NESTLÉ HOLDINGS, INC. and SUBSIDIARIES Half-Yearly Financial Report

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Half-Yearly Financial Report

June 30, 2018

(Unaudited)

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES

Table of Contents

Page

Management Report 3

Responsibility Statement 6

Condensed Interim Financial Statements

Condensed Consolidated Balance Sheet 7

Condensed Consolidated Income Statement 8

Condensed Consolidated Statement of Comprehensive Income 9

Condensed Consolidated Statement of Changes in Equity 10

Condensed Consolidated Cash Flow Statement 11

Notes to the Condensed Interim Financial Statements 12

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES June 30, 2018 and 2017

Management Report Nestlé Holdings, Inc. (“NHI”) (hereinafter, together with its subsidiaries, referred to as the “Company”) incorporated in the State of Delaware, United States, is a wholly owned subsidiary of NIMCO US, Inc., which is a wholly owned subsidiary of Nestlé S.A., incorporated in Switzerland, which is the holding company of the Nestlé group of companies (hereinafter, referred to as the “Nestlé Group”). NHI is the holding company for Nestlé S.A.’s principal operating subsidiaries in the United States, other than Nestlé Waters North America Inc., Prometheus Laboratories Inc., The Proactiv Company, LLC, and NSH Service, Inc. The Company engages primarily in the manufacture and sale of food products, pet care products, and beverage products. These businesses derive revenue across the United States.

Key Figures

2018 2017* Change (Dollars in millions) Sales $ 10,204.1 10,181.6 0.2% Costs of goods sold (5,678.1) (5,627.9) 0.9% as a percentage of sales (55.6)% (55.3)% Trading operating profit 1,152.6 1,169.4 (1.4)% as a percentage of sales 11.3% 11.5% Net financial expenses (70.4) (92.5) (23.9)% Income tax expense (513.7) (354.6) 44.9% (Loss) Profit for the period (426.8) 726.6 (158.7)% as a percentage of sales (4.2)% 7.1% Operating cash flow 704.4 735.6 (4.2)% as a percentage of sales 6.9% 7.2% Capital expenditures 234.4 220.8 6.2% as a percentage of sales 2.3% 2.2%

*2017 restated figures include modifications as described in Note 1 Accounting policies and related impacts in Note 13.

Overview The Company has delivered year-over-year improvements in sales. We continue to invest in our core food and beverage brands through increased capital expenditures and investing in high-growth businesses. We have divested the slower growing Confectionary business.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES June 30, 2018 and 2017

Sales For the first six months ending June 30, 2018 and 2017, consolidated sales totaled $10.2 billion. The main factors per segment are as follows:

 Nestlé USA Brands sales were $4.2 billion and $4.3 billion for the six months ending June 30, 2018 and 2017, respectively. There was solid growth in Coffee Mate creamers, particularly in e-commerce. Hot Pockets and pizza, particularly DiGiorno, also made positive contributions. The Confectionary business was divested at the end of March 2018. Some prominent brands in this segment include Coffee Mate, Nescafé, Nesquik, Stouffer’s, DiGiorno, Lean Cuisine, Hot Pockets, Nestlé Toll House, Dreyer’s, and Edy’s.  Nestlé Purina PetCare sales were $3.8 billion and $3.7 billion for the six months ending June 30, 2018 and 2017, respectively. PetCare reported solid growth. Some notable brands in this segment include Beneful, Alpo, Purina ONE, Dog Chow, Pro Plan, Beyond, Fancy Feast, Friskies, Cat Chow, and Tidy Cats.  Nutrition sales were $0.5 billion for each of the six months ending June 30, 2018 and 2017. Infant nutrition sales growth accelerated, helped by recent product launches, including HMOs (Human Milk Oligosaccharides) infant formula. A notable brand in this segment is Gerber.  Other businesses sales were $1.7 billion and $1.6 billion for the six months ending June 30, 2018 and 2017, respectively. Nespresso and Nestlé Professional delivered growth.

