December

€ million
2014

€ million
2013

1,311
109
(108)
(95)

1,217

1,010
398
–
(97)

1,311

CASH AT BANK AND IN HAND
There was no cash at bank and in hand for which payment notice
was required at either 31 December 2014 or 31 December 2013.

LIABILITIES

Due within one year:
Other amounts owed to group companies(d)
Loans from group companies(d)
Bonds and other loans
Taxation and social security
Other

Due after more than one year:
Bonds and other loans
Accruals and deferred income
Preference shares

€ million
2014

€ million
2013

20,423
1,775
3,777
–
206

21,593
1,753
1,044
15
156

26,181

24,561

789
7
68

864

1,780
17
68

1,865

(d) Amounts owed to group companies include balances with several group
companies which are interest bearing at market interest rates and are
unsecured and repayable on demand.

Creditors due after five years amount to €68 million
(2013: €68 million) (Article 2:375.2 of the Dutch Civil Code).

(a) The increase and decrease in intangible assets relates to the transfer of the

economic ownership of trademark rights.

CAPITAL AND RESERVES

INVESTMENTS IN SUBSIDIARIES

1 January
Additions(b)
Decreases

31 December

€ million
2014

€ million
2013

28,381
859
–

28,400
10
(29)

29,240

28,381

(b) The increase relates to the investment in shares in a group company.

In respect to the list of group companies, disclosures are given in note
27 to the consolidated accounts on pages 129 and 130.

DEBTORS

Due within one year:
Loans to group companies(c)
Other amounts owed by group companies(c)
Other
Taxation

Due after more than one year:
Loans to group companies(c)

€ million
2014

€ million
2013

3,801
548
78
35

4,462

782

3,120
1,754
86
–

4,960

–

(c) Amounts owed by group companies include balances with several group
companies which are interest bearing at market interest rates and are
unsecured and repayable on demand.

Company accounts Unilever N.V.
Unilever Group: shareholders’ equity

€ million
2014

€ million
2013

8,469
13,651

8,051
14,344

The equity of Unilever Group €13,651 million (2013: €14,344 million)
includes the equity of the parent Unilever N.V. €8,469 million
(2013: €8,051 million), the equity of parent Unilever PLC
£1,247 million (2013: £2,065 million). The remaining difference
arises from recognising investments in subsidiaries in the NV
accounts at cost less any amounts written off to reflect a
permanent impairment, not eliminating intra-group balances and
transactions and not performing other consolidation procedures
which are performed for the Unilever Group financial statements.

ORDINARY SHARE CAPITAL
The called up share capital amounting to €275 million consists
of 1,714,727,700 NV ordinary shares and 2,400 NV ordinary special
shares. These special shares numbered 1 to 2,400 are held by
a subsidiary of NV and a subsidiary of PLC, each holding 50%.
Further details are given in note 15A to the consolidated accounts
on page 110. 153,681,322 (2013: 152,979,295) of the ordinary
shares are held by Unilever N.V. (see disclosure ‘Other reserves’)
and 247,675 (2013: 48,171) ordinary shares are held by other
group companies.

SHARE PREMIUM ACCOUNT
The share premium shown in the balance sheet is not available
for the issue of bonus shares and for repayment without incurring
withholding tax payable by Unilever N.V.

133

Unilever Annual Report and Accounts 2014Financial statements

CONTINGENT LIABILITIES
NV has issued joint and several liability undertakings, as defined
in Article 2:403 of the Dutch Civil Code, for almost all Dutch group
companies. These written undertakings have been filed with the
office of the Company Registry in whose area of jurisdiction the
group company concerned has its registered office.

Contingent liabilities are not expected to give rise to any material
loss. They include guarantees given for group companies and joint
guarantees with Unilever PLC and Unilever United States, relating
to the long-term debt and commercial paper issued by Unilever
PLC and/or Unilever Capital Corporation Inc. The fair value of such
guarantees was not significant in either 2014 or 2013. The guarantees
issued to other companies were immaterial.

