WHO WE ARE

Unilever is one of the world’s leading fast-moving consumer goods companies. Our products are sold in over 190 countries and, on any given day, 2 billion consumers worldwide use them. We own some of the best known and best loved brands, from long-established names like Dove, Sunlight, Knorr and Lipton to new innovations such as Pureit, our unique in-home water purifier. We are passionate about them and proud of the way they help people get more out of life.

WHAT WE DO

We build our brands and develop our products through extensive consumer insight, relentless innovation, and crystal-clear design and marketing. This is a powerful blend that helps us excite and inspire customers and consumers in established and emerging markets in every corner of the globe. We are committed to making sustainable living commonplace and work to develop new ways of doing business that will reduce our environmental footprint and increase our positive social impact.

OPERATIONAL HIGHLIGHTS

In 2013 we again demonstrated the progress we are making in transforming Unilever into a sustainable growth company. Turnover was €49.8 billion, down 3.0% with a negative impact from foreign exchange of 5.9% and net acquisitions and disposals of 1.1%. Underlying sales grew 4.3%. Gross margin rose 1.1 percentage points driven by better mix, margin accretive innovations and savings. Despite higher spend on advertising and promotions, core operating margin rose by 0.4 percentage points.

OUR KEY PERFORMANCE INDICATORS

We report our performance against the four key financial and six key non-financial performance indicators below. Our financial KPIs are described in the Financial review starting on page 26 and our non-financial KPIs are on pages 14, 16 and 20. Total recordable accident frequency rate and the three manufacturing KPIs were reported in 2012, while the two people-related KPIs

covering diversity and employee engagement are being reported for the first time. In 2012, we also reported against four other key non-financial indicators which are no longer reported as KPIs but are incorporated into the reporting against our Unilever Sustainable Living Plan (USLP) commitments on pages 22 and 23. They will continue to be included in our online Unilever Sustainable Living Report for 2013 to be published in April 2014.

Over the last five years we have seen the steady transformation of Unilever into a sustainable growth company, underpinned by an energising and purpose-driven business model. 2013 was another year of progress in that journey and the Boards remain confident that Unilever’s strategy will continue to generate sustainable returns for shareholders.

Although the economic environment remains challenging, Unilever’s financial highlights point towards a business that is delivering long-term financial performance. Strong dependable cash flow has led to steadily increasing dividends year on year. The full-year dividend paid in 2013 rose to €1.05, a 10% increase from 2012.

FIVE YEARS OF PROGRESS

Five years ago, under a new Chief Executive Officer, the Group set out a new direction, captured in the Compass strategy. The emphasis was on restoring confidence in Unilever’s ability to deliver consistent top and bottom line growth. Every aspect of the business was reviewed and wide-ranging changes followed.

The progress since has been significant. Growth has been strong and well ahead of Unilever’s own markets, with a majority of the business winning share despite the tough environment. Moreover, there has been a marked step-up in the quality of the performance. Significant investments have been made, for example, behind the

long-term drivers of growth, including R&D, brand support and people development. Today, as a result, Unilever’s organisational structure is stronger, its portfolio of brands is more competitive and Unilever is benefiting from a much sharper focus on performance and delivery. Around €10 billion in turnover has been added to the top line and shareholders have undoubtedly benefited from the changes at Unilever – with a 98% cumulative Total Shareholder Return (TSR) over the last five years.

At the same time, the Group has been energised around its commitment to sustainable and equitable growth, as set out in the Unilever Sustainable Living Plan (USLP). By focusing Unilever’s business strategy around the need to develop solutions to some of the world’s most deep-seated social and environmental challenges, the USLP is motivating employees and inspiring a growing number of customers and suppliers to partner with us.

Five years on, the Boards believe that the Compass and the USLP provide the right framework for Unilever and that they will become increasingly relevant in helping to address tomorrow’s challenges and ensuring long-term success for the Group.

MAINTAINING GOOD GOVERNANCE

The Boards believe that a business built on the principles of good governance is more likely to succeed over the long term. We responded constructively to an increased number of government and regulatory consultation exercises in 2013. Helping to shape an environment conducive to good governance is an important investment for the Group. On remuneration, we remain committed to linking pay to the longer-term objectives of Unilever and, in turn, the longer-term interests of shareholders. We believe our current remuneration framework, set out later in the Directors’ Remuneration Report, reflects this.

BOARD FOCUS

In 2013 the Boards continued to visit a range of Unilever operations with meetings held at Unilever’s international management centre at Four Acres, UK; in New York, US; and in Barcelona, Spain in addition to London and Rotterdam. Unilever US remains our largest operation in terms of turnover so it was a fitting location for 2013’s corporate strategy review which included increased interaction between the Directors and members of the Unilever Leadership Executive. In Spain the Boards saw the robustness of Unilever’s business model in a challenging market. Visits such as these allow the Non-Executive Directors to gain a deeper understanding of the business, to gain more exposure to Unilever’s talent pipeline and to participate in Unilever events, sharing their experience and meeting senior managers. Given the volatile environment, the Boards have during the year paid particular attention to sharpening our focus on key risk areas.

EFFECTIVENESS

2013 was the third year in our three-year Board evaluation cycle. The interviews with Directors coupled with the evaluation questionnaires completed by Directors provided the Boards with important insights and enabled us to assess individual contributions and areas for improvement. The process confirmed that no major modifications were required and that the Boards continue to operate in an effective manner.

You, our shareholders, have the opportunity to vote on both the Group’s and Boards’ effectiveness at the Annual General Meetings in May. Although we always strive to improve, we were pleased, at our AGMs in May 2013, to receive votes in favour on all resolutions between 93.53% and 99.98% for NV and between 88.50% and 99.95% for PLC.

STRENGTHENING ALREADY DIVERSE BOARDS

A key role for the Boards is to provide adequately for their succession, and I was very pleased that you voted to elect Laura Cha, Mary Ma and John Rishton as Directors at the AGMs in May 2013. They all bring knowledge and an understanding of emerging markets, a prime driver of Unilever’s growth, and further strengthen the financial expertise of the Boards.

I am pleased that over 40% of our Non-Executive Directors are women. We understand the importance of diversity within our workforce, not least because of the wide range of consumers we serve. This goes right through our organisation, starting with the Boards. We are committed to gender diversity at Board level and are tracking the major efforts being made by Unilever management to increase the number of women in our workforce.

