NESTLÉ S.A.

2006 FULL YEAR RESULTS CONFERENCE CALL SPEECH

Conference Date: 22 February 2007

Chairpersons: Mr Paul Polman Chief Financial Officer Nestlé S.A.

Disclaimer

This speech might not reflect all exact words of the audio version.

This speech contains forward-looking statements, which reflect Management’s current views and estimates. The forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.

Paul Polman - Nestlé S.A. Chief Financial Officer

SLIDE 1 - Logo Slide

Good morning everyone and welcome to our full year results conference call. We’re here today to talk about a strong set of high quality numbers, delivered despite a tough cost environment, as we accelerate our transformation to a nutrition, health and wellness company.

SLIDE 2 - Disclaimer

But first I’ll take this safe harbour slide as read and move straight to the strategic context in which these results have been delivered.

SLIDE 3 - 2006 Highlights

By now you are familiar with the Nestlé Model. Its objective is to deliver 5 to 6% organic growth, combined with a continuous improvement in profitability and, Return on invested capital. 2006 was another year we delivered that Model – and the driver of our performance was the Food and Beverage business, whilst building a good foundation to ensure future profitable growth.

At the same time as delivering these strong results we made significant progress in further strengthening our Nutrition, health and wellness credentials. There were strategic acquisitions of Uncle Tobys, Jenny Craig and Novartis Medical Nutrition, Most of our growth , however was on our core brands with strong nutrition, health and wellness initiatives, supported by more 60/40+ product wins, and the broad roll-out of the Nutritional Compass with clear on-pack information for consumers. We also made a number of divestitures, such as bottling, canned liquid milk, private label ice cream, Japanese vending and numerous small ones, allowing us to focus our people and money on more profitable strategic businesses.

We advanced our organisational transformation as well. There was the creation of a stand-alone Nutrition business and FoodService strategic division. By driving profit responsibility down in the organisation with the creation of the Business Executive Managers, we also have put more emphasis on profitable demand generation. We have implemented the GLOBE system on 80% of Food and Beverage and have progressed with the shared services initiative. We are increasingly leveraging these initiatives which, together with enhanced discipline, enable us to better leverage our scale as we grow.

Our billionaire brands now represent about 70% of our Food and Beverage sales, with four new entrants this year alone ., , Dog Chow, and Nestlé Pure Life. These billionaire brands once more were the growth drivers of the Group.

Now let’s go to the numbers –and start with the highlights.

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Slide 4 - 2006 Highlights – all metrics improve

I said earlier that this is a strong set of results. The totals on this slide are a new set of records for the Group.

Sales increased by 8.1%, or 7.3 billion Swiss francs, to 98.5 billion CHF, with organic growth of 6.2%. Our strategic Food and Beverage brands were the engine for growth, as they were for the improvement in profits.

The EBIT rose 12%, or 1.4 billion francs to 13.3 billion. The EBIT margin improved by 50 basis points to 13.5%.

The net profit was up by 13.8%, or 1.1 billion francs to 9.2 billion CHF. The net profit margin rose 40 basis points to 9.3%.

Working capital, which will continue to be one of our key focus areas, improved 100 basis points to 6.7% of sales, a 1 billion franc improvement versus the trend we were on.

Our operating cash flow rose 14.4%, or 1.5 billion francs, to 11.7 billion, up 70 basis points.

Despite increased capital spend, the return on invested capital increased by 40 basis points to 21.2% and by 30 basis points after goodwill to 11.7% of sales.

As I said earlier, we have delivered a strong improvement across all key metrics at the Group level.

Let’s look at the Food and Beverage performance in more detail since, as you know, we have committed to give you more transparency , and better performance on this business.

Slide 5 - Food and Beverages Delivering the Nestlé Model

2006 was a very good year for the Food and Beverage business, which saw our brands get stronger as we drove nutrition, health and wellness. We invested in R&D, Marketing and Capacity expansion to continue to build our brands now and in the future. We are capturing the scale benefits from our growth, and improved our cost base with discipline to become more competitive and more than compensate for input cost pressures and, of course, to improve our overall margins.