REMUNERATION OF THE AUDITORS
For details of the remuneration of the auditors please refer to
note 25 on page 128.

PROFIT FOR THE YEAR

€ million
2014

€ million
2013

Company accounts Unilever N.V.

2,221

Unilever Group excluding non-controlling interest

5,171

1,682

4,842

The net profit of Unilever Group of €5,171 million (2013: €4,842
million) includes the net profit of parent Unilever N.V. €2,221 million
(2013: €1,682 million) and the net profit of parent Unilever PLC
£1,093 million (2013: £1,183 million). The remaining difference arises
from the recognition in NV’s accounts of investments in subsidiaries
at cost less any amounts written off to reflect a permanent
impairment, intra-group balances and transactions are not
eliminated and other consolidated procedures are not performed.

DIRECTORS’ REMUNERATION
Information about the remuneration of Directors is given in the
tables noted as audited in the Directors’ Remuneration Report
on pages 62 to 77, incorporated and repeated here by reference.

Information on key management compensation is provided in note
4A to the consolidated group financial statements on page 93.

EMPLOYEE INFORMATION
During 2014 16 employees were employed by Unilever N.V., of
whom 15 worked abroad.

The Board of Directors
3 March 2015

NOTES TO THE COMPANY ACCOUNTS
UNILEVER N.V. CONTINUED

LEGAL RESERVE
In 2006 the NV ordinary shares were split in the ratio 3 to 1 and
at the same time the share capital, previously denominated in
Dutch guilders, was converted into euros. Due to rounding the
new nominal value per share differs from the value expressed
in Dutch guilders. As a result, the reported share capital issued
at 31 December 2006 was €16 million lower than in 2005.

OTHER RESERVES

1 January
Change during the year

31 December

€ million
2014

€ million
2013

(3,237)
(88)

(3,330)
93

(3,325)

(3,237)

Unilever N.V. holds 153,681,322 (2013: 152,979,295) of its own
ordinary shares. These are included in other reserves.

PROFIT RETAINED

1 January
Profit for the year
Dividends
Realised profit/(loss) on shares/certificates held
to meet employee share options
Other charges

31 December

€ million
2014

€ million
2013

10,977
2,221
(1,757)

10,872
1,682
(1,638)

44
(2)

50
11

11,483

10,977

Unilever N.V. has approved the waiver by one of its subsidiaries of
dividends receivable of €567 million in 2014. The profits for the
year in that subsidiary are reduced by this amount.

Unilever N.V. has approved a transfer of assets being a receivable
amounting to €2,929 million through a gift from a subsidiary of
Unilever N.V. to a subsidiary of Unilever PLC.

PROVISIONS FOR LIABILITIES AND CHARGES
(EXCLUDING PENSIONS AND SIMILAR OBLIGATIONS)

Deferred taxation
Other provisions

Of which due within one year

€ million
2014

€ million
2013

62
13

75
9

84
13

97
9

At the balance sheet date, Unilever N.V. has unused tax credits
amounting to €300 million (2013: €267 million) available for offset
against future tax profits. Deferred tax assets have not been
recognised for an amount of €300 million (2013: €267 million) as
it is not probable that there will be future taxable profits against
which the credits will be utilised.

NET PENSION LIABILITY

Funded retirement (benefit)/liability
Unfunded retirement liability

€ million
2014

€ million
2013

8
109

117

(1)
101

100

In respect of the key assumptions for the Netherlands, disclosures
are given in note 4B to the consolidated accounts on pages 93 to 98.

134

Unilever Annual Report and Accounts 2014Financial statements

FURTHER STATUTORY AND OTHER INFORMATION
UNILEVER N.V.