SHAREHOLDER AND STAKEHOLDER ENGAGEMENT

Unilever values open, constructive and effective communication with our shareholders. I continue to meet with a number of investors and industry representatives to answer their questions and to gain a better understanding of their policies on governance and voting. We expect and welcome further engagement with our institutional investors.

Reflecting therefore on a successful 2013, let me express my thanks and appreciation to my fellow Directors on the Boards, our Chief Executive Officer, Unilever’s senior executives and to all the other 174,000 employees around the world. Looking forward, I am confident that we have the strategy, people and resources to continue to deliver sustainable and equitable growth in the years ahead.

Michael Treschow

Chairman

BOARD OF

DIRECTORS

1		Michael Treschow
		Chairman
2		Kees Storm
		Vice-Chairman & Senior
		Independent Director
3		Paul Polman
		Chief Executive Officer
4		Jean-Marc Huët
		Chief Financial Officer
5		Laura Cha
		Non-Executive Director
6		Louise Fresco Non-Executive Director		THE UNILEVER GROUP Unilever N.V. (NV) is a public limited company registered in the Netherlands. It has listings of shares and depositary receipts for shares on Euronext Amsterdam and of New York Registry Shares on the New York Stock Exchange. Unilever PLC (PLC) is a public limited company registered in England and Wales. It has shares listed on the London Stock Exchange and, as American Depositary Receipts, on the New York Stock Exchange.   The two parent companies, NV and PLC, together with their group companies, operate as a single economic entity (the Unilever Group, also referred to as Unilever or the Group). NV and PLC and their group companies, regardless of legal ownership, constitute a single reporting entity for the purposes of presenting consolidated financial statements. Accordingly, the accounts of the Unilever Group are presented by both NV and PLC as their respective consolidated financial statements. The same people sit on the Boards of NV and PLC and other officers are officers of both companies. Any references to the Board in this document mean the Boards of NV and PLC.   Names are listed in alphabetical order with the exception of the Chairman, Vice-Chairman, Chief Executive Officer and Chief Financial Officer.
7		Ann Fudge
		Non-Executive Director
8		Charles Golden
		Non-Executive Director
9		Byron Grote
		Non-Executive Director
10		Mary Ma
		Non-Executive Director
11		Hixonia Nyasulu
		Non-Executive Director
12		Sir Malcolm Rifkind
		Non-Executive Director
13		John Rishton
		Non-Executive Director
14		Paul Walsh
		Non-Executive Director
For Directors’ biographies, please see page 40.

TRANSFORMATION TO A CONSISTENT, COMPETITIVE, PROFITABLE AND RESPONSIBLE GROWTH COMPANY

2013 was another year of turbulence in many parts of the world. Widespread citizen protests in countries as far apart as Brazil, Turkey and Egypt, the devastating typhoon in the Philippines, and the significant weakening of many emerging market currencies were all reminders of today’s increasingly ‘VUCA’ world – volatile, uncertain, complex and ambiguous. While emerging markets slowed, there were only limited signs of recovery in Europe and the US, with little improvement in either consumer confidence or unemployment.

While today’s VUCA world is certainly more difficult to navigate, it does present opportunities if managed well. This is the thinking behind the Unilever Sustainable Living Plan (USLP) and our vision to double the size of the business while reducing our environmental footprint and increasing our positive social impact. This Annual Report seeks to highlight the integral link between our long-term business purpose of making sustainable living commonplace and Unilever’s overall results.

2013 RESULTS

2013 was another year of top and bottom line growth. Underlying sales growth was once again ahead of the market, at 4.3%, and our core operating margin was up 0.4 percentage points, to a record 14.1%, though weaker currencies impacted on our reported turnover and earnings. The quality of results was equally good, with 55% of our business winning share. Growth was driven by Personal Care and Home Care, which continue to outperform the markets and our competitive set. Most of the growth came from emerging markets, which now account for 57% of our business.

CATEGORY PERFORMANCE

In 2013, Personal Care, our largest category, showed strong broad-based momentum. The acquisitions of Alberto Culver, Sara Lee, Kalina and Toni & Guy have helped to transform the portfolio. Dove had a particularly impressive year. Home Care also delivered strong underlying growth. The implementation of low-cost business models and higher margin innovations, including concentrated detergents, helped to drive better gross margins in laundry, and household cleaners benefited from growth in new territories – Domestos toilet cleaner was our fastest growing global brand.

Foods has been a major cash contributor for Unilever, allowing us to finance faster

expansions in Home Care and Personal Care. Although we saw solid performances in savoury and dressings, with both Knorr and Hellmann’s building share, sales declined in spreads due to falling markets in Europe and North America. While we are encouraged by the early signs of recovery in our spreads business, we haven’t yet seen the broader improvements we were expecting and it remains an important focus for us. As part of our strategy of making Foods fit for growth, we sharpened the portfolio further in 2013 with the divestment of a number of less strategic, underperforming brands, like Wish-Bone, Skippy and Unipro.

It was a mixed year for Refreshment, with solid growth in tea but a contrasting performance from ice cream where two of our biggest markets – the US and Italy – struggled. We continued to expand into the profitable out-of-home ice cream sector with brands like Cornetto, Ben & Jerry’s, Magnum and Fruttare. Additionally, we expanded our low-cost business models and further sharpened our choices in capital expenditure. In tea, we have renewed our focus on driving the core business through our Lipton brand and we were pleased to welcome the premium T2 business to our portfolio.

FINANCIAL PERFORMANCE

Over the last five years, we have established a simple framework for driving long-term success – to grow ahead of our markets, expand our margin and deliver strong cash flow. We achieved this again in 2013, despite further investments in advertising and promotion to strengthen the business. Gross margin expansion of 1.1 percentage points was the best for ten years, while free cash flow of €3.9 billion reflected improved margins as well as tight capital management.

We used the strong balance sheet position to increase our holdings in Hindustan Unilever in 2013, from 52% to 67%, and we bought out the remaining holding in Unilever Pakistan. Our pension fund deficit decreased from €3.3 billion at the end of 2012 to €2.0 billion at the end of 2013, reflecting mainly strong investment returns.