Sales increased by 7.8%, or 6.7 billion Swiss francs, to 91.8 billion. Organic growth was 5.9%. I mentioned scale benefits just now. To be captured with discipline, they require strong RIG, which was 4.2% in 2006, compared to 3.8% in 2005. That stronger than anticipated volume, contributed to the improved F&B EBIT, and is the main reason 2006 results beat the market consensus.

F&B EBIT rose 11.2%, or 1.2 billion Swiss francs, to 11.2 billion CHF. The EBIT margin was up 40 basis points to 12.2%.

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Slide 6 - Continued strong growth Group and Food & Beverages

Let’s Move to the composition of sales, starting with the Total Group. Acquisitions, net of divestitures, contributed 0.3%, with acquisitions 0.7% and divestitures minus 0.4%.

Exchange rates were positive 1.6% and pricing 1.5%.

RIG reached 4.7% and organic growth 6.2%. Total sales were up 7.3 billion to 98.5 billion Swiss francs.

For Food and Beverage, the impacts of acquisitions and exchange rates were the same as for the Group.

Pricing was 1.7% and RIG 4.2% to give organic growth of 5.9%. Total F&B sales were up 6.7 billion to 91.8 billion Swiss francs. That growth was not the result of one or two stars flattering the rest: it is due to strong performances across our product categories and countries, and share gains by most of our “billionaire brands”. You will see this as we go through the sales performance of the product groups and zones, with

· Core brands getting stronger · Developing markets growing faster · Nutritional credentials enhanced across our brands · Innovations getting stronger – fewer, bigger, better

Slide 7 - Product Groups – Organic Growth

First is Powdered and Liquid Beverages which achieved 7.9% organic growth. The strong nutritional credentials of and were again the catalysts for their success. Nesquik was particularly in demand in ready-to-drink form in the US, whilst Milo was strong across Asia. The cereal extensions of both brands, a logical link for nutritious children’s products, also performed well. and continued to grow . Nespresso, in the year it celebrated its 20th birthday, grew at about 40% and passed a billion Swiss francs of sales for the first time.

Nestlé Waters, with 8.2% organic growth, is another beneficiary of the increased health awareness amongst consumers. The Nestlé branded waters performed well, as did the regional US brands such as Poland Spring, Deer Park and . Amongst our global brands, S.Pellegrino and Aqua Panna stood out. Both Poland Spring and Nestlé Pure Life exceeded 1 billion Swiss francs in sales for the first time in 2006.

Dairy, including ice cream, achieved 5.1% organic growth. Dairy is an increasingly focused, nutrition-driven business. This focus was enhanced in 2006 through the divestiture of some canned milk brands in Asia. The nutrition system, lower priced milks such as Bear Brand and adult nutrition offerings such as Nesvita all did well, as the product group enjoyed a strong year.

I told you earlier in the year that our focus on improving margins in US Ice cream would result in slower growth in 2006. It did indeed reduce the growth, and we were successful

Page 4 in increasing the margins. However, our core brands and recent innovations have continued to perform well in the market place. In Europe we benefited from the successful launch of our low fat, full flavour offering across a range of brands, as well as from the relaunch of Mövenpick of Switzerland, with all natural ingredients. The focus on further improving margins in this category will continue in 2007.

Nestlé Nutrition’s growth accelerated by 200 basis points in the second half to reach 6.1% organic growth for the year, above 2005, helped by an improvement in China. The business performed well in the 3 out of 4 BRIC countries where it is the market leader, as well as in Africa, Asia and the Middle East. There were good performances too in some European countries. Successful innovations , with the immune protection and allergy prevention improvement on our premium and super premium Infant formula, and Infant Cereals were the key growth drivers.

Prepared dishes and cooking aids achieved 4.8% organic growth. continued strong. Its nutritional extensions are further enhancing its heritage as a compliment to fresh cooking. Stouffer’s and performed well in North America. Lean Cuisine’s strategy of offering more choices to calorie-conscious consumers delivered double-digit growth. performed well in the US in Chilled and also had its best year for a while in Europe, with frozen pizza specially strong. had a poor year for growth, and need to recover in 2007.

