Annual I. Kewew. And Summary Financial Statement English Version In Gullders. Jnilever

Transcription

1 Annual I Kewew And Summary Financial Statement English Version In Gullders Jnilever

2 .. F Unilever s Corporate Purpose Our purpose in Unilever is to meet the everyday needs of people everywhere - to anticipate the aspirations of our consumers and customers and to respond creatively and competitively with branded products and services which raise the quality of life. Our deep roots in local cultures and markets around the world are our unparalleled inheritance and the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers - a truly multi-local multinational. Our long-term success requires a total commitment to exceptional standards of performance and productivity, to working together effectively and to a willingness to embrace new ideas and learn continuously. We believe that to succeed requires the highest standards of corporate behaviour towards our employees, consumers and the societies and world in which we live. This is Unilever s road to sustainable, profitable growth for our business and long-term value creation for our shareholders and employees. The two parent companies, Unilever N.V. (NV) and Unilever PLC (PLC), operate as nearly as is practicable as a single entity (the Unilever Group, also referred to as Unilever or the Group). This Annual Review therefore deals with the operations and results of the Unilever Group as a whole. Fluctuations in exchange rates can have a significant effect on Unilever s reported results. In order to highlight the currency impact, key 1997 comparisons are expressed both at the rates of exchange for the current year (current exchange rates) and also at the same exchange rates as were used for 1996 (constant exchange rates). The brand names shown in italics in this Annual Review are trade marks owned by or licensed to companies within the Unilever Group.

3 Directors Report 2 Chairmen s Statement 6 Flnanclal Highlights 7 Around the World 8 Business Overview 8 Results 9 Reglonal HIghlIghts 9 - Europe 10 North America 11 Africa and Mlddle East 13 Asia and Paclflc 14 Latin America 16 People 18 Technology & InnovatIon 19 Information Technology 20 Enwronmental Responslblllty 22 Product Areas 22 Foods and dairy based foods and bakery 24 Ice cream and beverages 27 Culinary and frozen foods 28 Home & Personal Care 28 - Home care and professlonal cleaning 29 - Personal care 32 Plantations, Plant Science & Trading Operations 32 Speclallty Chemicals 33 Financial Review 36 Total Shareholder Retlrrn 37 Organisation & Corporate Governance 37 Top Management Structure 38 Executive CommIttee of the Board 39 Business Group Presidents 40 Advisory Directors & Board CommIttees 41 Legal Structure 42 Corporate Governance Summary Financial 44 lntroductlon 44 Dlwdends Statement 45 Statement from the Auditors 46 Summary Consolidated Accounts 48 Additional Information

4 Chairmen s Statement 1997 was another good year for the world economy and a busy one for the Company. In our continuing businerses, underlying volume increased by SK%, which was well up on recent years. At constant exchange rates, and before exceptional items, turnover increased by 3% and net profits were 13% higher than in Operating margins improved by almost 1% of turnover, with significant progress in Europe, in part as a result of earlier restructuring. The priority given to corporate categories and a differentiated approach by regions is working well and the quality of the portfolio has been improved. The organisational changes introduced in 1996 have proved effective and we are gathering momentum in our pursuit of sustained and outstanding performance. The sale of our speciality chemicals businesses for US $8 billion was successfully completed in July. During the year we spent Fl. 3.0 billion at current exchange rates on new acquisitions, the largest of which was Kibon, a major ice cream business in Brazil. We also disposed of businesses in non-core areas with an annual turnover of over Fl. 4 billion. Bottom line net profit at constant exchange rates increased by 141%, including the net profit on the disposal of the speciality chemicals businesses of Fl. 6.3 billion. The Company is now in a very strong financial position, with a net cash surplus of Fl billion at the end of 1997 at closing exchange rates due also to strong cash flows in the continuing businesses. This has facilitated the acceleration of restructuring and portfolio rationalisation. Whilst we plan to use our strong balance sheet to strengthen the businesses by acquisitions, we will do so only where these are clearly value-enhancing and in line with the corporate strategy Our objective is the creation of value through sustainable growth. Our stratexgy remains to focus on a portfolio of product categories and geographic regions which together offer the best prospect of achieving that objective. We now believe that we should aim to deliver a total return to shareholders which is in the top third of a group of peer companies. This is a stretching target but, we believe, appropriate, and we have made reasonable progress towards it in Categories Thcrc are 14 corporate product categories in which we aspire to meet the everyday needs of people everywhere and on which we focus corporate resources. They currently represent three-quarters of our continuing business and in 1997 their volume grew by 4%, with an operating margin of 10%. This is encouraging evidence that we are concentrating on the right areas. Other parts of the portfolio are required to deliver sustained value, the alternative being disposal. Home and Personal Care businesses performed particularly well. In developing and emerging markets they again delivered double-digit growth in turnover and profits. We also saw encouraging turnover growth and profitability improvements in both Europe and North America. Most product areas performed satisfactorily, and hair care and deodorants made excellent progress. Performance in prestige products, however, was disappointing. Our Foods operations are more heavily concentrated in Europe and North America and so have not shared to the same extent in the growth in the developing and emerging markets. There is also a greater proportion of other categories within our foods portfolio and, consequently, the 1997 emphasis has been on higher profitability rather than higher volume. While overall turnover in 1997 was flat, largely as a result of portfolio rationalisation, turnover in the corporate categories grew by 6%. Ice cream enjoyed a successful year in Europe, and the acquisition of Kibon late in the year gave us the leading position in Latin America. In recent years we have made a considerable investment in building a global business in ice cream, and the focus will now be on profitable growth. Yellow fats did well to improve results in mature markets and we are successfully

5 building a sizeable business in Russia. Turnover of tea-based beverages was up but profits were lower, in a more competitive environment. Innovation - constantly improving the appeal and competitiveness of our products - remains the key to sustainable, pr-ofitable growth. As a consequence, much work has been done on improving our understanding of consumer needs and trends, and linking that to our innovation centres and research laboratories. I997 SdW the effective completion of our network of 68 innovation centres in 19 countries, many of these in developing and emerging markets, such as Argentina, Brazil, India, Indonesia, Mexico, South Africa and Thailand. Advanced information systems provide powerful tools for the speedy sharing of knowledge and best practice. We are proud of developments in this field, which are critical to our wish to bring global knowledge to the service of consumers everywhere. Regions Our strategy involves specific and differentiated roles for the regions where we operate. In the developed markets of Europe and North America, the priority has been portfolio rationalisation and margin improvement. This is yielding higher returns and an enhanced cash flow which, looking to the future, will support the pursuit of growth. We have put particular emphasis in the meantime on growth in developing and emerging markets. These account for nearly 90% of the world s population and offer great potential for long-term growth in the consumption of our products and services. In our more mature Western European and North American operations, per capita consumption in our categories is relatively high and market growth is modest. Profitable growth therefore depends on share gain and market extension via effective innovation and a competitively low cost base has seen significant improvement in operating margins, partly a5 a result of earlier restructuring, and we are stepping up marketing._. FitzGerald ~Iorr~s Tabaksblat men of Unilever

6 investment. In Western Europe, production continues to be rationalised on a large scale to further enhance competitiveness. Equally, in North America, having started the integration of our Foods businesses in 1996, we decided, this year, to do the same for our Home and Personal Care operations. The rationalisation of categories continued and, as a result, overall turnover was static. Operating margins improved, however, and operating results were significantly higher. Developing and emerging markets now account for over 30% of our turnover. We have selected five priority regions: Central and Eastern Europe, China, India, South East Asia and South Latin America, where we will concentrate our investment. Progress in China in 1997 fell short of our plan, but such a large market requires a long-term perspective and we remain committed to our ambitious targets. We are pleased to record that we made considerable progress in realising our ambitions for the other priority regions. Management and organisation We are encouraged by the first full year of operation of our new structure. The greater clarity of roles and responsibilities has led to a release of energy and vigour in the pursuit of improved competitiveness. Satisfactory progress has also been made in embedding throughout the organisation our Statement of Corporate Purpose and the new measures of value creation*, and this will remain a priority during Environment We shall issue in parallel with this Annual Report our second Environment Report - evidence of our commitment to business practices which lead to sustainable economic development. We are particularly concerned to play our part in the efforts to sustain fertile soil for the agricultural products which comprise many of our raw materials; fertile seas and oceans for our fisheries-related products; clean, potable water which is essential for the application of our Home and Personal Care products and also, of course, the minimisation of waste and emissions everywhere. These are complex and interdependent aims and we trust the Environment Report will illustrate our objectives and the progress w c have made. Outlook 1998 xvi11 also be a critical year in relation to European Monetary Union. We expect it to proceed on time, but much remains to be done to ensure that product and labour markets are both flexible and competitive. With the advent of the single currency, there will be greater price transparency across Europe. This will require continuing priority to enhancing competitiveness. Our business will continue to adapt to this new reality. In a constantly changing world, restructuring will be an on-going fact of life throughout our business. We expect costs of this nature to average some X% - 1% of turnover per annum.

7 We continue to put major effort towards ensuring that all systems dependent upon computers are millenniumcompliant and able to function effectively through and beyond the year However, we are concerned that not all our suppliers are giving this adequate attention, and certainly many governments are only now becoming aware of the nature and scale of the problem. We are placing even greater emphasis on gaining competitive advantage from the corporate scale and scope of Unilever. Identifying the most effective business practice and best ideas, and sharing them widely and quickly, is a special and exciting challenge. This focus on managing our knowledge will be a continuing feature of Looking ahead, the world economy will be affected by the problems in East Asia and economic growth is likely to be lower than in In developing and emerging markets as a whole, we expect slower growth than in recent years, with more variation between regions and countries. Despite recent economic setbacks in some parts of Asia, we remain confident in the longerterm outlook, given their young, well-educated and hardworking populations eager for a higher standard of living. Conditions in Europe are improving and overall economic growth may be ahead of North America should again see reasonable growth. Overall, we expect markets to be attractive enough to enable us to grow and to make further progress in improving underlying profitability. Each year, Unilever s progress depends on the skills and dedication of its employees. We are proud to say that our colleagues at all levels have responded splendidly to the very particular challenges of Our thanks to everybody for an outstanding team effort. Niall FitzGerald Morris Tabaksblat Chairmen of Unkver Niall FitzGerald meets the Paddle Pop Lion at the opening of the Wall s ice cream factory in Vietnam. Morris Tabaksblat presents prizes at the 1997 Unilever Advertising Awards in London. Niall FitzGerald announces the 1997 results in London. Morris Tabaksblat discusses developments in research at Unilever s Vlaardingen Laboratory.