A STRONGER ORGANISATION

A VUCA world requires continued investment in our long-term pillars of growth: brands, people, and operations. We increased investment further in manufacturing, with the construction of five plants currently under way, as well as continuing to upgrade our IT systems. Employee engagement scores rose again

and our commitment to building world- class leaders was re-affirmed with the opening of our state-of-the-art management development centre in Singapore.

We made changes to strengthen the organisation in 2013, integrating R&D into our category structure, sharpening and streamlining our marketing organisation. We also embarked on a major simplification exercise, Project Half for growth, which aims to rework our most complex processes and systems to free up time and resource to put behind our principal growth opportunities.

LOOKING FORWARD

2014 will be as challenging as 2013, with continuing volatility in the external environment. We will position Unilever accordingly and drive out complexity and cost to fund growth opportunities. The good news is that we have no shortage of opportunities: increasing our presence in places like Africa, returning our Foods business to competitive growth and extending our categories into more premium spaces. We are making good progress in driving bigger innovations faster across the world but we need to continue to set the bar higher.

Once again, we will remain focused on delivering profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow.

A BETTER WORLD, A BETTER BUSINESS – THE USLP AS A DRIVER OF GROWTH

Every year, the USLP becomes more firmly embedded in all aspects of the business. As this Annual Report highlights, the USLP is driving waste and inefficiencies out of the system and helping us transform the supply chain. Suppliers and customers are increasingly keen to work with us under the USLP and, by helping to grow our business in a responsible and equitable way, the USLP is benefiting all our stakeholders, including our shareholders.

It is in stimulating the growth of our brands that the USLP really comes to life. By developing strong social missions our brands are showing that they can make a real difference to people’s lives while at the same time growing our business. There were many inspiring examples in 2013,

some of them featured in this report. Lifebuoy, for instance, with its handwashing campaign to reduce diarrhoea and pneumonia; Pureit, helping to bring safe drinking water into the home; Dove, promoting self-esteem among young girls and women; Knorr, helping smallholder farmers to produce sustainably; and Domestos, bringing better sanitation to communities in desperate need of it.

However, the scale of the challenges we are trying to tackle through the USLP – whether food security, climate change, sanitation, job creation or the many others – is just too great for one organisation to address alone, which is why we are so pleased that our approach is gaining support from a growing number of external organisations, many of which we are fortunate to partner with. It was particularly satisfying in 2013 to see the launch of the Tropical Forest Alliance (TFA), a public-private partnership committed to reducing deforestation, which Unilever did so much to help get off the ground.

We will continue to bring our scale and our expertise to bear wherever we can to help solve the world’s challenges. Last year, for example, we took this commitment to another level, with the launch of Project Sunlight, a corporate campaign based on making sustainable living desirable and achievable by inspiring people to help build a world where everyone lives well and within the natural limits of the planet. Already 70 million people have been on to the website to make a pledge.

As the Project Sunlight campaign proclaims, we believe that there has never been a better time to create a better world for all, including for those yet to come. My own work as part of the UN Secretary-General’s High Level Panel on the post-2015 Development Agenda has strongly reinforced that view. In fact, I am more than ever convinced that this generation has it within its reach to eradicate poverty irreversibly and, yes, in a more sustainable and equitable way.

At Unilever we don’t just want to be a part of this, we want to lead actively in the areas related to our business. That is what the USLP is all about and I want to thank all of our employees, business partners and others for the remarkable contribution they made again in 2013 towards this goal.

Warm regards

Paul Polman

Chief Executive Officer

UNILEVER LEADERSHIP

EXECUTIVE (ULE)

PROFITABLE VOLUME

GROWTH

Profitable volume growth is the basis of the virtuous circle of growth. The drivers of our volume growth are innovation and investment behind our brands. Consistently strong volume growth builds brand equity as we reach more consumers, more often.

COST LEVERAGE +

EFFICIENCY

Profitable volume growth allows us to optimise the utilisation of our infrastructure and spread fixed costs over a larger number of units produced, reducing the average cost per unit. It improves our profitability and allows us to invest in the business.

INNOVATION +

MARKETING INVESTMENT

Lower costs and improved efficiency enable us to strengthen our business further. New and improved products are the result of investment in R&D and, together with effective marketing, strengthen our brand equity. This results in profitable volume growth, self-perpetuating the virtuous circle of growth.

PRODUCTS THAT DELIVER MORE

By combining human insight with technological innovation we find new ways to connect with consumers. In February 2013, for example, we launched a radical new compressed aerosol deodorant for women from Dove, Sure and Vaseline in the UK. The new cans are half the size and use half the propellant of their predecessors, while lasting just as long and delivering the same excellent protection. Not only does this reduction in packaging and material deliver environmental benefits – including an overall carbon footprint reduction of an average of 25% per can – but the format was an immediate success. More than 9 million cans have been sold since launch, representing a 9.6% share of the female antiperspirant aerosol market.

Another Personal Care innovation, Vaseline Spray & Go moisturiser, features a continuous-spray system which delivers a targeted application easily and evenly across the body. In developing a formulation which was thin enough to be sprayed but contained the right balance of moisturising ingredients, we were working on the insight that people wanted moisturisers which could be applied rapidly and did not need to be rubbed in. Since its launch, in North America alone Vaseline Spray & Go has added more than €25 million turnover to the Vaseline brand.

INNOVATING TO FIND NEW CHANNELS

Innovation can also build the equity of brands by bringing established products to consumers through novel channels. For example, Lipton introduced new hot and iced-tea varieties for the Keurig K-Cup brewing system – by sales value, the leading single cup coffee and tea dispenser in the US. The innovation, combined with a campaign that includes reaching 2.5 million consumers through Twitter, has seen Lipton gain over 10% of the tea capsules market

OUR BRANDS

CONTINUED

FEWER, BIGGER INNOVATIONS

Innovations that give competitive advantage to our biggest brands are the most likely to have a positive impact on our business as a whole. We have focused our R&D efforts on innovations that can be deployed with scale. For example, our Dirt is Good laundry brand has been improved by a combination of a new formulation which delivers better whitening and stain removal technology, and new packaging designed for single-handed opening and containing an integrated pour spout, freshness seal and dosing ball. The new concentrated Small & Mighty, launched in the UK, Ireland, Portugal, the Netherlands and France, has gained significant market share, up by 1.4 percentage points in the UK and by two percentage points in Portugal.