Chocolate, Confectionery and Biscuits reported 2.6% organic growth. Our overall growth is ahead of the market despite the category being under pressure from changing consumer trends A tale of two stories for us. There were strong performances in Latin America, much of AOA and parts of Europe, but weaker ones in the UK and US. was a good performer globally, with 7% growth, benefiting from a consumer preference for lighter chocolate bars. We are seeing an improvement in the UK, but there remains much to do.

PetCare achieved 7.1% organic growth. Both Europe and North America performed well. Our growth is being driven by the premium and super premium segments, brands such as Beneful, Pro Plan and ONE that often have specific perceived nutritional or health benefits. We are also seeing good growth in the organic and natural product extensions. Dog Chow’s sales exceeded 1 billion Swiss francs for the first time in 2006. is now also 1 billion CHF in Europe alone.

Finally Pharmaceutical products. You’ve seen Alcon’s results, so this product group’s 11.6% organic growth shouldn’t surprise you.

Slide 8 - F&B "Billionaire Brands" represent about 70% of F&B sales

Most of our Billionaire brands grew comfortably above the market. The success of many of them is a direct result of their strong nutritional credentials, which are well recognised by consumers… Milo, Nido, Lean Cuisine, the Nestlé brand across several categories, Nesquik etc. Other brands, such as Nescafé, Dreyer’s and Kit Kat, have benefited from strong performances of health-focused extensions.

The benefit to growth of our strategic transformation to Nutrition, Health and Wellness can be clearly seen on this slide. We have continued to enjoy considerable success with our strategy of adding additional health benefits to products in the form of Branded Active

Page 5 Benefits. The organic growth of products incorporating a BAB was over 20% in 2006, and the sales of those products reached close to CHF 4 billion.

There are four new billionaire brands based on 2006 sales, Nespresso, Nestlé Pure Life, Poland Spring and Dog Chow and, together, all our billionaire brands account for about 70% of our food and beverage sales. We have now more billionaire brands than any other company.

Slide 9 - Organic growth by region

Next our sales performance by geography. I think you all know that our Zones exclude the globally-managed businesses such as Nestlé Waters, Nestlé Nutrition and Nespresso, as well as the F&B joint-ventures, Cereal Partners Worldwide and Beverages Partners Worldwide. We’ve added these businesses back to give you more transparency and show you our true geographic food and beverage performance.

Zone Europe accelerated to 2.3%, with good performances from Soluble coffee, Petcare and Frozen food. The Zone achieved double-digit growth in both Eastern Europe and the hard discounter channel.

The total European Food and Beverage business was stronger at 3.3%, helped by faster growth from Nespresso, Nutrition and the JVs.

Zone Americas reported 6.1% organic growth. North America slowed a bit in the final quarter due to tough comps and our priority on profitability over sales in ice cream. Both North America and Latin America made good contributions to the full year growth however.

The total Americas business was also stronger at 7.2%, helped by faster growth from Nestlé Waters and Nestlé Nutrition.

Zone Asia, Oceania and Africa (AOA) accelerated to 7.9%. Our emerging market Food and beverage business in the Zone achieved double digit organic growth, helped by double digit growth in mainland China, India, Africa, the Middle East and our other mid sized markets.

The total Food and Beverage in AOA achieved 8% organic growth.

These performances underline my earlier comment about a good broad based performance, with each area of the world growing above its market.

Let’s now leave the growth story and move to the Group margin - a 50 basis points improvement.

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Slide 10 - 2006 Full Year Results 50 bps margin improvement

As well as growing our core brands, our organisation also strengthened discipline in execution, to drive the efficiencies and scale benefits which were the secret of our success in 2006, with GLOBE increasingly becoming a key enabler. We delivered efficiencies across all areas of cost to become more competitive. Product cost , Trade Spend and Overhead or Administrative cost all went down. This enabled us to compensate for higher input costs, to increase brand investment, both in marketing and in R&D, accelerate our capital spend and deliver a 50 basis point margin improvement.

COGS (Cost of Goods Sold) suffered from significant input cost increases in 2006. However programs like Operation Excellence, together with the benefits of scale from our strong growth enabled us to compensate and improve overall by 30 basis points. We were helped by hedging policies in some of the agricultural raw materials. We will not have the same benefit from hedges in 2007.