8 Financial Highlights l Underlying volume grew by 3.5% 0 Operating profit in continuing operations and before exceptional items was 13% ahead of last year at constant exchange rates l Strong margin increase, particularly in Europe l Continued strong growth in developing and emerging markets, particularly in Home and Personal Care l Mixed performance in North America l Chemicals businesses sold for US $8 billion l Net profit, at constant exchange rates, increased by 141%, boosted by the profit on the sale of the chemicals businesses Operating profit Earnings per share Fi mj/ion Guriders /xi FI 1 of ordrnary capital Dividends per share Guilders per N 1 of ord!nary capital N m : i-l The tab/es above and on the facing page are Total Busmess results, after exceptional Items, and at average current exchange rates They include the speaabty chemlcais operat/ons and, for earnings per share, the reiated disposal profil

9 Around the World 3f growth, but u South East Asia Continued strong performance, South Latin America Further strengthening of porifollo with acqu,s,t,oni n Unilever s five priority regioni I: Other countries In which Unilever s brands are sold Turnover by region % Operating profit by region % n Europe North America Africa and Mrddle East Asia and Pacific L&n America ? n Euiope Norttl Amerrra 13?O Africa and MIddIe East Asra and Parrfir Lahn America Turnover by product area % Operating profit by product area % n Foods Home (die & profeiiional cleaning Perxmai care ' Other Specrality Chemicals n Foods 52 4X Home care & professional cleaning a Persona/ care Other Speaality Chemicals

10 Results Unilever s results are published in the currencies of the two parent companies, namely the guilder and the pound sterling. Fluctuations between the currencies can lead to different trends for the same business. That is why we usually comment on performance at constant exchange rates (ie the same rates as in the preceding year), thus eliminating one variable over which we have no control. We also use constant exchange rates for the management of the business. In 1997, the year-on-year performance in guilders and pounds sterling at current exchange rates was markedly different. Therefore, in order to make the comparison with 1996 clear, the comments which follow are based on trends at constant exchange rates, unless otherwise stated Results Turnover decreased by 1%. In our continuing operations, ie excluding the speciality chemicals businesses, sales rose by 3% to Fl million. Underlying volume growth was 3.5%. Operating profit in our continuing business was 1% below 1996; excluding exceptional items of Fl million (1996: Fl. 620 million) operating profit rose, however, by 13% and margin improved by nearly 1%. This improvement mainly reflects the significant progress in Europe, partly as a result of earlier restructuring. The successful conclusion of the sale of our speciality chemicals businesses injuly 1997 resulted in an exceptional profit after tax of Fl. 6.3 billion. In addition, we have taken a charge of Fl. 437 million pre-tax to account for the exceptional loss on disposal of fixed assets. Net profit for the year increased by 141%; excluding all exceptional items, net profit was 13% ahead of last year. At current exchange rates, Fl. 3.0 billion was spent on acquisitions in 1997 and Fl billion received from disposals, of which almost FL 15.5 billion related to the sale of our speciality chemicals businesses. The effect on turnover and operating profit of acquisitions was FI. 637 million and Fl. 69 million respectively. The principal acquisition was Kibon, a major ice cream business in Brazil. Overall Business Development in was another good year for the world economy. In our continuing business, underlying volume growth of 3.5% was well up on recent years. The most significant improvement in the year came from Europe, with Western Europe doing much better, and Central and Eastern Europe again delivering high rate\ of growth. We continued to enjoy good growth in the developing and emerging markets, where consumer demand overall remains strong. In Europe, rcpor ted profits rose by 17%, partly as the benefits of restructuring in previous years came through; margins rose by over 1%. In North America, profits and margins were also well ahead of last year, driven by good performances in the mass market Home and Personal Care businesses and lower marketing costs in Foods. Asia and Pacific and Latin America had another strong year, and our performance in Africa and Middle East was satisfactory. Net exceptional items in operat.ing profit amounted to Fl million in 1997 (1996: Fl. 620 million), most of which were focused in Europe and North America. These included business disposal losses of Fl. 290 million. Cost savings from earlier restructuring initiatives continue to be substantial in both Europe and North America. Productivity, based on sales per employee, improved by 5% in The underlying quality of our business portfolio has again improved. During 1997, 23 businesses were acquired and 19 businesses were sold. The Regional Highlights and Product Areas commentaries are based on results in the continuing business, at constant rates of exchange, and before exceptional items, unless otherwise stated.

11 Reg ional Highlights Europe Foods sales were lower than in 1996, reflecting the sale of our Nordsce andjohn West businesses. There operamg prof1t Operating profit before exceptional,rems i % L--.- 7% % Turnover N. mdlion Operating profit N m~lhon was an increased emphasis on margin at the expense of volume in non-priority categories. Underlying volumes improved by 0.7%, mainly in ice cream, olive oil and tea. In corporate categories, we maintained share in generally flat markets. Operating profits made good progress, reflecting more competitive cost structures, substantially improved ice cream results helped by good weather, and better results in olive oil. Despite better volumes in tea, results in 1997 fell due to intensified competitive activity. I ior 3 h iines,nciuhg dhco ir ed opeiarroni Contin r,~o hmnesi Home and personal care markets were more buoyant. Underlying vohrme grew by 5%, with market shares improved or maintained in priority categories. Progress in deodorants was particularly good. The benefits of earlier restructuring came through strongly and margins Western Europe Overall economic growth was 2.5%, generally export-led, as domestic activity remained depressed. Unemployment was unchanged at over 11% and is a particularly serious problem in France, Germany, Italy and Spain. Thir, coupled with pressure on governments to bdlancc budgets to meet EMU criteria, understandably aifects consumer confidence. Inflation remained low. Other longer-term problems are arising from adjustment to increased competition in the expanding single market and competitiveness in international markets. It is clear that further considerable structural change is required ii European industry is to achieve global competitiveness. For our businesses in Western Europe, while our turnover fell slightly as a result of portfolio rationalisation, underlying volume grew by 2% (1996: decreased by 1.4%). Operating profits grew strongly, mainly in Foods, as the benefits of restructuring improved, despite higher market investments, to give a satisfactory increase in operating profit Central and Eastern Europe Central and Eastern Europe together have a large population of 419 million. Their GDP is now 10% of that of Western Europe, and grew by 1.8%. Economic reform programmes have resulted in good growth rates in some countries and have finally halted GDP decline in Russia. These are encouraging trends. Our progress in 1997 was dgain tery sdtisfactory, with underlying volume growth of 29%, mainly in the Czech Republic, Poland and Russia. In category terms, home and personal care, ice cream and yellow fats did particularly well. Operating profits made good progress after further significant market investment. There is plenty of scope for future market development in most of our corporate categories and we are encouraged by the progress to date. in earlier years came through and productivity, based on sales per employee, improved by 6% in Margins rose by 1.7%. Results were better in most countries. Exceptional items of Fl. 828 million in 1997 relate mainly to restructuring and portfolio rationalisation in Foods.

12 North America 1997,< i Turnover N mdhon Operating profit Fi miiiron 1996 CtlarlyF ii.<,',?,i, *,S'F, % 1216 (351% % I he underlying fabric of the business i, now healthier than it has been for several years, positioning it to be more innovative and customer focused. Exit from baker T and bulk oils, reinforces our strate<gy of rebalancing the portfolio for better focus and greater growth. Overall profits in Foods improved in most categories in 1997, partly as a result of lower support levrls. Home and Personal Care experienced good growth in North America in deodorants, laundry and personal \$dsh; but volumes were lower in prestige. Many of Llnilever s leading brands held or increased shares but non-strategic brands are being harvested or withdrawn, resulting in slightly lower overall shares in some categories. The Cuta nail polish remover busines\ was sold in early The North American economy continued to expand during Real GDP grew at more than 3.5%, while inflation averaged less than 2.5%. Unemployment reached a 23.year record low level. Against this favourable background, turnover grew by a disappointing 1% and underlying volumes were flat. In Home and Personal Care volume growth was 1%. In Foods volumes fell by l%, with improvements in yellow fats, ice cream and frozen foods more than offset by lower volumes in beverages, culinary and oils. However, restructuring activities are improving overall business performance, with operating profit growing by 17% and margins improving by more than 1% of turnover. This is mainly being accomplished through streamlined infrastructures, shared activities and servicer and, overall, a lower cost base which will make our businesses more competitive. Exceptional items in 1997 of Fl. 699 million relate mainly to the merger of the Home and Personal Carp hlrgnrsqc=s and further portfolio rationalisation. Overall profitability and margins increased, particularl! in hair care and deodorants due to reduced costs in Helene Curtis. Laundry and personal wdsh categoric\ also significantly increased profits on the strength of better volumes and the benefits of earlier restructuring. The merger of Unilever s thrre mass market Home and Personal Care businesses in the United States, dnnounced in September 1997, has formed Unilever Home 8c Personal Care USA, organised around producl categories to intensify the focus on innovation, supply chain management and deepening our partnership with customers to deliver superior vdluc. The operations include two global prrstige businesses, Calvin Klein and Elizabeth Arden. Overall, the prestige business worldwide had slightly higher turnover; prolits were, however, below last year s as Elizabeth Arden incurred a loss because of lower turnover in tht United State5 and the failure of the Black Pearls launch. In Foods, the dominant activity has been the merger, announced in September 1996, of Thomas J. Lipton and Van den Bergh Foods into the new Lipton. This has been Unilever s largest food merger, requiring considerable attention and commitment to ensure the benefits are obtained while control is maintained. Results of the merger to date are in line with expectations.

13 Africa and Middle East Change II wmr df consfl * ofi rifarl N miihon conrinurng busroeii rate, ram Idle< TUVlOVU % I -~~~ opemng prof1t 473 AL 434 The region is a very varied tapestry in both economic and political terms. Economic progress has generally been better in 1997 than in previous years. Relatively strong global economic conditions, together with a good rainy season in southern Africa, were contributory factors. South Africa, an important pillar of the region, remained stable. Sub-Saharan Africa was affected by political and economic difficulties in Kenya, Nigeria and Zambia, while the northern Africa and Middle East region enjoyed reasonable growth, despite civil unrest in Egypt and Israel. Turkey recorded good growth but inflation remained at very high levels. businesses, underlying volume growth was 5%, reflecting good progress, particularly in Home and Personal Care. Operating profits, excluding disposals, were slightly below 1996 levels; performance was mixed. On the positive side, our operations in South Africa recorded another excellent performance, with strong gains in home care and personal care. Cote d lvoire did well, particularly in palm oil based products. Kenya eliminated most of the losses incurred last year and encouraging progress was made in Arabia and Egypt. On the negative side, we made a loss in Nigeria as a result of economic problems coupled with serious control deficiencies. New management has been put in place. In Turkey, profits were sharply reduced, mainly in yellow fats, with a decline in market shares. Progress was made, however, in ice cream and personal care. Profits were also lower in Israel, due to product and market investments. Against this background, our strong business in the region maintained its overall position. While growth in turnover was impacted by disposals of non-core 1 BLUE SEAL i PURE PETROLEUM Reg. No J/14.2/25 JELLY Good grooming Vase/me continues to be a leading skin care brand In Africa and the Middle East Vase/me petroleum Jelly IS one of Unilever s oldest, most well-respected brands and IS used extensively as a grooming aid for both skin care and hair care

14 Open for business in Vietnam Vietnamese consumers have been enjoying quality Ice cream at affordable prices since Wall s began to manufacture locally In By developing a strong dlstnbutlon network In outlets in Ho Chi Minh City and by offering a variety of highquality products, Wall s quickly secured market leadership.