Similarly, our patented TESS technology, which uses the natural essence pressed from freshly picked tea leaves, has enabled the global re-launch of Lipton Yellow Label, the world’s best-selling tea brand. The re-launch has introduced this innovation to 44 countries in two years, resulting in an underlying growth of 5.6% in global turnover for Lipton Yellow Label.

HARNESSING SCIENCE STRATEGICALLY

In 2013 we launched the Strategic Science Group, designed to forecast evolving science trends, identify opportunities, and deliver growth through innovation. The Strategic Science Group is the third pillar in our New Ways to Innovate strategy, alongside Open Innovation and the New Business Unit. Together, they aim to harness rapidly-evolving science and leverage the work of external academia, small and medium sized enterprises, and start-ups, to develop new science and breakthrough technologies.

ACHIEVING MARKETING ‘CUT- THROUGH’ IN A DIGITAL WORLD

Marketing campaigns that are focused on global brands have the potential to achieve greater impact, by engaging people through multiple media – achieving what we call ‘cut-through’. In January 2013, Axe marked the launch of its range of Apollo deodorants, shampoos and shower gels with a multichannel campaign in more than 60 countries that included a competition to win a place on a space flight – resulting in more than a million people registering to participate, and more than 10 million votes on the AxeApollo.com website.

Similarly, Dove’s Sketches film, part of Dove’s ongoing Real Beauty campaign, became the most watched video advertisement of all time following its launch in April 2013 and achieved more than 175 million views in 2013. These campaigns recognise the importance of truly engaging consumers in a digital age – if they are engaged with our brand, they are more likely to be talking about it to others.

WINNING MARKET SHARE

IN EMERGING MARKETS

Emerging markets now account for 57% of our business and have the potential to provide far greater growth in the future. Brands which identify and respond to the local needs of people within those markets can have a great impact. This is exemplified by our Foods category: in Africa, for example, our Rama and Blue Band margarines are now fortified with seven vitamins including vitamin A, strengthening their proposition in a region which contains 33% of the world’s vitamin A-deficient children. Knorr, which celebrated its 175th anniversary in 2013, continues to innovate through relevant products such as the Baking Bag. This has gained share in all of our key markets in Latin America. In Brazil, one of the largest markets, Knorr’s Baking Bag has achieved more than two percentage points in market share. Laundry brands like Surf, launched in Morocco, and Omo, launched in the Philippines, have also gained market share.

WIN CONSUMER PREFERENCE

Brands with real purpose mean more to consumers – but to increase sales and margins, we also need to ensure that this sense of purpose is aligned with a product that delivers superiority in quality or functionality. Winning consumer preference is essential to our ambition to grow faster than our markets and, by allowing us to grow our premium offerings, helps us increase margins, making our business more profitable.

BRANDS THAT PEOPLE CHOOSE

We want all our brands to be preferred in their markets. In 2013, our global product benchmarking programme showed that 97.19% of products in scope are considered equal to, or better than, our key competitors’ products.

When the promise of one of our brands is clearly understood by consumers, and they are persuaded of its benefits, we create the conditions for rapid growth. For example, in 2013 we launched Cif and Vim (sold as Domestos in other countries) in Brazil.

While the slow-down in the Brazilian economy in particular has made this market more challenging for some of our brands in 2013, the combination of Cif’s and Vim’s improved formulae with a fast roll-out and local activation has led to a market share gain of 7.6 percentage points.

ALWAYS SEEKING IMPROVEMENT

During the year, all our categories have been profitable, despite signs that the global economic slow-down is having an effect in emerging markets. But we are under no illusions about the need to keep improving and strengthening our brands if we are to achieve growth. In Foods, for example, we are investing in ways to strengthen our margarines, through product renovation – our foods taste good because they are made from simple recognisable ingredients, a growing number of which are sustainably sourced – as well as launching new, innovative products such as mélanges, a blend of butter and margarine. Supported by better quality advertising, the mélanges started very successfully in Europe. In Refreshment, we are looking at ways to improve and premiumise our ice creams which, due to factors including a poor start to the summer particularly in Europe and

the US as well as intense competitive activity in key markets, did not grow as expected in 2013. Our Personal Care category continued to grow significantly and accounted for 36% of Group turnover in 2013, but could improve its share of the more premium segments of the market. Our Home Care category saw good underlying growth, with household care approaching the €2 billion mark and fabric conditioners €1 billion, but we would like to improve our profitability and roll out innovations even faster. Overall, as a business, we intend to simplify our offering further – reducing the total number of stock-keeping units (SKUs) that we sell, in order to focus on those which will best drive our growth and margins.

PREMIUM PRODUCTS, HIGHER MARGINS

Products which consumers prefer can command higher prices than their competitors – and we are increasingly focusing on the premium segments of our markets, which offer the potential for better margins and higher profits.

This segmentation is taking place across most of our categories and is fuelled by innovation, collaboration with partners, and selective acquisition. We have, for example, acquired T2, a fast-growing premium tea brand in Australia generating sales of around €37 million a year; and IOMA, a premium skin care brand, which uses state-of-the-art diagnostic technology to study an individual’s skin and tailor

a bespoke skin care regime. IOMA is a strategic acquisition that gives us access to the premium skin care market and channels where we are under-represented. Innovation is creating products such as Magnum 5 Kisses, a premium Rainforest Alliance Certified ice cream inspired by French patisserie, which was launched in 13 markets in 2013. Meanwhile our gourmet Maille brand, founded in 1747, opened its first store outside France, La Maison Maille in London’s Piccadilly, providing premium mustards, vinegars, gifts and accessories.

OUR PEOPLE

CONTINUED

FROM DIVERSITY TO INCLUSION

Women are Unilever’s core consumers, controlling nearly two thirds of consumer spending, so it’s important that we represent them in our workforce. As at 31 December 2013, 119,139 (68%) of our global workforce of 174,381 employees were male and 55,242 (32%) female. Of these, 115 are considered senior leadership executives (96 male, 19 female). If you include employees who are statutory directors of the corporate entities whose financial information is included in the Group’s 2013 consolidated accounts in this Annual Report, the number increases to 681 males and 181 females. 35% (five out of 14) of the Board are female. Our ambition is for 50% of our managers to be women (2013: 42% were female and 58% male).

We know there is still much to do and we are working hard to put programmes in place to improve our representation and retention of women. Our Winning Balance campaign, for example, encouraged employees to give their views on gender balance. We used over 1,750 responses to make real changes. These included a programme to retain female staff during and after maternity leave, as well as training leaders to be more inclusive.