Distribution costs, on the other hand, increased by 30 basis points. There are three elements here, all about equal weight. One, the growth of Nestlé Waters and Nespresso, both distribution intensive. Two, the acquisitions of Jenny Craig and Delta Ice Cream are also distribution intensive. And three, the higher fuel costs relative to 2005.

Next is Marketing and Administration. A huge spend category as it includes all costs related to marketing from brand support to trade spend, as well as administrative overheads. We increased our total spend in this category by 2 billion Swiss francs, or over 6% in 2006, sufficient to continue to fuel our organic growth target of between 5 and 6%. Pure marketing spend shows the biggest increase in absolute, although it is obviously more important how you spend it. Within the marketing area we have been successful in increasing the efficiency of our total trade spend and administrative costs. Administrative costs benefited from projects begun under the old FitNes program, as well as some early wins from the GNBS shared service initiative.

The 60 basis points improvement in Marketing and Administration is shared equally between Trade spend and administrative expenses, and is just the scale effect of our sales growing by 8% from a 90 billion base whilst our marketing and administration grew by 6% from a base of 30 billion.

We have talked a lot about our strategic transformation to Nutrition, health and wellness, so a 16% rise in R&D (Research & Development) spend should not be a surprise for you. Food and Beverage was the main contributor to the increase, which resulted in a 10 basis point increase as a percent of sales.

And that takes you to the 50 basis point improvement in EBIT, with Food and Beverage contributing 40 of the 50. In absolute numbers the Group’s EBIT increased 12% or by 1.4 billion to 13.3 billion Swiss francs.

This was a high quality performance, showing the importance of discipline in execution and the benefit of being able to leverage scale. We still have much to do and, with GLOBE more advanced, and GNBS shared services gathering momentum, we believe that we can continue to deliver improving margins in the future, whilst also investing in our brands and increasingly R&D.

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Slide 11 - EBIT – Primary reporting

This next slide shows the EBIT performance of our Zones and globally managed businesses. I’ll talk the product groups’ margins during the roadshow – the data is in the back-up slides.

Zone Europe recovered from being 90 basis points adrift at the half year to being just 40 points down. The gap with 2005 is explained by the launch of Nescafé and the impact of raw materials. The Dolce Gusto launch was in October, timed for the Christmas season, so 2006 bore the launch costs without any meaningful return in terms of sales. So far the launch is on plan, going well.

Zone Americas improved by 70 basis points to 15.8%. This Zone is a good example of where we can see benefits from the GNBS initiative, with shared services working well across Latin America, and some good initiatives in North America too.

The North American Ice Cream business improved its profitability as we had foreseen. PetCare improved quite dramatically in Latin America in the second half of the year, after a tough 2005 in that region. Mexico also did well, taking early action on its cost base in response to tougher market conditions there. The US continued to perform well, particularly in Prepared Foods and Shelf Stable Dairy.

Zone AOA improved by 40 basis points to 16.7%. The Zone has done a good job on managing both its costs and its pricing strategy. It also benefited from double digit growth in many markets. There were strong performances across its emerging markets, whilst Japan benefited from exiting its underperforming businesses and being able to focus on its core.

Nestlé Waters improved by 60 basis points to 8.7%. The improved margin was driven by two underperforming areas that are being tackled successfully: the home and office delivery businesses, which is benefiting from new strategies in the US and Europe, and the retail business in Europe, which is beginning to achieve a return on the on-going restructuring there.

Nestlé Nutrition’s margins fell by 80 basis points to 16.9%. In part this reflects the “cost of independence”, as 2006 was impacted by the phasing of start-up costs. This aspect should represent an opportunity for improvement in 2007. Also, Jenny Craig is dilutive to Nutrition’s margins although not for the total company. Jenny Craig, which is not included in the organic growth as it was acquired in August, has grown about 30% since the acquisition.

Nestlé Nutrition remains committed to its twin targets of 10% organic growth and 20% margins.

Finally on this slide, the Other Food and Beverage businesses improved their margins by 80 basis points to 13%. This category includes Nespresso, CPW and BPW. All performed well.

Page 8 Slide 12 - Strong second half EBIT performance

With our full year EBIT number being above Market consensus, it is clear that our second half performance exceeded expectations. Here’s a brief explanation.