15 Asia and Pacific 1996 Chanae Operating profit 1 19% ~~~ Y~-~ ~ Operating profit before exceptional Items ~ i~~ 1152 : 984 j 17% Turnover Fl miliron Operating profit N m~ilion ~ In South East Asia, growth in turnover and results were again double-digit, and just below 1996 levels, despite the second half economic turmoil; profit margins also improved. Performances in hair care, laundry and skin care were very encouraging. The Philippines and Thailand did particularly well, led by their Home and Personal Care categories. In Indonesia, we achieved satisfactory growth in a less buoyant market than that of recent years. We are again encouraged by progress in Vietnam, where our laundry and hair care businesses lead the market and are now profitable , iota, huiiness rncluding diic nri ed opeiamns I Canrirlurng busrneii The region s economies started the year well, but several countries hit serious financial problems during the second half. Growth in consumption and investment in China has slowed. In Japan, consumer expenditure declined after a consumption tax increase and continuing concerns over the health of the banking system weakened confidence. In South Korea and South East Asia, misgivings over credit and the financial system severely shook confidence and this led to dramatic falls in currencies and stock markets. These adverse economic developments in the region have not had a great impact on our operations in 1997, but are likely to be felt in In India, in 1997, there was some slowdown in GDP growth. The region recorded, for the third successive year, a very good performance, with strong growth in sales, profits and margins. In Central Asia, our Indian operations recorded another excellent performance with double-digit growth in turnover and operating profits. We gained market share in all categories, a high rate of innovation was sustained and significant improvements were achieved in both the effectiveness and competitiveness of the supply chain. In Pakistan, conditions were more difficult. The imposition of higher import duties caused a large increase in smuggled imports, and, as a consequence, volumes of our branded products fell, as did operating profits. In China, our turnover did not grow in Progress was made in hair, oral and skin care products and ice cream, but this was offset by declines in the personal wash sector. While this is disappointing, building a major business in China will take time, and progress will be uneven, One of the largest training and development programmes we have ever undertaken improved our management capabilities in Turnover in Japan fell below 1996 levels, partly due to the disposal of the Helene Curtis hair salon business; operating profits were maintained. Our hair care business improved its market position, led by further successes for the I,ux brand. In South Korea, agreement has been reached to dissolve our foods joint venture. Skin and personal wash products made some progress but overall the business continued in loss. In Taiwan, our business recorded good growth in both sales and profits. In Australasia, turnover was flat but improved margins resulted in an increase in operating profits. Skin care, deodorant and culinary products all did well, but laundry and beverages results were down.

16 Latin America sub\tantidl business through acquisition and organic growth. WC are now bringing these interests in line so a5 to improve growth and profits. Across the region, market share gains were recorded again in most priority categories, with the exception Turnover N mrihon Operating profit N mdlion of yellow fats and tomato products, where shares were flat. This expansion was driven by an active innovation programme, based on local understanding of consumer needs and a significant increase in marketing investment. Innovation centres to serve the region have now been established for ten key product categories. Productivity and cost effectiveness programmes The economies of Latin America grew strongly in 1997, with GDP rising, on average, by 5%. The region delivered another year of good growth. Slightly lower operating profit mainly reflect\ a sharp incrraye in marketing investment. Brazil, which remains the largest profit earner in the region, again delivered strong growth, particularly in all Home and Personal Care categories, with notable successes in deodorants, hair care and oral care driven by strong innovation programmes. However, higher marketing investments took profits below last year. There were continued advances in Chile, Colombia dnd Mexico with higher turnover driving strong profit growth. In Argentina, turnover also advanced strongly, but profits were lower due to investments in marketing, innovation and the costs of absorbing acquisitions in home care and ice cream. In Central America and Peru, growth in turnover was encouraging, but profits were less satisfactory. improved results margins and funded higher support behind leading brands. The foods businesses in Brazil, Chile and Mexico were reorganised. Operations in Colombia and Peru were restructured, and rationalisation of manufacturing ol personal care products in Argentina was initiated. In Brazil, the streamlining of manufacturing was completed for margarine, and started for mayonnaise, toilet soaps and tomato products. Several low-priority businesses were sold. These included cheese operation5 in Brazil, Chile and Mexico, a meats business in Mexico and minor fragrance brands in Chile. Acquisitions were made in key categories. In ice cream, leading positions were acquired in Brazil and Mexico, two of the region s largest ice cream markets. Ice cream businesses were also acquired in Argentina, Central America and Uruguay. We now have operations across the region and clear market leadership in this priority category in Latin America. Our Home and Personal Care business, especially the well-developed operations in southern Latin America, provided another year of strong growth. The leading positions of our brands improved, in spite of increased competitive activity. In Foods, which now accounts for one-third of our turnover, we continued to build a

17 A brighter wash in Brazil Market research In Brazil revealed that consumers on low Incomes used hard soap and bleach when hand-washing clothes. Not only were these Ineffective for bnghtenlng and odour removal but they could also lrntate the skin In response, Unilever developed A/a, a qualrty detergent at an affordable price.

18 People We employ nearly people in 88 countries. We expect our companies to be at the forefront in recruiting and developing all their people, in rewarding competitively on the basis of performance, potential and responsibility, and in providing an organisational environment best suited both for business results and for people to flourish and grow. Developing people starts at their place of work and in recognising that each individual has a contribution to make to business results. Over the last few years, Total Productive Maintenance (TPM), the.japanese productivity programme, has been introduced in 80 Unilever factories. At the core of the programme is the active involvement of our people in raising efficiency. They receive appropriate training and progressively take over responsibility in teams for their operations. Some have won awards from the TPM institute. We will continue to extend this programme. In connection with TPM, companies have Total Quality Programmes running, again with high employee involvement. One excellent example is in Elais, the food company in Greece. A sustained initiative over six years has had a dramatic effect on business performance. Turnover per employee has risen by 50% and helped double profit per employee. Elais was independently assessed as being among the top seven quality companies in Europe. Developing people has a great significance in the developing and emerging markets, where our businesses are growing rapidly and where there is a shortage of skilled people. This is especially 50 in countries which have recently opened their markets to private enterprise In China there has been a rapid and effective expansion of our training activities and in Central and Eastern Europe we delivered over man days of training in nearly eight days per employee. Training in these countries is likely to continue at this rate for several years to come. A dynamic change in the business environment often leads to organisational changes and the need for our employees to adapt to new structures and responsibilities. During 1997, we have seen a lot of change. Apart from the re-organisation of our management structure, the sale of our speciality chemicals businesses, the reorganisation of our North American businesses and the on-going restructuring of our European businesses have all involved considerable change for our people. Notable this year has been the successful merger of Lever Industrial International with the Diversey Corporation. It involved a superb team effort, bringing together previously competitive operations through a number of innovative processes. The result has been a speedy integration of the two businesses, enabling the new entity to fully exploit the market opportunities. DiverseyLever was, consequently, the winner of the first Unilever HR Excellence Award.

19 Business OvervIew 17 Alongside these company initiatives are Unilever-wide activities designed for maximum leverage of skills and knowledge. International mnnagcment training courses, ii z 2 5econdments and expatriation are critical to knowledge Cmnster L\CI-OV the business. We run courses at corporate, I n n n 1 regional and local level and secondments to all parts of the WOI Id. Ar our corporate training centre, the emphasis is on developing leadership and on building networks with colleagues from around the WOI Id. Over people attended international PJ ogrammes in n Europe North Amerrca " Africa and MIddIe East Asia and Pacific Latin America Also during 1997 we embarked capon two further worldwide initiatives to enhance individual and organisational effectiveness. Our traditional,job classification system was replaced by a strurt.ure of work levels. This helps design flatter and simpler organisations and allows greater flexibility in remuneration. We also moved to an integraled approach to performance and potential assessment. This will lead to more focused individual career planning and development programmes. Both these initiatives are supportive of the programme of Shaping for Outstanding Performance. Smooth operators Voductwe Maintenance (TPM), the Japanese ctlwty programme, has been Introduced at 80 Unilever factones Results are Impressive. Unilever Indonesia s Home and Personal Care factory at Surabaya (TPM team members pictured left) has one of the best performance records In the business

20 Technology & Innovation Unilever aims to deliver innovative products that meet consumer needs. We do this by harnessing the global scale and scope of our businesses, including our global research capabilities and expertise. Teamwork and effective networking are essenca1 to promote new ideas and to disseminate scientific knowledge. All our research and development facilities and innovation centres are linked through a single global innovation network and process, enabling ideas and technolo<gy for one region to be quickly applied to another product elsewhere. By bringing together innovation centres and research with sophisticated communication systems, we are able to tap into the best scientific talent available worldwide and harness it to the service of our business objectives. Company 5 science programme is world class, provide guidance on individual projects and recommend the use of resources beyond Unilever in order to confronl scientiiic challenges. This external perspective complements the work of our own scientists. Looking to the future, we continue to explore the potential of biotechnology within our business, particularly how it could be used to help meet the world demand for food and other renewable materials. However, we believe that novel ingredient9 should only be introduced in keeping with best practice within the industry, when they have been approved by the competent authorities, and with the informed consent of consumers. For this reason, we support an open debate about the role of modern biotechnology. The responsibility for innovation lies chiefly with 68 innovation centres located around the world. Their task is to build a deep understanding of consumer needs and aspirations, feed them into our research and development programme and bring the resulting innovation quickly to the market. They focus not only on specific categories, such as ice cream, laundry and skin care, but also on their own region. In 1997, we spent over Fl. 1.7 billion (1.7% of turnover) on research and development. In addition to developing internal expertise, we also have extensive links with external scientists who participate in research programmes and share their expert knowledge. We also use eminent independent scientists to monitor the aualitv of Unilever s research. Thev helu ensure the Research and development expenditure Fl mhx N 3 Y, _ - - d r Jlil

21 Information Technology Our hllsiness requires 11s to operate across many regions and time zones. To do this effectively, we have continued to develop our global network, or Unilever intranet, this year. Today, more than of our employees use desktop computers as part of their jobs. Electronic mail facilities are available in 88 countries. These resources give employees rapid access to information, enabling them to make fast, informed decisions. This network also supper ts global teamworking and encourages the sharing of ideas. For example, companies from all over the world cdn contribute their experiences to a global project team and, at the same time, ensure that their local consumer preferences are fully understood. Ten new Infrastructure Management Centres (IMCs) are now being equipped across the world. They will provide a range of services, from the purchase and management of all computing and network equipment to the provision of service desks for users, leaving local companies iree to pursue their primary business goals. The traditional one-way approach to information flows is also changing. First, a common IT tool - Innovation Process Management - has been adopted across the business to manage innovation. It enables c all our operations to use the same methods for innovation projects, so that information can be easily shared. Secondly, electronic connections outside Unilever are being improved. On-line links allow interactive dialogue with both customers and suppliers. This leads to a more efficient supply chain, improved profitability and, hopefully, satisfied customers. The Internet has also become an important communication tool. On-line links with consumers are being established to identify new opportunities for growth. is fast becoming an important source of market information, and messages received at our brand web sites generate valuable market research data, giving us a better understanding of the needs of current and potential consumers. Research laboratories and innovadon centres are also benefiting from the potential of the Internet. It takes only minutes to gather knowledge that would have taken days or weeks to assemble using traditional methods. Our businesses in developing and emerging markets are also making full use of IT. In India, for example, satellite technololgy has been extended to more than 200 sites and is proving invahlable to Unilever in its sourcing and supply chain management. Millennium compliance The Year 2000 or millennium bug by itself may appear to be a simple technical problem. It is not. It presents a major business challenge because there are millions of corrections to be completed and tested by an absolute deadline. The problem is extensive because, apart from information systems, the task involves correcting IT infrastructure, factory and process control facilities, and telecommunication networks for both voice and data. This is complex in a networked world, where failure of one link in the chain can quickly cascade into a business problem elsewhere. We are addressing this threat as a critical corporate priority. This major project is being vigorously progressed in each of our Business Groups. It is tightly managed, with specific guidelines and milestones. Adequate resources are committed, including specialist external help. Our work is not limited to the Company s internal processes. We are working with our business partners to ensure the smooth functioning of the supply chain. We are also making a contribution to the general Year 2000 debate within various industry and trade associations.