Our efforts are showing signs of success and we’re encouraged by external recognition including two golds for ‘Winning Balance’ at the tenth Stevie Awards for Women in Business, as well as a Catalyst Award for Creating a Gender-Balanced Workforce in Different Cultures. We were included in The Times Top 50 Employers for Women in the UK, The Working Mother 100 Best Companies in North America and the Corporate Empowerment for Women Award from Cosmetics Executive Women, North America.

SIMPLIFYING THE WAY WE WORK

Simplifying working practices and cutting out unnecessary bureaucracy has a twofold benefit: it helps us respond swiftly to changes in the market place and allows our people to focus on what inspires them – building and growing our brands.

One way of doing this is to bring people together: we have opened a European Marketing and Innovation Hub in Rotterdam, relocating approximately 270 employees from nine different countries, which will speed up both decision-making and the sharing of best practice. We’re also pleased that 58% of people based there are women and they represent 28 different nationalities.

We are also looking at working practices across the company. For example, we are rolling out Agile Working and now have 30 Agile Workplaces. This new way of working measures performance on results, not time and attendance, and reinforces diversity by helping people – particularly women –balance their personal and professional lives.

And during the year we set ourselves a challenge: to rework our major processes and systems – those that are the most complex, time consuming and frustrating – to halve the time they take to use. In the spirit of this ambition, we coined the initiative Project Half for growth, and identified a radical simplification of ten processes and systems that would reduce the time we spend on doing things that don’t add value and concentrate on things that do. Each initiative is championed by a ULE member.

Similarly, Project Sunset, an IT tool that speeds up decisions, has been rolled out across 103 countries and is already available in seven languages. The new approach, pioneered by Hindustan Unilever in 2012, escalates business problem solving to the highest levels of leadership within three weeks. Using Sunset in India to deal swiftly with customer management issues has led to better retention of salesmen and lower costs of hiring.

Meanwhile, building on the findings from our Winning Balance campaign, more than 87,000 people viewed our Winning Together programme which is helping teams make changes to everyday working practices. This includes meetings and email etiquette, so as to spend time more effectively on making the biggest difference to the business. For example, teams are creating their own manifestos and sharing best practice, with promises including more video conferencing to reduce travel, keeping meetings to time and an end to cc-ing emails unnecessarily.

But there is still much to do. In 2014, we intend to focus on helping leaders promote a culture of inclusivity.

VALUES AND PERFORMANCE CULTURE

In a turbulent world, people are looking for meaning at work, and contributing to making sustainable living commonplace, as we do at Unilever, is highly motivating. Our values of integrity, responsibility, and respect, and our pioneering spirit guide our people in the judgements, actions and decisions they make each day. They are especially important as we expand into new markets, recruit new people and face new challenges.

ENGAGEMENT

Each year, our Global People Survey measures employee engagement, alternating between polling all employees and managers only. In 2013, we surveyed our managers and 89% participated, with the overall engagement score increasing five percentage points to 78% (compared with managers’ results in 2012). However, our bias for action scores rose only slightly to 50% – we hope to see this change as our programmes to simplify our working practices start to take effect.

HUMAN RIGHTS

In line with the UN Guiding Principles on Business and Human Rights (UNGP), we base our human rights commitment and policy on the International Bill of Human Rights (the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights) and the principles concerning fundamental rights set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work. We seek to uphold these rights in our operations, in our relationships with our suppliers and other business partners, and by working through external initiatives, such as the United Nations Global Compact. In 2013 we appointed a Global Vice President for Social Impact to lead the implementation of the UNGP and the development of the Enhancing Livelihoods pillar of the USLP, including the advancement of women’s rights and economic inclusion. We will report in more detail on this next year.

MOTIVATION

To reach our ambition of sustainable growth, we need people with a winning

mindset, a passion for consumers and an appetite to drive personal performance. To do this, we are building a winning culture in which every employee is encouraged to grow to his or her full potential. Our performance-based reward structure recognises those who have delivered results and have the right values for our business.

While recognition reinforces our values and the positive behaviours that drive our business performance, recognition can be delivered in many ways. This year, we honoured five people nominated by their colleagues as Unilever heroes. Our 2013 heroes include Habiba Haroon (pictured on page 15) who helped more than 1,000 women in rural Pakistan to earn a sustainable income, and Hasan Monsoor, from our Customer Development team in Bangladesh, who devised a way of protecting our teams and delivering our products safely during politically-charged protests that often escalate into violence.

A number of initiatives beyond our brands enable our people to contribute to social issues as Unilever grows. For example, the Unilever Foundation Challenge, now in its

second year, names five employees as global ambassadors for the Unilever

Foundation, which partners with Oxfam, Population Services International, Save the Children, UNICEF and the World Food Programme to improve people’s quality of life.

And our Big Moments campaign is driving greater awareness of our mission to be more sustainable by educating our people and encouraging them to talk to their communities about sustainability. Indeed, 79% of all employees had spoken to friends and family about our sustainability plans, up from 63% in 2012.

Partnerships are crucial to meeting our Unilever Sustainable Living Plan (USLP) ambitions to source 100% of our raw materials sustainably; this year, 48% of our agricultural raw materials were sustainably sourced, compared to 36% in 2012. In November 2013 we announced our commitment to buy all our palm oil from known traceable sources by the end of 2014, an important step towards our commitment to securing 100% sustainably from certified, traceable sources by 2020.

INNOVATING TOGETHER

Partnerships are also essential to developing outstanding innovations: many of our great ideas are developed with our suppliers. We are also finding new ways of innovating with other external partners – for example, through ‘innovation eco-systems’, which bring together our R&D experts with academics, small and medium sized enterprises (SMEs), and start-up companies. We have established a ‘science grid’ of the world’s leading academic institutions, and we are establishing a presence in a select number of ‘hotspots’ of science technology and enterprise where we previously had no R&D infrastructure.

GROWING SUSTAINABLY WITH CUSTOMERS

We work closely with our retail customers, who are long-standing partners in our effort to ensure that consumers get the best choice, quality and service. This year we added five locations to our existing network of collaboration centres, where we develop joint integrated strategies for merchandising without having to run in-store pilots. We run joint sustainability programmes with key customers including Walmart, with whom we run the health- and environment-focused Living Project, and Tesco, through ‘A better future begins at home’. In markets where reaching consumers is still about the local small shop, we use analytics to help us pinpoint where we will expand our coverage and GPS technology to track the stores that we add. In India, for example, we have added more than 2 million outlets in the last four years.