First - growth. Our volume growth was strong over the second half, and that helped margins. (Europe picked up in the final quarter with about 2% RIG, and AOA was very strong with about 7% RIG in the final quarter).

Second - mix. Positives were Mexcio, Latin American PetCare and Dreyer’s in the Americas, as well as the improved second half margin in Europe. On the negative side, though, was Nestlé Nutrition’s reduction in margins reflecting Jenny Craig and start-up costs.

Third - the benefit of improved discipline in execution, as well as some early wins from GNBS shared services, enabled by GLOBE.

Slide 13 - Increased earnings per share, proposed dividend and payout ratio

I am not going to go through the detail of the rest of the income statement, since it was basically in line with consensus. You have the numbers in the background slides, as well as in the financial statements on the web site.

Here therefore is the increased earnings per share, proposed dividend and pay-out ratio. The total earnings per share increased 15% and we will be proposing to shareholders a 15.6% increase in the dividend. The pay-out ratio goes up slightly.

That completes my review of profitability. Let’s move to working capital.

Slide 14 - Improved management of working capital

You may remember that we drove more focus with monthly reporting of working capital by our markets, enabled by GLOBE. Our working capital performance in 2006 is a good example of how regular reporting against agreed KPIs can drive discipline in execution.

We achieved a 100 basis points improvement in working capital, representing a 1 billion Swiss franc improvement. More importantly the consumer gets even fresher products. This area remains an opportunity, but the good performance in 2006 benefited our cash flow, which we can see on the next slide.

Slide 15 - Strong cash flow generation

The Group’s operating cash flow increased by 14.4% to 11.7 billion Swiss francs. Our free cash flow generation increased by half a billion francs to 7 billion. A great improvement, with hopefully more to come.

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Slide 16 - Significant improvement in cash flow Profitable growth & innovation drive Capex

The difference between our operating and free cash flow is explained mainly by our capital expenditure. Our dynamic growth over the last few years and strong innovation pipeline have made significant demands on the Group’s operational capacities. We have always had a policy of investing capital in the business on a strict need-basis and with demanding criteria for financial returns. This continues to be our preferred investment for future growth.

The improvement in our free cash flow of half a billion francs is the more remarkable if you look at the level of capital expenditure. This increased in 2006 from 3.7% of sales in 2005 to 4.3% of sales, by 0.8 billion to 4.2 billion Swiss francs. A clear investment in growth.

Slide 17 - Increased Capex into profitable growth categories, enhancing ROIC

This next slide gives you some more detail on the Capital expenditure (capex). First you can see that the weight of spend, 65% of it, is very much towards growth, either going to increased capacity for profitable growth or R&D. In fact 65% understates the growth element of the capex, because a fair portion of the replacement capex is for growth, as it upgrades existing lines. Some of the brands benefiting are shown on the slide and we can give more detail in the Q&A if you’re interested.

Slide 18 - Seeds for future growth

And here you can see some a geographic overview of some of those initiatives.

Slide 19 - Return on invested capital improves

Another area of continuing focus is our Return on invested capital (ROIC). In 2006 we were again able to report an improvement, regardless of whether you look before or after goodwill.

As most of you know, I have made no secret of the fact that we believe our return on invested capital can, and should improve. Our focus is on both elements of the equation. Firstly, improving our EBIT margin, which is consistent with our delivery of the Nestlé model. Secondly, there is scope to improve ROIC through increasing our asset turn; that is, increasing sales relative to net assets.

As these results demonstrate, we already have a strong platform to deliver organic sales growth in the 5-6% range as per the Nestlé model. To maintain this growth into the medium term, we are increasing our capital expenditure to around 5% of sales. However, it is important to reiterate that we remain committed to increasing sales relative to our net asset base. So to improve ROIC there are two positives at work. Firstly, our capex investment will increase our capacity to sell products with higher margins than group average – our

Page 10 strategic transformation. Secondly, improving our asset turn while investing in our asset base – our operational transformation – multiplies the effect of increased EBIT margin on ROIC.

That covers the 2006 financials. All these areas I have just covered, profitability, working capital, cash flow and ROIC continue to be areas of focus. It was pleasing to see an improvement across all of them in 2006, but I believe that by continuing to focus on discipline, simplicity and our underperformers, as well as leveraging scale, we can continue to raise our performance into 2007 and beyond.