22 Environmental Responsibilitv, b c drc co~n~n~ltetl to tlrc pj-jijc iplr of sjr~td~jjdl~lt tle\elopjncnl: Jnwtlll, CJ the 1ltw1~ of the plewnt Lvithout cojnpjojni~ing the dbjlitv of future g:cnerdtions to Jncc( theil ncccl5. In pi-dctic e, thi$ J~~C ~IJIS, dt thr vej \ Icast, Jninimi~ing dn) rlcgdtkv rn\ij ojjjrjentdl impact of curi c n t dctivitie. O\ei thr entire 1Jfc c\icle ot 0JJJ prodrjcl5 - fj-0jrj irlitidl research, dcvrlopjnent arid design to wurcing Jnatcr ials and final di\powl - F+? contjnue to take step5 to Jeducc thci~ irnpac i ojj thv cn\ij onment. NV\\ lo~~~-cnlo~ ir spredtl\, for cxdmple, cc)ljtdin 1~5s orgdnic mdtcrial and conwqwjjtly hd\e 1~45 ijjjpdct on thr en\ijonmcjit but Ire just ns good to eat. In Jndnufac tuj ing, WC hd~ c ijnpro\ed aljtl \tandnj dised the cn\jronmrntdl majqejnent of om s~atcjn5 in our factoj Jej djojmt1 the WYIJ Id. All \i tc\ nj e now Jmplcmrnring s\5tt Jii\ 1kIsrd on IXYL prdcricc guitlcljjjes, bhj( Ii drc nlso closely dligjjcd to the ret entlb intjorlrjced inter national rnvii onjncntd1 JndJldgeJrlcnt itdntldl tl, IS By the erld of 1997, tollowing Jndcpendrnt exterildl ~criticarion, 13 site5 hdd dchir\ed this accreditation In tlie djc d of trdinlng, 1%~ ha\c dnrloprd ejj\ijonjnrntdl dudjcjics5 and djjdit-tidmjjig pr<jsj drrijrjc5 bawd 011 best prdcticr guitlchlcs. Thesr Iidle hccn JJsed to tjaijj en~ij01imejitdl JndJJdgcJs, who in tilrn train other rmplqee~ Thoc pq~mmc~ AJL drsignrtl to I~clp site Jridndger 5 d4w\s thcij p*ogj-~5s JJJ foll0~1jng I nilr\ej 5 gjjjdeline\. So InJ-, I.52 \Jteh hd\c been djjdiwd djld lhr go,dl is (0 djtdit e\ej \ 5ite by thr hew An important clejjlc ljt of crj\~i~~onnj~nt;jl man;jgrjjjclit is Lo sc ( cljall~ngiji g targets for- impj-wcjnent. Most sitc:s have targets 011 emissions7 xvaste, ejjcrg!; and bztrr consumption. l erii~rinance tlat;j up to the eild of 1996 shows tlcclining ejnissions iii rriost critical aiw~s, except liamid~~r~s \caste, which Mils inflr~rncetl by new dc+iriitions ol what cc~)nsliljjles IJazwdous 11>, rcgrrlalors in sewi-al countries.!ye arc rrlaking every ef f ort to rcc1j1cc this in future. In order to JrioJiitor o,jr cnviroiimental activitic.s, we rrquirc cacll of 01x operations to rnanagr antl I-eport on thrir envirojjjijc.jilal pej-forrnance. In J-went years, ive IJavr exarnirlcd ajx2s \vhr:re wc corjld rnosl rfl eclively contrilxltc IO si~stainal)le tlcwlopment and, in 1997, agrertl thr-cc arc;j i for priojity action. l%rsr are sustainable fishing, sustainahlc agriculture arid clean water- strxvartlsliip. b ork hild AI-ratly begull in the xca 01 lishing, th1~0ug11 the kjrmation of a conservation partnership with the M orld Wide Fund lb- Nalure. This led, in 1 397, to the cstahlishrnent of the Marine Stewardship Council, whose aijn is to achier the sustainahili~y of fish stocks. 41 though wol-k on sustainable agriculture and clean \vatcj stc~rdship witllill Unilrvrr is at a I-elatively early stage, the pj-ocess of do-eloping practical programmes of action is now under way.

23 Ptoduc t det\ 15 of kc) intpo~ ~tntr and I\ I eg,trdcd n\ n ~otpot ntc ropongbilii7; ant1 ii0 pi otlucr i5 mu httrd (0 cot1~1tirl~t \ ~vltlloltt ce11t1 II clcnt ante. 1 he ltighcst 4tdtttlnt tls of occupdtiott,rl salch Xc t cqtttrrtl 111 ottt fnt tories nlltl offices.,ttid it IS the euplictt rc5pon5tbilit\ of ltne tilntl rgelnctlt to lclllc\~ tl1ctrt. M e pttblish ;I f~tll repot-t ott ottt- cll~it.oltlrt~tlial activities every two yars. Ttidcpetitlertt ett\.it.otlrncntal auditor s ha~c \;crified lhr second Environment Rrport, ptthlishetl in p;tt-:tllel \Atli this Annttal Re~ie\~-. It sets out t-esr )i sibilitics ;Intl systems [or- setting latgcb for impro~rment, monitoring achicremrnt ant1 the rcgulzttautliting of rn\.it-ontrtei~tal pcrtbrrnancr. It outlines otn progtwss in the arca ot et7~irottt~tetital inat~agcrn~nt. as ~ccll as in sttstaittahlc li5hing, suslainal~lr agricrtltru-t and clc;tn tvatrt. str~~;tt&llip. Stewards of the sea Consumer demand for fish is rising, but about 70% of the world s cornl ~rri~ll\~ imnortant marine stocks have been over-exploited OI r are slowly recovering. Unilever, with the World Wide F )r Nature, has helped to set up the Marine Stewardshi ncil with the aim of securing the long-term sustainability of fish stocks.

24 Foods Foods sales in total were static. Profit development was satisfactory, reflecting improvements in the quality of the portfolio and the benefits of restructuring. In developing and emerging markets we are growing our relatively small business quickly, often by acquisition. Oil and dairy based foods and bakery FI million Change lil.d,,~,,~ _1,<1,,S,~/,& (3, <O,,ii,l I,/le,,d!di,,,I?, TUrn0Vei ~16614 j % operamq prof1t ~ (36)% I._ ~. ~- ~~-~~A-- ~~..~ Operating profit before exceptional Items ~ % Whilst overall turnover in this product area was flat, mainly due to disposals, underlying volumes were 2% up on Profitability and margins were well above 1996 levels as a result of the strong performance in Europe. The benefits of recent restructuring initiatives delivered significant savings; profits improved in France, Italy and the United Kingdom, but results were much lower in Turkey. Exceptional items in 1997 of Fl. 675 million were focused in Europe and North America, an important element of which relates to portfolio rationalisation. Oil and dairy based foods In yellow fat\, the overall market decline continued in Western Europe and North America. However, we gained market shale in North America and maintained it in Western Europe. Good progress continued in Central and Eastern Europe, where Russia exceeded expectations. Innovations in 1997 included the roll-out in the United States of Ihwnmel & Bro7un, a spread made with yoghurt, and Oliuio, an olive oil based spread, in Belgium and the United Kingdom. We continue to leverage our strong brand franchises in both developed and emerging markets. The Ruma brand of margarine was enhanced by extensions to the range in the Czech Republic and Germany. Ramn is now the number one brand in Russia and several other Central European countries.

25 Rama spreads the word Rama margarine has taken the RussIan market by storm, becommg the top-selling brand It- lust 18 months It has set a new standard In quality for both product and packaging and Russia looks ready to become one of Unllever s biggest and most successful margarine markets

26 In olive oil, following a difficult 1996, there was a significant improvement in performance in 1997, shared by all markets except Spain. This was due to a fall in raw material prices and improved economies between our companies. Growth in most countries continues and Bwtolli performed well. In cheese, we continued our focus on the key brands, Ice cream and beverages Cl1anye N mhii 1, 0s 4 <,$li d,<i rip Ire lld5 TUrnOVer % operating prof1t % I Operating profit before exceptional ~temi I % Turnover N miliron Operating profit Fi mdhon with profit improvement now the priority. Bakery In bakery, results were lower. We disposed of the unprofitable business in North America and are aiming for increased profitability elsewhere. Food labelling Debate surrounding genetically modified organisms continued in Europe. The proposal by the European Commission to label on the basis of DNA detection was not suppol-ted by member states. In the absence of a legal framework, we have started to label our foods products voluntarily, based on new protein presence, in line with proposals by the European foods industry Underlying volume growth for this product area was 4%, with gains in both ice cream and beverages. Profitability and margins were well ahead of last year, mainly in ice cream. Exceptional items of Fl. 233 million in 1997 relate to continued restructuring focused in Europe and North America. Ice cream Turnover grew in 1997, increasing by some 5% over 1996, with underlying volume growth of 4%. Profits and margins improved significantly, particularly in Emope and North America, mainly from better weather and efficiency improvement programmes. We continued OLK strategic expansion in developing and emerging markets, with acquisitions in Argentina, Brazil, Colombia and Mexico. A new operation was started in Vietnam, and we have extended to most major cities in China. Following

27 the progress of geographic expansion over the IasL few years, Unilever now has ice cream sales in nearly 90 countries worldwide. The summer in Europe was better than 1996 and this was reflected in the improved results, with almost all countries ahead, particularly Germany and the United Kingdom. M+jor brands continue to do well. Our United States business improved its profit position, despite a highly competi tivc environment. The Canadian business, however, had a difficult year. Turnover and profit performance in Latin America were very encouraging, helped by acquisitions. New factories have been built in Australia, Sri Lanka and Vietnam and good manufacturing practices are being continually updated. We invested heavily in research and development. The investigation by the European Commission into the practice of cabinet exclusivity in Ireland continued throughout the year. 4s at the date of writing, the Commission is shortly expected to announce its views on the compatibility of this practice in Ireland with EC competition rules. mainlv in Europe, largely rdlcctillg higher marketing investments. New brand mixes include Fralib 7ihal green led in Fiance, Lipton flavoured Sun TW in Scandinavia and idling Shivn C:hq Chinese tea in Taiwan. The ready-to-drink tea market continues to grow internationally and 1,ipton hds brand leadership. The partner ship with Pepsi-Cola in North America ha5 made L@rtor~ Bntk the leading North American iced tea brand. In Europe, there was good growth in turnover. Lqton Itr Tvrc was ldunched successfully in Saudi Arabia and Thnil,md and relaunched in Bra/ii, with a new partner, Brahms. As \cicntific stud& into the health propc~ ticc of ten continue to reveal the effectiveness of the anti-oxidants present in the leaf, we anticipate thdt consumc rs will become more aware of the\e benefits, which will increase lea consumption, partic~~larly in dc\~clopcd markets. Beverages Turnover grew by 9% and underlying volume by 3%, due to aggressive brand development in India, Poland and Russia. Competitive activity has been greater than in recent years. Profits declined somewhat in 1997, The right blend Launched In India In 1995, Brooke Bond Al Tea has become a brand worth over FI. 80 mllllon with a 6% volume share lnnovatlve marketing and a low-cost supply chain have meant reglonal blends, which suit consumer tastes, can be offered at great value.