The entire value chain from suppliers to our customers are all important allies in the ‘war on waste’. In our supply chain alone, we have avoided cumulative costs of €200 million for raw and packaging materials and disposed waste combined, and more than €150 million in energy costs since 2008.

HARNESSING THE BENEFITS OF SCALE

Through supply chain efficiencies we created savings of €1.5 billion and released €0.2 billion of working capital in 2013.

We manage our factory network globally, which allows us to export around the world with consistent quality and competitive costs. For example, our Knorr factory in Sanguinetto, Italy, produces 72% of global jelly bouillon and is currently the cost benchmark for all our plants.

Hunting for efficiencies also makes our business more sustainable. For example, despite underlying volume growth of 2.5% in 2013, our logistics operation reduced total vehicle kilometres by 47 million, compared to 2012. This was achieved by implementing smarter distribution networks and driving up vehicle load fill. This led to an overall reduction of CO₂ by more than 70,000 tonnes.

RESPONDING TO LOCAL CONTEXTS

We combine our global scale with the agility to respond to local needs. Our low-cost business models (LCBMs) deploy teams to local markets to identify opportunities to enhance margins. LCBMs have so far helped realise more than €200 million in cost savings from our Refreshment and Home Care categories and we are now expanding the LCBM programme to Foods and Personal Care.

We are making good progress on the targets within our direct control. Those outside our control are proving more challenging, especially when it comes to helping consumers reduce energy and water associated with washing and showering at home. Just as important, however, is the learning we have gained over three years of driving the implementation of the USLP.

IMPROVING HEALTH AND

WELL-BEING

By the end of 2013, we had helped 303 million people improve their health and hygiene habits. This is more than a quarter of the way towards our ambitious 2020 target. Brands such as Lifebuoy and Dove gained market share and along with Signal extended their reach and achieved increases in sales. Across Foods and Refreshment, we assessed that 31% of the total portfolio met product-focused, highest nutritional standards that are based on globally recognised dietary guidelines. Our focus on improving products, coupled with partnerships and branded campaigns, is contributing to better diets for many millions of people.

MANAGING ENVIRONMENTAL IMPACT

In 2013, big reductions in the energy used for manufacturing mean that our own CO₂ emissions from energy are now 32% below 2008 levels measured per tonne of

production. Water abstraction is also down 29% per tonne of production, despite the growth in production. Similarly, total waste sent for disposal has reduced by 66% per tonne of production and we are on target for all our sites to achieve zero non-hazardous waste to landfill by 2015.

While we have made excellent progress in our own manufacturing operations, the total environmental footprint of our products including consumer use has increased for greenhouse gas (GHG) emissions across the value chain (+5% since 2010) and domestic water (+15%). While we are making improvements in our underlying business, for example, laundry concentrates and compressed deodorants, other parts of our portfolio are evolving in ways which are increasing our footprint: our Personal Care business has expanded in shower and hair products via the Alberto Culver acquisition (which accounts for three percentage points of the GHG increase) and our laundry business has experienced high levels of growth from bars in India which, while very affordable for people on low incomes, are also associated with a more water-intensive washing habit. We are continuing to look for ways to reduce the impact of these products. The total footprint from packaging waste to landfill has reduced

(-11%) as a result of efficient pack designs and the disposal of sauce brands with large waste footprints.

FINANCIAL

REVIEW 2013

Another year of good, consistent,

profitable and competitive top and

bottom line underlying growth

FINANCIAL OVERVIEW 2013

CONSOLIDATED INCOME STATEMENT

Turnover at €49.8 billion decreased 3.0%, including a negative impact from both foreign exchange, of 5.9%, and acquisitions net of disposals of 1.1%. Underlying sales growth was 4.3% (2012: 6.9%), balanced between volume growth of 2.5% (2012: 3.4%) and pricing of 1.8% (2012: 3.3%). Emerging markets, now 57% of total turnover, were flat at reported exchange rates, with underlying sales growth of 8.7% versus 11.4% in the prior year. The Group saw a weakening in the market growth of many emerging countries, in particular during the third quarter, exacerbated by significant currency devaluation.

Core operating margin was up 0.4 percentage points to 14.1%. Gross margin improved by 1.1 percentage points to 41.2% at constant exchange rates. All categories and all regions improved gross margin. This was a result of a higher margin business mix, driven in part by margin accretive innovations, and active cost management. Commodity costs have been more stable than recent years, increasing by around 4% in 2013.

Investment in advertising and promotions increased by 0.5 percentage points or €460 million, at constant exchange rates. Overheads increased by 0.2 percentage points as a result of favourable one-off items in 2012.

Operating profit was €7.5 billion, compared with €7.0 billion in 2012, up 8%. The increase was mainly driven by non-core items which were a net credit of €0.5 billion (2012: net debit €0.1 billion); core operating profit was flat at €7.0 billion. The total gain on business disposals, recognised in non-core items, was €0.7 billion.

Highlights for the year ended 31 December

⁽¹⁾ Refer to page 31.

The cost of financing net borrowings was €397 million (2012: €390 million). The average level of net debt increased following the acquisition of additional shares in Hindustan Unilever Limited while interest rate movements were favourable. The average interest rate was 3.3% on debt and 2.9% on cash deposits. The pensions financing cost was a charge of €133 million, compared to €145 million in 2012, both restated for the impact of the revision to the accounting standard IAS 19.

The effective tax rate remained consistent with 2012 at 26%. Our longer term expectation for the tax rate remains around 26%.

Net profit from joint ventures and associates, together with other income from non-current investments, contributed €127 million in 2013, compared to €91 million in the prior year. The movement is mainly due to the low prior year comparator which included an impairment of warrants associated with the disposals of the US laundry business.

Fully diluted earnings per share were €1.66, up 11% from €1.50 in the prior year, driven by higher operating profit. Core earnings per share were €1.58, up 3% from €1.53 in 2012 after a 7% headwind from currency movements.