THE RULES FOR PROFIT APPROPRIATION IN THE
ARTICLES OF ASSOCIATION (SUMMARY OF ARTICLE 38)
The profit for the year is applied firstly to the reserves required
by law or by the Equalisation Agreement, secondly to cover losses
of previous years, if any, and thirdly to the reserves deemed
necessary by the Board of Directors. Dividends due to the holders
of the Cumulative Preference Shares, including any arrears in
such dividends, are then paid; if the profit is insufficient for this
purpose, the amount available is distributed to them in proportion
to the dividend percentages of their shares. Any profit remaining
thereafter shall be distributed to the holders of ordinary shares
in proportion to the nominal value of their respective holdings of
ordinary shares. The General Meeting can only decide to make
distributions from reserves on the basis of a proposal by the
Board and in compliance with the law and the Equalisation
Agreement.

PROPOSED PROFIT APPROPRIATION

POST BALANCE SHEET EVENT
On 20 January 2015 the Directors announced a dividend of
€0.285 per Unilever N.V. ordinary share. The dividend is payable
from 11 March 2015 to shareholders registered at close of
business on 6 February 2015.

SPECIAL CONTROLLING RIGHTS UNDER THE
ARTICLES OF ASSOCIATION
See note 15 to the consolidated accounts on pages 109 to 113.

INDEPENDENT AUDITORS
A resolution will be proposed at the Annual General Meeting
on 29 April 2015 for the appointment of KPMG Accountants N.V.
as auditors of Unilever N.V. The present appointment will end
at the conclusion of the Annual General Meeting.

€ million
2014

€ million
2013

1,859
(1,337)

1,682
(1,260)

522

422

Profit for the year (available for distribution)
Dividend

To profit retained

CORPORATE CENTRE
Unilever N.V.
Weena 455
PO Box 760
3000 DK Rotterdam
The Netherlands

135

Unilever Annual Report and Accounts 2014Financial statementsRESPONSIBILITIES OF KPMG ACCOUNTANTS N.V.

This page sets out the responsibilities of KPMG Accountant N.V.
as referred to in the audit opinion on pages 79 to 83.

OUR RESPONSIBILITIES FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
Our objective is to plan and perform the audit assignment
in a manner that allows us to obtain sufficient and appropriate
audit evidence for our opinion.

Our audit has been performed with a high, but not absolute,
level of assurance, which means we may not have detected
all errors and fraud.

We have exercised professional judgement and have maintained
professional skepticism throughout the audit, in accordance with
Dutch Standards on Auditing, ethical requirements and
independence requirements.
Our audit included e.g.:
• Identifying and assessing the risks of material misstatement
of the financial statements, whether due to fraud or error,
designing and performing audit procedures responsive to
those risks, and obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control;

• Obtaining an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control;

• Evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates and related
disclosures made by management;

• Concluding on the appropriateness of management’s use of

the going concern basis of accounting, and based on the audit
evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt
on the company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may
cause the company to cease to continue as a going concern;
• Evaluating the overall presentation, structure and content
of the financial statements, including the disclosures; and
• Evaluating whether the financial statements represent the

underlying transactions and events in a manner that achieves
fair presentation.

We communicate with the Audit Committee regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings, including any significant findings in
internal control that we identify during our audit.

We provide the Audit Committee with a statement that we
have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.

From the matters communicated with the Audit Committee, we
determine those matters that were of most significance in the audit
of the financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, not
communicating the matter is in the public interest.

136

Unilever Annual Report and Accounts 2014Financial statementsCOMPANY ACCOUNTS
UNILEVER PLC

BALANCE SHEET
AS AT 31 DECEMBER

Fixed assets
Intangible assets
Investments in subsidiaries

Current assets
Debtors due within one year
Liabilities due within one year

Net current assets/(liabilities)

Total assets less current liabilities

Liabilities due after more than one year

Provision for liabilities and charges (excluding pensions and similar obligations)

Capital and reserves

Called up share capital
Share premium account
Capital redemption reserve
Other reserves
Profit retained

Total capital employed

£ million
2014

£ million
2013

176
8,372

8,548

598
(7,256)

(6,658)

1,890

648

(5)

1,247

41
94
11
(394)
1,495

189
8,115

8,304

248
(6,081)

(5,833)

2,471

398

2,065

41
94
11
(367)
2,286

1,890

2,471

The financial statements on pages 137 to 139 were approved by the Board of Directors on 3 March 2015 and signed on its behalf by
M Treschow and P Polman.