28 A passion for pasta sauce Launched In the Unlted States two years ago, Fwe Brothers pasta sauce has already establlshed Itself as a strong brand. Its swift success IS the result of fresh Ingredients, particularly tomatoes, which are processed wtthln four hours of picking to ensure freshness

29 Culinary and frozen foods The worldwide network of culinary innovation centres FI mllmn 1997 lyy Change was expanded with the opening of the Latin American I< irec i <>,>!a IS a> I i/l an >Id, centre in So Paulo. In the United States, Rqi cheese TUVlOVU (5W pasta sauces and FZVP &&rr~ grilled vegetable flavour OperarIng profit ~ (13)% sauces were introduced. In France, Muyokzd, a ketchup- Operating prof~tbeforc exceptional,term i and-mayonnaise-in-one sauce, was launched, while a Turnover N mdiron Operating profit Fi million new range of Asian sauces, paste5 and dressings, under the Sakzm s brand, was established in Australia. iiiij il-~l~5~i Frozen foods Whilst volumes were 1% below 1996, growth in fish and vegctablcs was satisfactory and we managed to expand our volume. In many cases this growth was supported by major new promotional campaigns Profitdbility improved considerably, particularly in the United Kingdom, following setbacks in 1996, Turnover was below last year, due mainly to the disposal of Nordsee in Germany. Underlying volumes and we eliminated many product lines where were flat. Profitability and margins improved in Europe profitability was poor. In addition, the effects of earlict. restructurinp are showing through in and North America, the latter helped by lower support our margins. levels. Exceptional items of Fl. 427 million related to restructuring in Europe and North America. Culinary Turnover, excluding disposals, was flat. Our performance was mixed. In Western Europe, volumea were strong, particularly in cooking ingredients and meal sauce\. Australia, India and RusGa also did well. In North America, soups and side dishes, however, declined and overall profitability was lower. Building on a successful introduction in 1996, C&t mayonnaise was established as a leading brand in Russia. Chilled mayonnaise was launched in Belgium and Germany, and potato and vegetable gratin sauces in Austria, Germany, Spain and the United Kingdom. Leveraging our strong culinary brands, Colman :c was extended to meal sauces in the United Kingdom, cooking pastes were launched under the Kissan brand in India and the C& range of products was flrrther developed with new products, such as marinades: in Brazil.

30 Home & Personal Care Our business In Home and Personal Care IS well spread geographlcally and In 1997 we saw excellent sales growth, particularly In our strong global brands Growth In operating profits was even stronger with the benefits of cost savings and the full Integration of the Helene Curtis and Dlversey acqulsltlons ExceptIonal Items in 1997 of FI 306 million mainly relate to the merger of the mass Home and Personal Care businesses In the United States and continued restructuring in DlverseyLever Home care and professional cleaning FI million Chdnge,,'<,.,I., i: <,,ll..i ~,~,^, (i,.,i,_(r",,,l S VC, TUrflOVer %.-.~. ~~. Operdtlny pdi % Operating profit before excepi~onal,temi % Turnover Fi million Operating profit F/ m//ion The home care and professional cleaning business includes products for laundry, household cleaning and dishwash in the home. This business is well spread geographically, with particular strength in a number of developing and emerging markets. The product area also includes DiverseyLcver which operates in processiona cleaning in the institutional and indllstrial markets. These bllsinesse5 progressed very well in Growth wa3 strong in developing and emerging markrts, but encouraging levels of growth wcrc also achieved in the more mature European and North Arner ican mal kcts. Operating profits grew faster than \ales, despite incredsed ma1 keting support costs. Margins therefore improved, mainly in Europe and North America, as we continue to benefit from the cost-sdving measui es undertaken in previous years. Cleaning with peace of mind Malaysia has proved a successful market for Domestos floor cleaner - sold there as Vim. This unique brand extension quickly embraced local consumer needs by leaving floors,$,~ clean while safely repelling cockroaches. Its non-toxic formula -. gives excellent cleaning and peace of mind in protecting family health.

31 Home care Personal care In Idundry, we maintained our ovrrall yhnre of the relatively buoyant consumer market around the world. In Etnope, we made gains in a number of market\. In North America, sales growth was strong and margins improced with the benefits of cost savings from the closure oi the St Louis powders facility. The business in Latin Americd remains strong, despite intensified competition. Orno continues to grow and we extended a new brand, ALa, across the north east of Bra/ii. Our businesses in the rest of the world also &owed encouraging growth. Our ho~l\ehold cat e business recorded satisfactory Opcrat1ng profit Ci1ange,lll,,r,I,,,,rei,Ji<,l,,',r,,~li l.lfl> 1lc?l,lr,,l,l r,:, : % % Operating profit before exceptional,temi 2726 ~ 2462 ~ % giowl11 iii 1997 dnd Lhc increasing consunic I concct n for henlth and hygiene pt-ovided us with borne new business opportunities. The Dorrwtoc brand performed well in Central and Eastern Europe. Hand dishwash products continue to expand in developing and emerging markets. Professional cleaning 1997 was the first flrll year of operation of Diver seylever following the merger of Diversey and Lever Induatrial International in April Integration of the two operations has been completed satisfactorily and resulted in lower co$ts and better margins, mainly in Europe. Substantial operating improvements were rridtie from restructuring and several new products were launched during 1997, including LmmSdect, a unit designed for the hotel industry, which dispense5 a range of Unilever personal care products. DiverseyLever is now established as one of the leading institutional, industrial cleaning and hygiene companies in the world YLI 96 9/ Y5 9h 91 Our personal care business includes personal wash, skin care, hair care, ol-al care, deodorants and the prestige businesses of Calvin Klein and Elizabeth Arden. The total personal Lare business had excellent turnover and profil growth in 1997, helped by the first full year of Helene Curtis dnd slrong underlying volume nnd profit growth in almost all categories and regions. Our new organisation, focusing attention on the strong brands in this broad category, i> working well. In personal wash, Lux remained a strong favourite with consumers, selling more than 3.5 billion bars, and benefiting from a relaunch in Overall category growth was particularly strong in Egypt, India and Indonesia. Dove is our second major brand and continues to grow in all principal markets. Li$&zq maintained its position as a key brand in the health segment. Axe sharpens its edge Axe male deodorant is enjoying outstanding success, powered by the launch of new varieties and backed by an innovative and hard-hitting advertising campaign Elida Faberge has excelled in understanding the brand s 15 to 25.year-old consumers and the need to keep the deodorant s marketing fresh and lively.

32 Only the best for guests When the Holiday Inn hotel chain wanted premium personal care products for tts guest bathrooms that would generate less packaging waste, DlverseyLever came up with LeverSelect, a wall-mounted system dispensing leadlng Unilever brands such as Dove, T/mote/ and Lux A perfect example of the synergy between lndustnal and consumer brands.

33 Our skin tale business showed very strong growth dnd improved profitability this year. The I ond c brand perfol med particrllnrly well, especially in Asian markets. In North America, Viwh~ In/rn5~7~ Cuvr continued to grow. Fmr ti I,ov& which is the main brand in the Indian market, also reported strong performance clsewhcre. Our businesses in Central and Eastern Europe had an excellent year. The hair care business did well, benefiting from the inclusion of the Helene Curtis brands SCLZOR Srk~fz~s rind FZW~TP. Profitability has been g-1 eatly improved through integr ntion with Unilever. The 0rgan?rp range, ieldunrhed with improved formulation\, contintled to grow in many European countries. Suntzlk, our large5r brand in hair care, pcrlormcd very well in L,atin America rind South East Asia. Kange improvements include variants based on natural ingredients targeted specifically dt local consumers. In oral care, Mentadent continues to have a strong position in North America, although the competition has now launched similar baking soda and peroxide products. Pepsodent progressed well in many developing and emerging markets. C&lose-up, which is positioned for the younger generation of consumer, increased share in Latin America. In deodorants, we had another strong year, with exceptional growth in our business in Europe, led by Ax~/Lyzx with some truly creative adcertising campaigns. Our business in North America is now significantly stronger with the addition of Helene Curtis Dqree and Suave brands. Krxona reported excellent growth in Latin America. In prestige, turnover was flat, and lower volumes in North America offset growth elsewhere. Calvin Klein continued to operate profitably and to build its franchise with the roll-out of ck be and the introduction of the new fragrance, Contmdiction. Elizabeth Arden, on the other hand, had sales below 1996 levels and incurred a loss.

34 32 Product Area, Plantations, Plant Science & Trading Operations Speciality Chemicals OIII. foist. si>ccialily c-licitiicals btisinessrs - Nation;tl Slarch & (~lictnic:al Company, Qtic sl Iittet-naliotial, The I lan~ations (kortp has oil palm plantirtiotts in Malaysia, Thailand and West Africa and tea plantations in Itttlia, Kcnw at~d Tatn~ania. I l~c Plant Scicncc Grortp, based in Lhr United Kingdom untlcr the name of Plant Breeding 1ntc rtr;rtional (PKI), helps bttiltl cot~s~tttt~thctlcfits throltgh thr tlrvrlopment of iic\c ;uitl impt~ovetl r;tb tn;trci~i;tls. I his rcrlttiws it c.otnl~inaliott 0C skills in I~iot~c~hnolog~, c-oitvct~tiotial plant I~rcctling, agw~ti~~tny it~id prim;trv I)t.occwiiig. L~iiiclietn~t Intcrnaiional arid (kosfieltl - wc t-c soltl in Jtrlv For L S,$8 l,illion. Their contribrttion to tltt-novet-. and operating profits in 1997 was Fl. 3.7 billion and F million respectively. At current exchange t-atrs, lttrtto\~t~ and opctuing pt.ofil in 1997 wrc Fl. 4.0 l,illioti and Fl. 5 I4 tnillioii rrspeckdy liesrtlts wet-e ahead of last year-, parlicidarly itt plantations, as world commodity prices for palm oil and tea were stronger, largely reflcctitlg higher dctnancl and imcrt-taiti1ic.s over suppl!;. In out ttntling opcrntion5, turnokct declined in 1997 tliic to tii\powl\ of lcxtiles oprtntioni, in Aft tea and the sale of the Iz\a ton busincsa tn Ah ica rind the United Kingdom. From bush to brand Unilever has a major presence in the global tea market through the Brooke Bond and Lipton brands. One of the Company s tea operations is located in its Kenyan tea estate, where a favourable climate of high light int.ensity and regular rainfall makes for excellent growing conditions.