PERSONAL CARE

FOODS

KEY DEVELOPMENTS

REFRESHMENT

KEY DEVELOPMENTS

KEY DEVELOPMENTS

HOME CARE

KEY DEVELOPMENTS

ASIA/AMET/RUB

KEY DEVELOPMENTS

THE AMERICAS

KEY DEVELOPMENTS

EUROPE

KEY DEVELOPMENTS

Net cash flow from operating activities was €6.3 billion, a reduction of €0.5 billion over the previous year. The chief contributors were an increase in operating profit of €0.5 billion offset by a lower inflow from working capital, which is measured against a strong performance in 2012, and currency headwinds. Unilever has consistently enjoyed a negative working capital position as a result of tight management attention across the supply chain – indicative of careful attention to maintaining a strong financial and liquidity position. Better forecasting and planning processes led to lower inventories of €0.5 billion, while receivables increased by €0.4 billion and mutually beneficial terms negotiated with strategic vendors resulted in higher payables of €0.1 billion.

The net outflow from investing activities was €0.4 billion higher than the previous year. Whilst net capital expenditure and interest were broadly unchanged, the net inflow of acquisitions, disposals and other investing activities was €0.8 billion compared to €1.2 billion in 2012. Our net capital expenditure of €2.0 billion, or 4.1% of turnover, reflects the investment in capacity to support our growing business.

Net cash outflow from financing activities was €1.2 billion lower than the prior year. Of the €5.4 billion outflow, €2.9 billion was used for the acquisition of non-controlling interests in 2013 partly financed by a €1.3 billion net inflow from movements in financial liabilities and short-term borrowings. In comparison, we used our cash to reduce net financial liabilities and short-term borrowings by €3.0 billion in 2012.

Cash and cash equivalents held at the year end were €0.2 billion lower at €2.0 billion.

BALANCE SHEET

Unilever N.V.‘s and Unilever PLC’s combined market capitalisation rose from €81.9 billion at the end of 2012 to €83.8 billion at 31 December 2013. The full year dividend for 2013 rose 10% to €1.05. A final dividend of €0.2690 per NV ordinary share and £0.2222 per PLC ordinary share was declared on 21 January 2014. Information on dividends is set out in note 8 on page 109.

⁽¹⁾ Refer to page 31.

Goodwill and intangible assets reduced by €0.8 billion mainly due to business disposals and currency movements. All material goodwill and indefinite-life intangible assets have been tested for impairment. No impairments were identified.

During 2013 the Group sold its global Skippy business to Hormel Foods for a total cash consideration of approximately US $700 million. It also sold its Wish-Bone and Western dressings brands to Pinnacle Foods Inc. for approximately US $580 million.

In July 2013 Unilever paid INR 192 billion (€2,515 million) for 319,563,398 shares in Hindustan Unilever Limited (representing 14.78% of the total shareholding), increasing the Group ownership to 67%. Accordingly, €104 million previously shown as attributable to non-controlling interests within equity is now attributable to shareholders and the resulting loss on the acquisition recorded in retained earnings is €2,411 million.

Current assets were flat versus 2012, with good progress in reducing inventory levels being offset by higher trade and other receivables.

During 2013 Unilever recognised provisions of €120 million in relation to investigations by national competition authorities. Current liabilities were €1.6 billion higher mainly driven by the impact of a €2.5 billion cash outflow to increase the Group’s interest in Hindustan Unilever Limited. Non-current liabilities (excluding pensions) were broadly in line with the previous year. The net movements in assets and liabilities for all pension arrangements during the year was as follows:

The overall net liability for all pension arrangements was €2.0 billion at the end of 2013, down from €3.3 billion at the end of 2012. €1.0 billion of this relates to funded schemes in surplus (2012: €0.8 billion). The decrease in the net obligation reflects the impact of investment returns, in excess of the interest cost on liabilities, and cash contributions. Cash expenditure on pensions was €0.7 billion, the same as in the prior year and as forecast for 2014.

FINANCE AND LIQUIDITY

The Group’s financial strategy provides the financial flexibility to meet strategic and day-to-day needs. Our current long-term credit rating is A+/A1 and our current short-term credit rating is A1/P1. We aim to maintain a competitive balance sheet which we consider to be the equivalent of a credit rating of A+/A1. We believe this provides us with:

Unilever aims to concentrate cash in the parent and central finance companies in order to ensure maximum flexibility in meeting changing business needs. Operating subsidiaries are financed through the mixture of retained earnings, third-party borrowings and loans from parent and central finance companies. Unilever maintains access to global debt markets through an infrastructure of short-term debt programmes (principally US domestic and euro commercial paper programmes) and long-term debt programmes (principally a US Shelf Registration programme and a European markets Debt Issuance Programme). Debt in the international markets is, in general, issued in the name of NV, PLC, Unilever Finance International BV or Unilever Capital Corporation. NV, PLC and Unilever United States Inc. will normally guarantee such debt where they are not the issuer.

Approximately €1.3 billion (or 59%) of the Unilever Group’s cash and cash equivalents balances are held in foreign subsidiaries. We generally repatriate distributable reserves from our subsidiaries on a regular basis. In the majority of countries we are able to repatriate funds to Unilever N.V. and Unilever PLC through dividends free of tax. In a few countries we face cross-border foreign exchange controls and/or other legal restrictions that prevent balances being available in any means for general use by the parent companies or subsidiaries. In each of the last three years the amount of cash held in these countries was less than €250 million.

We closely monitored all our exposures and counter-party limits.

Unilever has committed credit facilities in place for general corporate purposes. The undrawn bilateral committed credit facilities in place on 31 December 2013 were US $6,400 million. Further details are given in note 16A on page 120.

On 11 February 2013 we redeemed a US $450 million four-year bond which was issued in 2009 at 3.125%. On 21 May 2013 we redeemed a €750 million five-year bond which was issued in 2008 at 4.875%. On 5 August 2013 we issued a seven-year €750 million bond at 1.75%. On 6 September 2013 we issued US $750 million 2.20% fixed rate notes due March 2019.

CONTRACTUAL OBLIGATIONS AT 31 DECEMBER 2013

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

Unilever’s contractual obligations at the end of 2013 included capital expenditure commitments, borrowings, lease commitments and other commitments. A summary of certain contractual obligations at 31 December 2013 is provided in the preceding table. Further details are set out in the following notes to the consolidated financial statements: note 10 on pages 111 and 112, note 15C on pages 118 and 119, and note 20 on pages 129 to 131.