As permitted by Section 408 of the United Kingdom Companies Act 2006, an entity profit and loss account is not included as part of
the published company accounts for PLC. Under the terms of Financial Reporting Standard 1 (revised 1996) ‘Cash Flow Statements’
(FRS 1), a cash flow statement is not included, as the cash flows are included in the consolidated cash flow statement of the
Unilever Group.

ON BEHALF OF THE BOARD OF DIRECTORS

M Treschow
Chairman
P Polman
Chief Executive Officer
3 March 2015

137

Unilever Annual Report and Accounts 2014Financial statements

DEFERRED TAXATION
Full provision is made for deferred taxation on all significant
timing differences arising from the recognition of items for
taxation purposes in different periods from those in which they
are included in PLC accounts. Full provision is made at the rates
of tax prevailing at the year end unless future rates have been
enacted or substantively enacted. Deferred tax assets and
liabilities have not been discounted.

SHARES HELD BY EMPLOYEE SHARE TRUSTS
Shares held to satisfy options are accounted for in accordance
with UK GAAP, namely FRS 25 ‘Financial Instruments:
Presentation’, FRS 20 ‘Share Based Payments’ and Urgent Issues
Task Force abstract 38 ‘Accounting for ESOP Trusts’ (UITF 38). 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 other reserves.

DIVIDENDS
Under FRS 21 ‘Events after the Balance Sheet Date’, proposed
dividends do not meet the definition of a liability until such time
as they have been approved by shareholders at the Annual
General Meeting. Therefore, we do not recognise a liability in
any period for dividends that have been proposed but will not
be approved until after the balance sheet date. This holds for
external dividends as well as intra-group dividends paid to
the parent company.

TAXATION
Current tax is the expected tax payable on the taxable income for
the period, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect
of previous periods.

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. Provisions are
measured on the basis of the best estimate of the amounts
required to settle the obligations at the balance sheet date. Unless
indicated otherwise, provisions are stated at the face value of the
expenditure expected to be required to settle the obligations.

FINANCIAL GUARANTEES
Where the Company enters into financial guarantee contracts to
guarantee the indebtedness of other companies within its group,
the Company considers these to be insurance arrangements and
accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time as it
becomes probable that the Company will be required to make a
payment under the guarantee.

NOTES TO THE COMPANY ACCOUNTS
UNILEVER PLC

ACCOUNTING INFORMATION AND POLICIES

BASIS OF PREPARATION
The accounts have been prepared on a going concern basis and in
accordance with applicable United Kingdom accounting standards
and the UK Companies Act 2006.

The accounts are prepared under the historical cost convention
except for the revaluation of financial assets classified as
‘available-for-sale investments’ or ‘fair value through profit
or loss’, and ‘derivative financial instruments’ in accordance
with the accounting policies set out below which have been
consistently applied.

Unilever PLC intends to prepare its accounts under FRS 101 for
the first time in 2015. The consolidated accounts for the Group
will continue to be prepared under full IFRS. The Board considers
that it is in the best interests of the Group for Unilever PLC to
adopt FRS 101 ‘Reduced Disclosure Framework’.

A shareholder or shareholders holding in aggregate 5% or more
of the total allotted shares in Unilever PLC may serve objections
to the use of the disclosure exemptions on Unilever PLC, in
writing, to its corporate office (100 Victoria Embankment, London,
EC4Y 0DY) not later than 30 June 2015 and, if so received, Unilever
PLC may not use these disclosure exemptions.