35 Financial Review The figur-es q~~otetl in this Financial Review are in guilders, at current rates of exchange, ~mless otherwise stated. The profit and loss account for continuing operations and cash flow information are translated at annual average rates of exchange, the results of discontinued operations are at the average rates up to the date of disposal, and the profit on disposal of the speciality chemicals businesses is at the rates prevailing on the disposal date, 8 J ly The balance sheet is translated at year-end rates of exchange. Discontinued operations On 8July 1997 Unilever sold its speciality chemicals businesses. The 1996 and 1997 results of these businesses, to the date of disposal, are reported as discontinued operations. Results Turnover for the Group rose by 8% to Fl million. with continuing operations increasing by 12% to Fl million; the 3..5% increase in underlying sales volume was augmented by rhe 9.5% weakening of guildrrs against the basket of Unilever currencies. Operating profit lose by 1% to Fl million; continuing operations operating profit was 8% higher dt Fl million, with a 1% improvement in underlying operating margin partly offset by significantly higher net exceptional charges of Fl million (1996: Fl. 620 million). Analysis of operating performance by geography and by business segment is given in Business Overview and Product Areas on pages 8 to 15 and 22 to 32 respectively. The prolit, before tax, on the disposal of the speciality chemicals businesses was Fl million; an exceptional charge of Fl. 484 million was taken tin the loss on disposal of surplus and obsolete fixed assets following a global review. Income from fixed investments declined, mainly as a rcslllt of the sale, at the end of 1996, of the Nigerian breweries. Net interest cost of Fl. 230 million (1996: FL 657 million) was significantly lower as a result of the interest income from the proceeds of the disposal of the speciality chemicals businesses in the second half year, and strong business cash flow. Average net debt of Fl. 9.3 billion in 1996 became average net funds of IIK~I~C than Fl. 2.5 billion in 1997 at constaiit exchange rates. Net interest cover increased to approximately 68 times (1996: 11.6 times), and to more than 30 times if the profit on the disposal of the speciality chemicals businesses is excluded. The Group s effective tax rate, including the effect of tax adjustments from prior years, was reduced to 27.1% in 1997 from 36.3 % in Excluding the impact of the disposal of the speciality chemicals businesses, the tdx rdte was 34.7%, reflecting lower tdx and d reversa1 in the impact of one-off items from non-deductible losses in 1996 to non-taxable gains in Minority interests increased by Fl. 94 million to Fl. 30X million, reflecting their share in the disposal of the speciality chemicals businesses. Earnings & dividend per share Net cash flow before Guilders per Fi 1 of ordinary capital investing activities N m~ilion 9 m * : z N * Methods of calculation Return on capital employed 15 the sum of profit on ordinary actlvltles after taxation, plus ~nteieit, after tax, on borrowings due after mow than one year expressed as a percentage of the average capital employed during the year Net interest over IS profit before net interest and taxation diwded by the net ~nteresl Combined earnings per share are net proflt attrtbutable to ordinary capital divided by the average number of share units representing the comhlnw ordinary capital of NV and PLC less certain tr st holdings N :

36 Net profit after exceptional items, which include those in operating profit, together with the profit on disposal of the speciality chemicals businesses and the loss on disposal of fixed assets, at current rates of exchange increased by 159% to Fl million. Before these exceptional items net profit increased by 13% at constant rates; the 9.5% weakening of guilders increased this to 24% at current rates of exchange. Return on capital employed, excluding goodwill eliminated in reserves, rose to 29.0% from 15.2% in Dividends and market capitalisation Earnings per share increased by 159% from Fl to Fl Dividends paid and proposed on NV ordinary capital amounted to Fl per Fl. 1 ordinary share (1996: Fl. 1.75)) an increase of 27%. The ratio of dividends to profit attributable to ordinary shareholders was 21.0%, reduced from 42.6% in 1996 primarily as a result of the disposal of the speciality chemicals businesses. Profit of the year retained was Fl million (1996: Fl million). Unilever s combined market capitalisation at 31 December 1997 was Fl billion (1996: Fl billion). Balance sheet The net impact of the weakening of guilders against other currencies between the two balance sheet dates was a Fl. 701 million currency gain on retranslation of net assets. Profit retained, after accounting for dividends, currency retranslation of balances and movements and the net goodwill adjustment on acquisitions and disposals, increased by Fl million to Fl million. Total capital and reserves increased to Fl million. Cash flow The strong cash generation of recent years continued, with cash flow from operations increasing to Fl million (1996: Fl million). For the continuing operations the increase was Fl million to Fl million, with significant gains again coming from a reduction in working capital. Net cash flow before investing activities of Fl million was Fl. 353 million lower than 1996 as the lower net interest payments of Fl. 430 million were more than offset by higher taxation payment at Fl million, mainly as a result of payments resulting from the disposal of the speciality chemicals businesses, and dividends on ordinary capital of Fl million. Capital expenditure at Fl million was almost the same ds A total of 23 businesses were acquired for a cash consideration of Fl million guilders, most notably the purchase of the Kibon, Monthelado and Holanda ice cream businesses in Latin America. Cash proceeds from 19 disposals were Fl million, of which the sale of the speciality chemicals businesses accounted for Fl million. Other disposals included the Nordsee fish restaurants and wholesale business in Austria and Cermany, John West, a canned foods business in the United Kingdom, Leverton, a Caterpillar equipment dealership in Africa and the Combined market capitalisation N. m!ilion I n Europe North America 49 99, == Africa and Middle East q Asia and Pacific m ~ Latin America i ~ End of year Low Im H,gh

37 United Kingdom, and the Zwanenberg meat business in Mexico. Net funds at the end of 1997 were Fl million, cornpared to net debt of Fl million in 1996, with the proceeds of the disposal of the speciality chemicals businesses augmented by the strong underlying cash generation. Finance and liquidity Unilever s continuing financial strength gives it the flexibility to raise funds in all the major global debt rnarkets at the lowest costs available to corporate borrowers. Group policy is to finance operating subsidiaries through an appropriate mix of retained earnings, barlk 1~01 rowing5 and loans from parent and Group finance comp,miea. In 1997 the net funds position resulting from the disposal of the speciality chemicals businesses, together with improved business cash flow, has led to a notable reduction in external funding activity. Long-term debt fell by Fl. 599 million in 1997, debt totalling Fl million maturing in 1998 was reclassified to short-term borrowings at the year end, and there were no significant new borrowings. The maturity profile is spread over an eight-year period to The proportion of long-term debt repayable within five years fell in 1997 to 63%, compared to 69% at the end of For short-term finance when required, Unilever has commercial paper programmes in place in the United States domestic markets and Europe, and operating subsidiaries fund day-to-day needs using local bank borrowings. At the end of 1997, short-term borrowings were Fl million, Fl. 513 million lower than in More than one-third of Unilever s total borrowings are in US dollars, with the remainder now spread over a large number of other currencies, including Dutch guilders, French francs and sterling. Unilever has committed multi-currency credit facility arrangements until the year 2000 with nine banks under which it may borrow up to US $2 700 million for general financing or acquisition purposes. No funds are currently drawn under these facilities. Cash and current investments at the end of 1997 totalled Fl million (1996: Fl million). Alrnost 86% of the funds are under direct Group Treasury control in the parent and Group finance companies. The funds are mainly invested in short-term bank deposits and high-grade marketable securities. Approxirnately 80% of these funds are held in US dollars (41%)) Dutch guilders (23%) and sterling (16%) with the remainder spread over a large number- of other currencies. Treasury and hedging policies The Group Trcasur y function operates cl5 a c05t centre, governed by financial policies and plans agreed by the directors. Its purpose is to serve the needs of the business through effective mdndgemtmt of financial risk, to secure finance at minimum coqt and invest liquid funds securely. All mqjor arca\ 01 activity are covered by policies, guidelines, exposure limits, a system of authorities and independent reporting. Performance is closely monitored, with independent reviews undertaken by the corporate internal audit function. Unilever operates an interest rate management policy aimed at reducing volatility and minimising interest costs. Interest rates are fixed on a proportion of debt and investments for periods of up to ten years. The proportion fixed is higher in the near term than in the longer term, so increasing the predictability of shortterm interest costs, whilst maintaining some flexibility LO benefit frorn rate movements in the longer term. This is achieved through the issue of fixed rate long-term debt, combined with the use of a range of straightforward financial derivative instruments. Under the Group s foreign exchange policy, trading exposures are generally hedged, rnainly through the use of forward foreign exchange contracts. Some flexibility is permitted within overall exposure limits. Assets held in foreign currencies are, to a large extent, financed by borrowings in the same currencies. Consequently, some 55% of Unilever s total capital and reserves at the end of 1997 was denominated in the currencies of the two parent companies. From an earnings perspective, excluding the net profit on the disposal of the speciality chemicals businesses, some 24% of Unilever s 1997 net income was denominated in

38 Total Shareholder Return guilders, 22% in sterling, 11% in dollars and some 21% in dollar-related currencies. To ensure maximum flexibility in meeting changing business needs, investment management policy is to concentrate Unilever s substantial liquid funds centrally in the parent and Croup finance companies. These funds, mainly in dollars, guilders and sterling, are invested in short-term bank deposits and marketable securities, or on-lent to subsidiaries. Credit risk exposures are minimised by dealing only with a limited range of financial institutions with secure credit ratings and by working within agreed counterparty limits, Counterparty credit ratings are regularly monitored and there is no significant ConcentraCion of credit risk with any single counterparty. Further details on derivatives, foreign exchange exposures and other related inli)rmatioll on financial instruments are given in the separate Unilever Annual Accounts 1997 booklet on page 26 and in the annual report to the United States Securities and Exchange Commission on Form 20-F. Total Shareholder Return (TSR) is a concept u?ed to compare the performance of different companies stocks and shnrc\ over time. It combines share price appreciation and dividends paid out to show the totd1 return to the shareholder. This is expressed as an internal rate of return, calculated from the initial price, dividends pdid out and the closing price. It is generally regarded as the most relevant performance indicator. The Company calculates this return over a three-year rolling period. This period i5 sensitive enough to reflect changes but long enough to smooth ollt short-term volatility. The return is expressed in US dollars and the US dollar share price is based on quotations for NV and PLC, combined in proportion to the number of shares in issue. We chose US dolldrs to facilitate comparison with our reference group companies. A TSR represents the absolute return to the sl~awl~olde~ in that period. Shareholders could alternatively inlest in bonds, which have a different risk profile. More realistically, their alternative would be to invest in companies with a similar profile and hence comparable risk. Unilever has chosen 20 international consumer goods businesses as a reference group, which togethel give a fair reflection of its category and regional sprcdd. Unilever has set itself a financial target of performing in the top third of this reference group. This, we believe, is appropriately stretching. The absolute size of the TSR will vary with stock markets, but the relative position is a reasonable reflection of overall financial performance. In 1997 we improved our position by two places to just above the median on a three-year rolling basis. Although progressing in the right direction, we need to move up several places to dchieve our target.