Unilever is satisfied that its financing arrangements are adequate to meet its working capital needs for the foreseeable future. In relation to the facilities available to the Group, borrowing requirements do not fluctuate materially during the year and are not seasonal.

FINANCIAL INSTRUMENTS AND RISK

The key financial instruments used by Unilever are short-term and long-term borrowings, cash and cash equivalents, and certain plain vanilla derivative instruments, principally comprising interest rate swaps and foreign exchange contracts. The accounting for derivative instruments is discussed in note 16 on page 120 and on pages 124 and 125. The use of leveraged instruments is not permitted.

Treasury processes are governed by standards approved by the Unilever Leadership Executive. Unilever manages a variety of market risks, including the effects of changes in foreign exchange rates, interest rates, commodity costs and liquidity. Further details of the management of these risks are given in note 16 on pages 120 to 125.

BASIS OF REPORTING AND CRITICAL

ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with IFRS. The accounting policies that are most significant in connection with our financial reporting are set out in note 1 on pages 94 and 95 and other than as noted below are consistent with those applied in 2012.

In the year the Group adopted IAS 19 (Revised) ‘Employee benefits’ which changes disclosure requirements and restricts the accounting options available for defined benefit pension plans. The changes resulted in an increase in finance costs of €193 million for the year ended 31 December 2013 (€138 million for the year ended 31 December 2012) and a reduction in net defined benefit liability of €198 million in the restated comparative opening balance sheet as at 1 January 2012, with a corresponding increase in actuarial gains or losses on pension schemes before tax when restated under the new standard.

AUDIT FEES AND OPINION

Included within operating profit is €21 million (2012: €21 million) paid to the external auditor, of which €16 million (2012: €18 million) related to statutory audit services.

The audit opinions issued, by PricewaterhouseCoopers Accountants N.V. and PricewaterhouseCoopers LLP, on the consolidated results of the Group, as set out on pages 86 to 89, were unqualified and contained no exceptions or emphasis of matter.

NON-GAAP MEASURES

Certain discussions and analyses set out in this Annual Report and Accounts include measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. We believe this information, along with comparable GAAP measurements, is useful to investors because it provides a basis for measuring our operating performance, ability to retire debt and invest in new business opportunities. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance and value creation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Non-GAAP financial measures as reported by us may not be comparable with similarly titled amounts reported by other companies.

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

UNDERLYING SALES GROWTH (USG)

Underlying Sales Growth or “USG” refers to the increase in turnover for the period, excluding any change in turnover resulting from acquisitions, disposals and changes in currency. Acquisitions and disposals are excluded from USG for a period of 12 calendar months from the applicable closing date. Turnover from acquired brands that are launched in countries where they were not previously sold is included in USG as such turnover is more attributable to our existing sales and distribution network than the acquisition itself.

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

TOTAL GROUP

PERSONAL CARE

FOODS

REFRESHMENT

HOME CARE

UNDERLYING VOLUME GROWTH (UVG)

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

The relationship between the two measures is set out below:

The UVG and price effect for category and geographical area are shown in the tables on pages 27 and 28.

FREE CASH FLOW (FCF)

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

The reconciliation of FCF to net profit is as follows:

Further details of non-core items can be found in note 3 on

page 98.

CORE EARNINGS PER SHARE

The Group also refers to core earnings per share (core EPS). In calculating core earnings, net profit attributable to shareholders’ equity is adjusted to eliminate the post tax impact of non-core items. Refer to note 7 on page 108 for reconciliation of core earnings to net profit attributable to shareholders’ equity.

NET DEBT

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

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

The following discussion of the risk outlook and our principal risk management activities includes ‘forward-looking’ statements that reflect Unilever’s view of the operating risk environment. The actual results could differ materially from those projected. See the ‘Cautionary statement’ on the inside back cover.

OUTLOOK

Market conditions for our business were again challenging in 2013 and we do not anticipate this changing significantly in 2014.

Economic pressures are expected to continue. Consumer demand in emerging markets has slowed and is expected to remain subdued in 2014. In developed market economies, there are signs of gradual recovery, but any improvement in consumer demand is likely to be slow and muted and shoppers will remain focused on value. While the greatest pressures in the Eurozone have reduced, they have not been permanently resolved and economic and political risks remain.

Currency markets remain volatile and uncertain. Commodities markets have been relatively stable during 2013 but we remain watchful of potential volatility in 2014. Terrorist activity and political unrest may also result in business interruptions and a decreased demand for our products.

The competitive environment for our business is likely to remain intense in 2014. Our competitors, both global and local, will continue to shift resources into emerging markets. We expect continued high levels of competitive challenge to our many category leadership positions. Some of this may be price based, but we also expect strong innovation based competition. With the improvements we have been making, and continue to make, to our business we are well prepared for these challenges.

Our plans give us confidence that Unilever can continue to deliver against the objectives we have set out: volume growth ahead of our markets, steady and sustainable improvement in core operating margin and strong cash flow.

OUR RISK APPETITE AND APPROACH TO RISK MANAGEMENT

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

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

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

ORGANISATION

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

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

FOUNDATION AND PRINCIPLES

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

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

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

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

PROCESSES

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

ASSURANCE AND RE-ASSURANCE

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

BOARDS’ ASSESSMENT OF COMPLIANCE WITH THE RISK MANAGEMENT FRAMEWORKS

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

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

Details of the activities of the Audit Committee in relation to this can be found in the Report of the Audit Committee on pages 53 to 55.

Further statements on compliance with the specific risk management and control requirements in the Dutch Corporate Governance Code, the UK Corporate Governance Code, the US Securities Exchange Act (1934) and the Sarbanes-Oxley (2002) Act can be found on pages 47, 48 and 50.

PRINCIPAL RISK FACTORS

Our business is subject to risks and uncertainties. On the following pages we have identified the risks that we regard as the most relevant to our business. There may be other risks which are unknown to Unilever or which are currently believed to be immaterial. We have also commented below on certain mitigating actions that we believe help us to manage these risks. However, we may not be successful in deploying some or all of these mitigating actions. If the circumstances in these risks occur or are not successfully mitigated, our cash flow, operating results, financial position, business and reputation could be materially adversely affected. In addition risks and uncertainties could cause actual results to vary from those described, which may include forward-looking statements, or could impact on our ability to meet our targets or be detrimental to our profitability or reputation.