Slide 20 - Share buy-backs are just one part of the financial strategy

Next share buy-backs, which I will address head on to save you asking the question.

As you know, share buy-backs are just one part of a broader financial strategy, so let me start by reminding you of that strategy, and of our priorities for our cash flow.

First and foremost, we are about maximising our cash flow – and I hope that we have demonstrated that with our results today.

Our priority for the cash we generate is the needs of the business - first capital expenditure, then acquisitions that will deliver long-term shareholder value. Next we look to the dividend. And finally, come the share buy-backs.

If I put those priorities in the context of 2007, we expect a further rise in capital expenditure, to about 5% of sales in 2007. This increase is to support investment in highly profitable growth areas such as PetCare, Nescafé, Nespresso, CoffeeMate and ready to drink dairy in North America. We will also have to pay for Novartis Medical Nutrition sometime in the next few months. And then of course there is the proposed dividend, up a strong 15.6%.

So, while the Board keeps share buy-backs under review, you should not expect one in the near future. To put it simply, we believe that our planned investments in the business offer a greater return to investors than a share buy-back would.

Slide 21 - 2006 Summarised

To summarise, 2006 was a year in which Nestlé’s people delivered a high quality financial performance, even in the midst of the strategic transformation, the acquisitions, the accelerated GLOBE implementations, the GNBS initiative and, of course, despite a tough competitive environment and volatile raw materials.

Our organic growth was above target and, in Swiss francs, we generated an additional 7.3 billion of sales, an additional 1.4 billion of EBIT, an additional 1.1 billion of net profit, and an additional 1.5 billion of operating cash flow.

This was a strong performance, and the food and beverage business was the catalyst.

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Slide 22 - What we said & What we did

During the course of the year we made a few predictions. We delivered on many of them – Food and beverage was the main driver of organic growth and the margin improvement; Europe did improve from the half year; our drive to improve capital efficiency was successful; Dreyer’s did achieve a good improvement in profitability, though it needs still to do more.

On the other hand, we were expecting more from Nutrition and Confectionery. I will talk these more on the roadshow.

Slide 23 - Raw material, packaging & energy Nestlé's weighted market-price index

Let’s now have a quick look at how 2007 is shaping up.

This slide shows the market price index of Nestlé’s weighted raw material, packaging and energy costs. You can clearly see the volatility in market prices that we talked about during 2006.

Slide 24 - Agricultural commodities Nestlé's weighted market price index

This next slide shows just the market price index for Nestlé’s basket of agricultural raw materials. You can see that we entered 2007 at a much higher cost level than we entered 2006. Peter am I have continuously been properly cautious about this trend and, unfortunately, have been right so far. This higher cost environment is the context in which you need to think about our 2007 performance.

We will be clearly focused on all those areas that I have talked about today to drive our performance to the next level. This is key as, next to the raw material environment being tougher than in 2007, we will also continue to invest for profitable growth through increased capex, as well as continued brand support and innovation.

We have said that we will again deliver the Nestlé Model. We expect organic growth between 5 and 6%, in line with our target, and we expect again to improve our margins constant currency, though not at the level of improvement achieved in 2006.

Actually, you guys are a smart bunch, and I think the consensus on organic growth and EBIT margin for 2007 is pretty much on the mark.

Slide 25 - Questions & answers

I’ll now go to your questions.

Q&A SESSION

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Slide 26 – Closing words

You know that Nestlé has achieved the Nestlé Model over the last 10 years and more. Looking briefly to the longer term, I would like to remind you that Nestlé is well positioned, in categories, market positions, geographies and demographics, and has the right strategy to make the most of its opportunities.

I believe therefore that the Nestlé Model is good for at least the next ten years – strong annual growth, improved EBIT margins constant currency each year and an improving trend in ROIC.

Peter Brabeck and I are looking forward to seeing you on the roadshows in the next couple of weeks. We will focus on our strategic and organisational transformations, and how they contributed to our performance in 2006, as well as how they will continue to do so in the longer term.

You can also tune into the press conference, starting at 10, if you still have the energy.

Thanks very much for your attention.

END OF SPEECH

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