39 Orqanisatlon & Corporate Governance 37 Organisation & Corporate Governance Top Management Structure The Chairmen of NV and PLC are the principal executive officers of Unilever. They lead the sevenmember Executive Committee, which is Unilever s top decision-making body. The Executive Committee is responsible for corporate strategic leadership. Other members of the Executive Committee are: the Category Directors for Foods and for Home & Personal Care; the Strategy 8r Technology Director; the Financial Director; and the Personnel Director. The core building blocks in the Unilever organisation remain the individual companies operating in their particular markets. These are organised into 12 Business Groups, each with a President as chief executive who is accountable, with full profit responsibility, for the operational companies within his group. This grouping is essentially based on geographical markets. In the majority of regions, all Unilever companies form one Business Group. However, some regional operations are too large to be managed as a single group. Companies in Europe and North America are therefore organised in two or three Business Groups, each focusing on specific product areas. On the other hand, the DiverseyLever Business Group, which covers Unilever s operations in industrial cleaning and hygiene, is organised globally. The Executive Committee comes together with the 12 Business Group Presidents within the Executive Council, which is led by the Chair men.

40 Left Nlall FltzGerald and Morns Tabaksblat R/ght Jan Peelen and Clwe Butler Below Alexander Kemner, Hans Eggerstedt and laln Anderson Executive Committee of the Board Alexander Kemner * Category Director, Foods Aged 58. Category Director, Foods sillcc Joillcd Urlilcver Appointed director Previous posts include: Food & Drinks Co-ordinator 89/90. Member, Foods Executirc 89/92. Regional Director, East Asia & Pacific Y?/Y6. Clive Butler * Category Director, Home & Personal Care Aged 31. Category Director, Home 8c Persor~al (kc since 19% Joined Unilever Appointed director Previous posu include: Corporate Drvclopment Dil-rrtol Pernonnel Director 93/S& Non-executive director ol Lloyds TSB Group pk. Hans Eggerstedt * Financial Director Aged 59. Financial DirrctoI sinrc Joined Unilever Appointed director Prrx~ous posts include: Frozen Products Co-ordinator 85/90. Commercial Director 90/92. Jan Peelen* Personnel Director Aged 58. Personnel Director since 1996.Joinrd Unilever Appointed director Previous posts include: Regional Director, East Asia & Pacific 87/92. Chairman, Foods Executive 93/96. Non-executive dirrctor of Barclays PLC and Barclavs Bank PLC. lain Anderson * Strategy & Technology Director Aged 59. Suategv SC Technoloa Dnxror s~n<e 199F Also Categolv Dlrrclor, lndretl~nl Jomed Umlever 1965 Appomted dlrector J 988. Retlrmg Previous post\ mclutle~ Corporate Dewlopment Dlrcctor 88/9 L Chermcdls Co-ordmator 92/96 Rq~ondl DIrector, North Amer~a, 94/Yb Detrrgenrs Co-ordmatot 1996 Non-executwe drector of Brash Telecommunlcatlon\ plc

41 Business Group Presidents Richard Goldstein

42 SK Brian Hayes and Frits Fentener van Vlissingen Right Bertrand Sir Derek Collomb Birkin Below Onno James Below left Ruding W Kinnear right - If Richmond Advisory Directors & Board Committees Sir Derek Birkin Aged 68. Appointed 19Y:l. Chairman, Tumlel Holdings 75/82. Director, RTZ (:orporation X2/96, CEO X5/91 and Chairman 91/96. Director, Mrrchantc Twst since 1986, (:arlton Communications and Merck SC Co. lx. (USA) sinrr 19n L and Mhtmough (Holdings) PLC: since IYYli Bertrand Collomb,Agged 55. Appoinwd French sovc,- mcor achninistrmtor 66/75. Lafnrge (iroup since Chairman and CEO, Laf;qc since Member-, E:uropeall Round Table of hldllstrialists. (:hairman, lnstitut de I Entreprise. Dirrctor, Elf Aqrlit&r since Oscar Fanjul Aged 48. Appointed Secretzq Ge11rml and Cl&T Sec1-erary, Spanish Ministry of Industry and Enrrgy 83/85. Chairman, Ixtituto Nxional dr Hid)-orarbwos X5/95. Chairman and CEO Repsol X6/96 James W Kinnear Aged GY. Appointed 19Y4. Retiring 1Y98. Vice-Chail-man, Texaco Inc. X3/%, and President and CEO, X7/93. Director, Corning Inc. since 1978, ASARCO Inc. since 1990 and Paine N ebber Group Inc. since Karl Otto P6hl Aged 68. Appoimed Retiring Secretar-y of State, Germm Ministry of Finance 72/77. Deput) President, Drutschc Bwdcsbank 77/79 alld President 80/91. Partner, Sal. Oppcnhrim Rank sillcr Onno Ruding Aged 58..Appoinred 19YO. Member of Board,,~ns~rrdarn-Rotter~larn Bank 81/X2. Minister of Finance, the Netherlands X2/89. Chairman, Nrthrrlands (Zhristiall Federation of Employers 90/92. Vice-Chairman and Dircrtor, Citicorp and Citibank since Honorary Advisory Director The Rt Hon The Viscount Leverhulme KG TD A@ 82. (:I-andson of William Lever, the formder of Lxver BI-others. Appointed Honorary Advisory Director of PLC for life on his rrtirrmcllt as an Advisor> Dirccmr in 1985.

43 Board Committees Legal Structure The Unilever Group was established in 1930 when the Margarine Unie and Lever Brothers decided to merge their interests, while retaining their aeparate legal identities. Now known as Unilever N.V. and Unilever PLC respectively, these are the parent companies of what today is one of the largest consumer goods businessrs in the world, with its corporate centre located in London and Rotterdam. Since 1930, NV and PLC have operated as nearly as is practicable as a single entity. They have the Same directors dnd are linked by a series of agreements which have the result that all shareholders, whether in NV or PLC, participate in the prosperity of the whole buainesa. There is, in particular, the Equalisation Agreement which regulates the rights of the two sets of shareholders in relation to each other. NV and PLC are holding and service companies and Unilevcr ~ businesses are carried on by their group companies around the world. NV and PLC have agreed to co-operate in every field of operations, to exchange all relevant information with regard to their businesses and to ensure that all group companies act accordingly. In most cases the shares in the group companies are held by either NV or PLC. Further particulars of these arrangements are set out on page 2 of the separate Unilever Annual Accounts 1997 booklet. In particular, there is an explanation as to why NV and PLC and their group companies constitute a single group for the purpose of presenting consolidated accounts. Audit Committee: Sil- Brian lhyes (Chairman) K 0 Piihl Dr 0 Ruding External Affairs and Corporate Relations Committee: Lord Wight of Richmond (Chairman) 0 Fmjul JW Kinnear Legal Structure of the Group Directors Equalisation and Nomination Committee: F EI Frntencr van Vlissingrn (Chairman) Sir Drrek Birkin B Collomh NV.4 FilzGeraltI M T~abaksb1.x Remuneration Committee: FH Fentener van Vlissingen (Chairman) Sir Derek Birkin B Collomh

44 Corporate Governance Board Committees The directors have established the following committees: Directors and Advisory Directors Each of the ten directors is a full-time execuuve and a) the Executive Committee, which rompriscs the is a director of both NV and PLC. In addition to their Chairmen of the two parent compnnies rind, normally, specific management responsibilities, Unilever s directors five other members. It is responsible for agreeing are jointly responsible as the Boards of Directors of NV priorities and allocating resources, setting overall and PLC for the conduct of the business as a whole corporate targets, agreeing and monitoring Business Group strategies and plans, identifying and exploiting The directors have adopted a schedule of matters opportunities created by Unilever s scale and scope, which are reserved for decision by the Boards. Other managing relations with the external war-ld at the matters are delegated to committees. corporate level, and developing future leaders. It As the concept of the non-executive director, as normally meets formally every two or three weeks. recognised in the United Kingdom, is not a feature b) an Audit Committee, which comprises three of corporate governance in the Netherlands, and the Advisory Directors. It reviews financial statements belore Supervisory Board, as recognised in the Netherlands, publication and overaeea financial reporting and control is unknown in the United Kingdom, it is not practicable arrangements. It meets at least twice a year. Both the to appoint supervisory or non-executive directors who head of Unilever s corporate internal audit function could serve on both Boards. However, a strong and the external auditors attend the Committee s independent element has long been provided by meetings and have direct access to the Chairman Unilcvcr s Advisory Directors. of the Committee. The Advisory Directors are the principal external c) an External Affairs and Corporate Relations presence in the governance of Unilever. One of their Committee, which comprises three Advisory Directors, key roles is to assure the Boards that the provisions fat It advises on external issues of relevance to the brtsiness the corporate governance of Unilever are adequate and reviews Unilever s corporate relations strategy. It and reflect, so far as practicable, best practice. normally meets four times a year. Although Advisory Directors are not formally d) a Nomination Committee, which comprises members of the Boards, their appointment is provided three Advisory Directors and the Chairmen of NV and for in the Articles of Association of both parents, and PLC. It recommends to the Boards candidates for the their terms of appointment, role and powers are formally positions of director, Advisory Director and member of enshrined in resolutions of the Boards. They comprise the Executive Committee. It meets at least once a year. all, or a majority of, the members of certain key committees of the Boards. They attend the key quarterly e) a Remuneration Committee, which comprises three meetings of the directors in addition to their committee Advisory Directors. It reviews the remuneration policy meetings, other conferences of the directors and the for directors and has responsibility for the Executive Executive Committee, and other meetings with the Share Option Schemes. It meets at least twice a year. Chairmen. In addition, the Advisory Directors may f) committees to conduct routine business as and meet as a body, and when so meeting they will elect when necessary, which comprise any two of the directors a chairman from among their number. and certain senior executives. They administer certain Advisory Directors are appointed by resolutions of the matters previously agreed by the Boards or the Boards for a term of, normally, three years. They are Executive Committee. appointed for a maximum of, usually, three consecutive All committees are formally established by Board terms but retire at age 70. Their remuneration is resolutions with carefully defined remits. They report determined by the Boards. regularly and are responsible to the Boards of NV and PLC.