ACCOUNTING POLICIES
The principal accounting policies are as follows:

INTANGIBLE ASSETS
Intangible assets comprise trademarks purchased after
1 January 1998 and are amortised in the profit and loss account
over their expected useful lives of up to a maximum of 20 years.
These assets are held at cost less accumulated amortisation.
They are subject to review for impairment in accordance with
United Kingdom Financial Reporting Standard 11 ‘Impairment of
Fixed Assets and Goodwill’ (FRS 11). Any impairment is charged
to the profit and loss account as it arises.

FINANCIAL INSTRUMENTS
The company’s accounting policies under United Kingdom
generally accepted accounting principles (UK GAAP), namely
FRS 25 ‘Financial Instruments: Presentation’, FRS 26 ‘Financial
Instruments: Measurement’ and FRS 29 ‘Financial Instruments:
Disclosures’, are the same as the Unilever Group’s accounting
policies under International Financial Reporting Standards (IFRS)
namely IAS 32 ‘Financial Instruments: Presentation’, IAS 39
‘Financial Instruments: Recognition and Measurement’ and
IFRS 7 ‘Financial Instruments: Disclosures’. The policies are set
out under the heading ‘Capital and funding’ in note 15 to the
consolidated accounts on pages 109 and 110. PLC is taking the
exemption for financial instruments disclosures, because IFRS 7
disclosures are given in notes 15 to 18 to the consolidated
accounts on pages 109 to 123.

138

Unilever Annual Report and Accounts 2014Financial statementsNOTES TO THE COMPANY ACCOUNTS
UNILEVER PLC CONTINUED

INTANGIBLE ASSETS

1 January
Additions
Amortisation

31 December

INVESTMENTS IN SUBSIDIARIES

Shares in group companies(a)

£ million
2014

£ million
2013

189
–
(13)

176

166
44
(21)

189

£ million
2014

£ million
2013

8,372

8,115

(a) Investments in subsidiaries include equity shares in Hindustan Unilever

Limited, a subsidiary of the Group, with a cost of £2,197 million
(2013: £2,197 million). The shares are listed on the Bombay Stock Exchange
and had a market value of £8,594 million (2013: £6,222 million) at
31 December 2014. The carrying value of the investments is supported by
their underlying net assets.

1 January
Movements in shares

31 December

PROFIT RETAINED

DEBTORS

Due within one year:
Amounts due from group companies(b)
Taxation and social security
Other

£ million
2014

£ million
2013

569
26
3

598

198
45
5

248

(b) Amounts due from group companies include balances with several group
companies which are interest bearing at market interest rates and are
unsecured and repayable on demand.

LIABILITIES

Due within one year:
Amounts due to group companies(c)
Bonds and other loans(d)
Accruals and deferred income
Other

Due after more than one year:
Bonds and other loans(e)

£ million
2014

£ million
2013

7,245
–
11
–

7,256

5,162
907
11
1

6,081

648

398

(c) Amounts due to group companies include balances with several group
companies which are interest bearing at market interest rates and are
unsecured and repayable on demand.

(d) This included a £350 million 4% note issued in 2009 which matured in

December 2014 and commercial paper.

(e) This includes a £400 million 4.75% note issued in 2009 maturing in June

2017 (year-end value amortised cost £398 million) and a £250 million 2.0%
note issued in 2014 maturing December 2018 (year-end value amortised
cost £249 million).

PROVISIONS FOR LIABILITIES AND CHARGES
(EXCLUDING PENSIONS AND SIMILAR OBLIGATIONS)

Deferred taxation
Other provisions

Of which due within one year

£ million
2014

£ million
2013

(5)
–

(5)

–

7
1

ORDINARY SHARE CAPITAL
The called up share capital amounting to £41 million
(2013: £41 million) consists of 1,310,156,361 (2013: 1,310,156,361)
PLC ordinary shares and 100,000 (2013: 100,000) PLC deferred
stock. 50% of the deferred stock of Unilever PLC are held by N.V.
Elma – a subsidiary of Unilever N.V. and 50% owned by United
Holdings Limited – a subsidiary of Unilever PLC. Further details are
given in note 15 to the consolidated accounts on pages 109 to 113.