Profitability Trading operating profit was $1.2 billion for each of the six months ending June 30, 2018 and 2017, which equaled approximately 11.3% and 11.5% of sales for each period, respectively. The decrease, as a percentage of sales, was primarily due to increased commodity and freight inflation and increased property, plant, and equipment impairments partially offset by operational efficiency savings. Cost of goods sold was $5.7 billion and $5.6 billion for the six months ending June 30, 2018 and 2017, which equaled approximately 55.6% and 55.3% of sales for each period, respectively. The increase, as a percentage of sales, was primarily due to the previously mentioned increased commodity inflation partially offset by operational efficiency savings. Distribution expenses were $985.9 million and $934.3 million for each of the six months ending June 30, 2018 and 2017, which equaled approximately 9.7% and 9.2% of sales for each period, respectively. Increased freight inflation was offset by operational efficiency savings.

Marketing, general and administrative expenses were $1.7 billion and $1.8 billion for each of the six months ending June 30, 2018 and 2017, respectively. There was a decrease in these expenses as a percentage of sales from 17.7% in 2017 to 16.8% in 2018, primarily due to ongoing restructuring projects reducing structural costs.

Net other trading expenses were $124.9 million and $87.5 million for each of the six months ending June 30, 2018 and 2017, respectively. The increase in expenses was primarily due to impairment of property, plant, and equipment and results on deferred compensation.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES June 30, 2018 and 2017

Net Profit Margin – Other Items of Interest Net financial expenses decreased by $22.1 million from the six month period ended June 30, 2017 to the six month period ended June 30, 2018, primarily due to increased interest income on amounts due from affiliated and associated companies.

The Company’s income tax expense increased by $159.1 million from the six month period ended June 30, 2017 to the six month period ended June 30, 2018, primarily as a result of previously unrecognized deferred tax liabilities related to investments in subsidiaries.

Cash Flow Operating cash flow remained $0.7 billion for the six months ending June 30, 2018 and June 30, 2017. The 2018 cash flow activity is primarily due to the divestiture of the Confectionary business and the reclassification of the Gerber Life Insurance business to assets held for sale.

Principal Risks and Uncertainties In the course of its business, the Company is exposed to certain risks and uncertainties: risk of damage to consumer trust, credit risk, liquidity risk, market risk (including foreign currency and interest rate), commodity price risk, risk of disruption of supplies, settlement risk and other risks. The Company believes that its principal risks and uncertainties for the remaining six months of the financial year have not changed in respect of the financial year ended December 31, 2017 (“2017 NHI Annual Financial Report”). The detailed discussion of these risks and uncertainties and the Company’s objectives, policies and processes for managing these risks and uncertainties were disclosed in the Management Report section under the heading Principal Risks and Uncertainties and in the Notes to the Consolidated Financial Statements, in particular, Note 12, included in the 2017 NHI Annual Financial Report. Outlook As we look towards the second half of 2018, we expect further improvement in sales growth and margin improvement is expected to accelerate with further benefits from our efficiency programs and more favorable commodity pricing. The Company has made further progress to actively evolve the product portfolio towards high growth, high margin categories and brands. The Confectionary business was divested in March 2018. An agreement was announced granting the Nestlé Group the perpetual rights to market Starbucks consumer and foodservice products globally, outside of Starbucks coffee shops. The agreement is expected to close at the end of August 2018. The process of exploring strategic options for the Gerber Life Insurance business is on track with completion expected in 2018.

The Company is committed to supporting the Nestlé Group in achieving its full-year 2018 financial objectives including organic sales growth expected to be around 3%, Underlying Trading operating profit margin improvement, an increase in underlying earnings per share in constant currency, and capital efficiency.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES June 30, 2018 and 2017

Responsibility Statement Giulio Gerardo, Chief Financial Officer, confirms that to the best of his knowledge:

(a) the financial statements, which have been prepared in accordance with IAS 34, give a true and fair view of the assets, liabilities, financial position and profit or loss of NHI, or the undertakings included in the consolidation taken as a whole as required by DTR 4.2.4; and

(b) the interim management report includes a fair review of the information required by DTR 4.2.7.