45 Reporting to Shareholders The formal statements of the directors responsibilities are set out on page 4 of the separate Unilever Annual Accounts 1997 booklet. These cover Annual Accounts. Going Concern and Internal Control. The report to shareholders by the Remuneration Committee, on behalf of the Boards, on directors remuneration is set out on pages 39 to 47 of the Unilever Annual Accounts The Annual Accounts also contains, on page 5, a formal statement on Corporate Governance. The reports from the auditors on these matters are set out or reported, as appropriate, on pages 5 and 6 of the Unilever Annual Accounts Board Changes Dr lain Anderson will retire on 30 June 1998 and his colleagues wish to record their appreciation of his contribution to Unilever over a long and distinguished career. All directors will retire from office, in accordance with the Articles of Association of NV and PLC, at the Annual General Meetings on 6 May 1998 and, with the exception of Dr Anderson, offer themselves for re-election. As already announced, Mr Rudy Markham, currently Business Group President, North East Asia, has been nominated for election as a director and will succeed Dr Anderson as Strategy & Technology Director and a member of the Executive Committee. As anticipated by last year s Annual Report, Dr Ashok Ganguly, Mr Christopher Jemmctt and Dr Okko Miiller retired at the Annual General Meetings in Mr James W Kinnear and Mr Karl Otto P6hl will retire as Advisory Directors with effect from the Annual General Meetings in The directors wish to record their appreciation of their contributions during the past four and six years respectively. Also as already announced, Baroness Chalker of Wallasey and Mr Hilmar Kopper have been appointed as Advisory Directors with effect from the 1998 Annual General Meetings. J W B Westerburgen SC Williams Joint Secretaries of Unileve, 9 March 1998

46 Summary Financial Statement Introduction This Annual Keview booklet and the separate booklet entitled Unilever Annual Accomlts 1997 together comprise the full Annual Report and Accounts for 1997 of NV and PLC when expressed in guildcrs and pounds slerling respectively. This Summary Financial Statement is a summary of the Unilever Group s full annual accounts set out in Unilever Annual AccounLs That separate booklet also contains additional tinancial information and further statutory and other information. For a fll11 understanding of the results of the Group and state of affairs of NV, PLC or the Group, Unilever Annual Accounts 1997 should be consulted. See page 48 for details. The auclitors have issued an unqualified audit report on the full accounts. The United Kingdom Companies Act 1985 requires the auditors to report if the accounting records are not properly kept or if the required information and explanations are not received. Their report on the full accounts contains no such statement. The following summarised financial statements should be read with the directors report set out earlier in this Review, which mentions, to the extent applicable, any important future developments or post-balance sheet events. Dividends The Boards have resolved to recommend to the Annual General Meetings on 6 May 1998 the declaration of final dividends on the ordinary capitals in respect of 1997 at the rates shown in the table below. The dividends will be paid in accordance with the timetable on page 48. NV Per Fl. 1 of ordinary capital Interim Final 1997 FI FI PLC Per 1.25~ of ordinary capital FI Interim 2.80~ 2.57~ FI Final 5.62~ Total FI FI 1 75 Total 8.42~ 8Olp For the purpose of equalising dividends under the Equalisation Agreement, Advance Corporation Tax (ACT) in respect of any dividend paid by PLC has to be treated as part of the dividend. PLC s 1997 final dividend has been calculated by reference to the current rate of ACT (twenty/eightieths); if the effective rate applicable to payment of the dividend is different the amount will be adjusted accordingly and a further announcement made to tht shareholders of PLC. Sub-division of Shares The ordinary shares of both NV and PLC were sub-divided at a 1 to 4 ratio with effect on 13 October NV Fl. 4 shares were sub-divided into four shares of Fl. 1 each; PLC 5p ordinary shares were sub-divided into four shares of 1.25~ each. On the New York Stock Exchange, trading in the NV New York Fl. 1 shares and the PLC American Depositary Receipts (each evidencing four ordinary shares of 1.25~ each) commenced on 21 October 1997.

47 Statement from the Auditors This statement is addressed to the shareholders ofunile\er N.V. and Unilever PIG. We have audited the Summary Financial Statement set out on pages 44 to 47 The Summary Financial Statement is the responsibility of the directors. Our responsibility is to report to you on whether the statement is consistent with the annual accounts and director-s report. We conducted our work in accordance with auditing guideline The auditor s statement on the summary hnancial statement adopted by the Auditing Practices Board. In our opinion the Summary Financial Statement of the Unilever Group set out on pages 44 to 47 is consistent with the full accounts and directors report for 1997 and complies with the requirements of Section 251 of the United Kingdom Companies Act 1985 and the regulations made thereunder. Coopers 81 Lybrand N.V. Coopers & Lybrand Registeraccountants Chartcrcd Accountants and Registered Auditors Rotterdam London As auditors of U-i/ever N. V Ac au&m of &G/ever PLC 9 March 1998 Accounting policies The accounts are prepared at current rates of exchange (see page 33) The accounts are prepared, in all material respects, in accordance with accounting principles generally accepted in the Netherlands and the United Kingdom. The treatment of deferred taxation, for which full provision is made, complies with Dutch legislation as cttrrrntly applied rather than with Accounting Standards in the United Kingdom. NV and PLC shares held by employee share trusts and subsidiaries to satisfy options are deducted from capital and reserves as required by Dutch law whereas the United Kingdom Accounting Standard, UITF Abstract 13, would classify such shares as fixed assets. Sale of speciality chemicals businesses On 8,July 1997 Utiile\ri sold its specinlity chemicals businesses to Imperial Chemical Industries PLC (ICI). The profit on disposal of these businesses is included in these accounts at the rates of exchange prevailing on that day. The results of these businesses for the period from 1 January 1997 to 8 July 1997, trdnslated at the average rates of exchange for that period, are shown as discontinued operations.

48 Summary Consolidated Accounts Unrlever Group Profit and loss account for the year ended 3 1 December FI. million Turnover Continuing operations Acquisitions 637 Discontinued operations Operating costs (87 021) (80 267) Operating Continuing Acquisitions Discontinued profit operations operations r i Operating profit before exceptional items - continuing businesses ( Profit on sale of discontinued speciality chemicals businesses Loss on disposal of fixed assets in continuing businesses Income from fixed investments Interest Profit on ordinary activities before taxation Taxation Profit on ordinary activities after taxation Minority interests 8482 ( (230) (657) (4 185) (2 531) (308) (214) Net profit Attributable to: NV PLC Dividends Profit of the year retained Combined earnings per share Guilders per Fl. 1 of ordinary capital Pence per 1.25~ of ordinary capital r FFl (2 305) (1 805) Directors The directors of Unilever during 1997 are shown on pages 38, 39 and 43. Their total emoluments for the year ended 31 December 1997 were Fl million (1996: Fl million) and their aggregate gains on the exercise of share options were Fl million (1996: Fl. 0.7 million). All the directors participate in defined benefit pension schemes.

49 Fl million Unilever Group Balance sheet ai at 3 1 December Fixed assets Current assets Stocks Debtors due within one year Debtors due after more than one year Cash and current investments Creditors due within one year Borrowings Trade and other creditors Net current assets Total assets less current liabilities Creditors due after more than one year Borrowings Trade and other creditor5 Provisions for liabilities and charges I (3 139) (3 652) (18 542) (17 424) Minority interests Capital and reserves Attributable to: NV PLC Total capital employed Cash flow statement for the year ended 3 1 December Cash flow from operating activities Returns on investments and servicing of finance Taxation Capital expenditure and financial investment Acquisitions and disposals Dividends paid on ordinary share capital (750) (687) (4 157) (1 877) (2 774) (2 819) (2 275) (2 075) (1 796 Cash inflow before management of liquid resources and financing Management of liquid resources Financing (14 122) (1 517) 539 (766) 770 Increase/(decrease) in cash in the period Increase/(decrease) in net funds in the period (311) This Summary Financial Statement was approved by the Boards of Directors on 9 March N WA FitzGerald M Tabaksblat Chairmen of Unilever

50 Additional Information Financial calendar Annual General Meetings NV am Wednesday 6 May 1998 Concert- en Congresgebouw de Doelen Entrance Kruisplein 30 Rotterdam Announcements of results First quarter 1.May 1998 First half year 7 August 1998 PLC 11.OO nm Wedncsdw 6 May 1998 The Queen W/abcth II Confu cncc (:cntrr Brodd Sdnctuarv, Wstrnin\ter London SWlP 3EE Nme months 6 Nokemher 1998 Pro\i\ional ior vedr 23 Fehrudr) 1999 Dividends on ordinary capital Final for 1997 NV Proposal anno~mced 10 February 199X Ex-dividend date 7 May 1998 Record date - Declaration 6 May 1998 Paynwnt ddtr 22 May 1998 PLC 10 February April April May May 1998 NV New York Shares 10 Febrlldry Mq May May june 1998 PLC American Shares 10 February April April ,hfdy June 1998 Interim for 1998 Announced 6 No\wnber 1998 Ex-dividend date 16 November 1998 Record date Payment date 18 December November November 199X 20 NolembeI December November Nowmber No\ember Dee emher 199X 6 November November Nowmber December 1998 Preferential NV dividends 4% Preference Paid 1 Jannal-y 6% Preference Paid 1 October 7% Prrferencr Paid 1 October United Kingdom capital gains tax Since 1982, PLC ordinary shares have been sub-divided on two occasions. Firstly, with effect on 26 Jlme 1987, the 25p shares were split into five shares of 5p each, and secondly, with effect on 13 October 1997, the 5p shares were split into four shares of 1.25~ each Th? market value of PLC: 1.2.5~ ordinary shares at 31 March 1982 would have been p. Listing details NV I hc shares or certificates (depositary receipts) of NV are listed on the stock exchanges in Amsterdam, London, New York and in Austria, Belgium, France, Germany, Luxembourg and Switzerland. PLC The shares of PLC arc listed on the Stock Exchange, London and, as American Depositary Receipts (each evidencing four ordinary shares of 1.25~ each), in New York. Financial and other publications I ersions of this booklet WC availahlc, with Figures exprc-ssrd in pounds sterling, in English and, with figures expressed in guilders, in Dutch and English. The Unilever Annual Accolrnts 1997 booklet is available in the same versions. Also available are, in Dutch and English, the NV Chairman s letter to NV s shareholders in response to the recommendations of the (:ommittee on Corporate Governance established by the Amsterdam Stock Exchange Association and the Association of Securities Issuing Cornpanics in the Netherlands, the announcements of. the Unilever Group s consolidated results for each quarter, Introducing Unilever and Unilever s Organisation, and, in English only, the Environment Report and the annual report to the United States Securities and Exchange (1ommission on Form 20-F. Copies of these publications can be obtained without charge from Unilever s Corporate Relations Department: Rotter&am telephone + 31(O) telefax + 31(0) corp.commllnications-rdam~unilevrr.corn London telephone + 44(O) telef.ax + 44(O) corporate.relations@unilever.com New York telephone telefax corporate.affairs-ny~unile~er.conl

51 .. Unilever N.V. Weena 455, PO Box DK Rotterdam Telephone +31 (0)lO Telefax +31 (0)lO Unilever PLC PO Box 68, Unilever House Blackfriars. London EC4P 4BQ Telephone +44 (0) Telefax +44 (0) Unilever United States Inc. 390 Park Avenue New York NY Telephone +l Telefax +I Unilever PLC Registered Office Port Sunlight, Wirral Merseyside L62 4ZA Unilever PLC Registrars Lloyds Bank Registrars 54 Pershore Road South Kings Norton, Birmingham B30 3EP Telephone +44 (OJ Telefax +44 (0) Unilever web site v Produced by: Unrlever Corporate Relations Department Design: The Partners Main photography: Mike Abrahams, Peter Jordan, Barry Lewes, Tom Main, Bill Prentice & Dorling Kindersley Typesetting & print: Westerham Press Limrted. St Ives plc

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