OTHER RESERVES
The own ordinary shares held by PLC amount to 27,750,464
(2013: 26,696,994) and are included in Other reserves.

£ million
2014

£ million
2013

(367)
(27)

(394)

(381)
14

(367)

£ million
2014

£ million
2013

2,286
1,093
(721)
(1,163)

2,231
1,183
17
(1,145)

1,495

2,286

1 January
Profit for the year
Other movements(f)
Dividends paid(g)

31 December

(f) Further details are given in note 24 to the consolidated accounts on page 128.
(g) Further details are given in note 8 to the consolidated accounts on page 103.

CONTINGENT LIABILITIES
Contingent liabilities are not expected to give rise to any material
loss. They include guarantees given for group companies and
joint guarantees with Unilever N.V. and Unilever United States,
relating to the long-term debt and commercial paper issued by
Unilever N.V. and/or Unilever Capital Corporation Inc. The fair
value of such guarantees was not significant in either 2014 or
2013. The guarantees issued to other companies were immaterial.

REMUNERATION OF AUDITORS
The parent company accounts of Unilever PLC are required to
comply with The Companies (Disclosure of Auditor Remuneration)
Regulations 2005. Auditors’ remuneration in respect of Unilever
PLC is included within the disclosures in note 25 on page 128.

PROFIT APPROPRIATION

Profit for the year (available for distribution)
Dividends(h)

To profit retained

£ million
2014

£ million
2013

1,093
(876)

217

1,183
(883)

300

(h) The dividend to be paid in March 2015 (see post balance sheet event) is not

included in the 2014 dividend amount.

POST BALANCE SHEET EVENT
On 20 January 2015 the Directors announced a dividend of
£0.2177 per Unilever PLC ordinary share. The dividend is payable
from 11 March 2015 to shareholders registered at close of
business on 6 February 2015.

139

Unilever Annual Report and Accounts 2014Financial statements

INDEX

Our Annual Report and Accounts is in two parts; for pages 1 to 40 please refer to Our Strategic Report and for pages 41 to 139 please
refer to this Governance and Financial Report.

Accounting policies
Acquisitions
Americas, The
Annual General Meetings
Asia/AMET/RUB
Associates
Audit Committee
Auditors
Balance sheet
Biographies
Board committees
Board remuneration
Boards
Brand and marketing investments
Brands
Capital expenditure
Cash
Cash flow
Categories
Cautionary statement
Chairman
Chief Executive Officer
Commitments
Company accounts, statutory and other information
Compensation Committee
Comprehensive income
Contingent liabilities
Core earnings per share
Core operating margin
Core operating profit
Corporate governance
Corporate responsibility
Corporate Responsibility Committee
Deferred tax
Depreciation
Directors’ responsibilities
Disposals
Diversity
Dividends
Earnings per share
Employees
Equalisation Agreement
Equity
Europe
Exchange rates
Executive Directors
Finance and liquidity
Finance costs and income
Financial assets
Financial calendar
Financial instruments
Financial liabilities
Financial review
Foods
Free cash flow
Geographies
Goodwill

88-89
31-35, 125-126
10, 91, 93, 104-105
40, 45, 60-62
91, 93, 104, 105
84, 87, 90-91, 106-107, 127, 128
43, 56-57
48, 56-57, 79-83, 128, 134-136, 139
33, 86, 131, 137
54-55
41
62-77
2-3, 41-43
92
10
105
119-121
33, 87
10, 32, 90
Inside back cover
2, 41-43, 45, 54
4-6, 54
124-125
131-139
38, 62-77
84, 96, 102
124-125, 134, 139
31, 35, 102
7, 31-33, 35
31-32, 35
41-48
58-59
41, 58-59
100-101, 132, 138
92, 105-106
78
31-35, 125-126
7, 48, 61
40, 103, 132, 138
31, 84, 102
25-27, 48, 93
41
85, 111
91, 93, 104-105
88
41-43, 54, 65-77
34, 114-116
99
119-121
40
114-123
109, 112-113
31-35
10, 19, 32, 90, 105
7, 33, 35
10, 91, 93, 104
103-105

Gross profit
Group structure
Home Care
Impairment
Income statement
Innovation
Intangible assets
International Financial Reporting Standards
Inventories
Joint ventures
Key management
Key performance indicators
Leases
Legal proceedings
Market capitalisation
Net debt
Nominating and Corporate Governance Committee
Non-core items
Non-Executive Directors
Non-GAAP measures
Operating costs
Operating profit
Outlook
Payables
Pensions and similar obligations
Personal Care
Post balance sheet events
Preference shares and dividends
Principal group companies
Property, plant and equipment
Provisions
Receivables
Refreshment
Related-party transactions
Research and development
Reserves
Restructuring
Revenue recognition
Risk management and control
Risks
Segment information
Share-based payments
Share capital
Shareholders
Share registration
Staff costs
Strategy
Taxation
Total shareholder return
Treasury
Turnover
Underlying volume growth
Underlying sales growth
Unilever Leadership Executive
Voting
Website

92
88
10, 21, 32, 90
90, 92, 104-105
31, 84
2, 8-9, 14
103-105, 132, 138
88
107
84, 87, 90-91, 106-107, 127, 130
93
7, 31-32, 34-35
124-125
125
33
35
41-42, 60-61
90-92
3, 39, 41-43, 45, 54, 60-61, 74-75
34-35
92
31, 84, 90-92
6
108
93-98
10, 18, 32, 90
128, 135, 139
40, 99, 112
129-130
105-106
123
107-108
10, 20, 32, 90
127
8-9, 14, 18, 23, 92, 109
85, 117, 139
123
90
36-37, 46-49, 50-53, 57
36-37, 49-53
32 90-91
98-99
43-46, 110, 133, 139
28-30, 44-46
40
93
14
100-102, 132-133, 138-139
76
109-121
84, 90-91
7, 31-32, 35
7, 31-32, 34
6, 55
43, 45
40

140

Unilever Annual Report and Accounts 2014CAUTIONARY STATEMENT
This document may contain forward-looking statements, including ‘forward-looking statements’ within the meaning of the United States Private Securities
Litigation Reform Act of 1995. Words such as ‘will’, ‘aim’, ‘expects’, ‘anticipates’, ‘intends’, ‘looks’, ‘believes’, ‘vision’, or the negative of these terms and other
similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. These forward-looking
statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Group. They are not
historical facts, nor are they guarantees of future performance.

This report 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 Unilever Group.

Designed and produced by Unilever Communications in conjunction with Addison Group at www.addison-group.net.

Printed at Pureprint Group, ISO 14001. FSC® certified and CarbonNeutral®.

This document is printed on Amadeus 100% Recycled Silk and Offset. 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.

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.

FOR FURTHER INFORMATION ABOUT
UNILEVER, PLEASE VISIT OUR WEBSITE:
WWW.UNILEVER.COM

BRINGING SANITATION TO THE WORLD’S POOREST CONSUMERS

*The photograph of Saritadevi was taken for WSUP by Atul Loke.

UNILEVER N.V.
Head Office and Registered Office
Weena 455, PO Box 760
3000 DK Rotterdam
The Netherlands
T +31 (0)10 217 4000
F +31 (0)10 217 4798

Commercial Register Rotterdam
Number: 24051830

UNILEVER PLC
Head Office
100 Victoria Embankment
London EC4Y 0DY
United Kingdom
T +44 (0)20 7822 5252
F +44 (0)20 7822 5951

Registered Office
Unilever PLC
Port Sunlight
Wirral
Merseyside CH62 4ZD
United Kingdom

Registered in England and Wales
Company Number: 41424