August 10, 2018

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheet As at June 30, 2018 and December 31, 2017 (Dollars in thousands, except capital stock par value and shares) (Unaudited)

December 31, Assets June 30, 2018 2017 * Current assets: Cash and cash equivalents $ 521,235 45,903 Short-term investments 235,641 54,601 Trade and other receivables, net 15,432,503 12,001,592 Inventories, net 2,112,184 1,742,700 Derivative assets 92,959 123,258 Assets held for sale 4,142,933 390,016 Prepayments 120,749 77,462 Total current assets 22,658,204 14,435,532 Non-current assets: Property, plant and equipment, net 5,947,138 5,937,153 Employee benefits assets 353,005 238,574 Investments in associates and joint ventures 48,235 50,066 Deferred tax assets 647,158 570,802 Financial assets 1,256,547 4,698,666 Goodwill 14,929,132 16,167,268 Intangible assets, net 232,582 1,348,836 Total non-current assets 23,413,797 29,011,365 Total assets $ 46,072,001 43,446,897 Liabilities and Equity Current liabilities: Trade and other payables $ 2,013,934 2,059,730 Financial liabilities 8,810,258 6,102,845 Provisions 213,861 202,029 Derivative liabilities 359,640 349,162 Current income tax liabilities 769,699 354,863 Liabilities directly associated with assets held for sale 2,642,933 — Accruals 1,295,990 1,764,205 Total current liabilities 16,106,315 10,832,834 Non-current liabilities: Financial liabilities 9,440,429 9,320,911 Employee benefits liabilities 1,706,458 1,805,925 Deferred tax liabilities 1,323,286 1,530,979 Provisions 86,337 88,912 Other accrued liabilities 4,338 1,974,022 Total non-current liabilities 12,560,848 14,720,749 Total liabilities 28,667,163 25,553,583 Equity: Capital stock, $100 par value. Authorized, issued, and outstanding, 1,000 shares 100 100 Additional paid-in capital 5,624,297 5,624,297 Other equity reserves (1,116,202) (1,074,887) Accumulated earnings 12,896,643 13,343,804 Total equity 17,404,838 17,893,314 Total liabilities and equity $ 46,072,001 43,446,897

* 2017 restated figures include modifications as described in Note 1 Accounting policies and related impacts in Note 13. See accompanying notes to condensed interim financial statements.

7 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Income Statement For the Six-month Period Ended June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Note 2018 2017 * Sales 2 $ 10,204,139 10,181,552 Cost of goods sold (5,678,100) (5,627,938) Distribution expenses (985,910) (934,256) Marketing, general and administrative expenses (1,713,231) (1,804,369) Royalties to affiliated company (549,426) (558,075) Net other trading expenses 6 (124,887) (87,508) Trading operating profit 1,152,585 1,169,406 Net other operating expenses 6 (993,504) (483) Operating profit 159,081 1,168,923 Net financial expenses 7 (70,389) (92,546) Profit before taxes, associates, and joint ventures 88,692 1,076,377 Income tax expense 8 (513,736) (354,638) (Loss) profit from associates and joint ventures (1,796) 4,822 (Loss) Profit for the period $ (426,840) 726,561

* 2017 restated figures include modifications as described in Note 1 Accounting policies and related impacts in Note 13. See accompanying notes to condensed interim financial statements.

8 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Comprehensive Income For the Six-month Period Ended June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

2018 2017* (Loss) Profit for the period recognized in the income statement $ (426,840) 726,561 Fair value adjustments on available-for-sale financial instruments, net of taxes — 32,321 Fair value adjustments on cash flow hedges, net of taxes (23,087) (3,996) Items that are or may be reclassified subsequently to the income statement (23,087) 28,325 Remeasurement of defined benefit plans, net of taxes 53,566 33,291 Fair value changes on equity instruments, net of taxes (92,115) — Items that will never be reclassified to the income statement (38,549) 33,291 Other comprehensive (loss) income for the period (61,636) 61,616 Total comprehensive (loss) income for the period $ (488,476) 788,177

* 2017 restated figures include modifications as described in Note 1 Accounting policies and related impacts in Note 13. See accompanying notes to condensed interim financial statements.

9 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Changes in Equity For the Six-month Period Ended June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Capital Additional Other equity Accumulated stock paid-in capital reserves earnings Total Equity as at December 31, 2016 as originally published $ 100 5,624,297 (1,010,767) 11,765,425 16,379,055 First application of IFRS 15 — — — (151,783) (151,783) First application of IFRS 16 — — — (33,468) (33,468) Equity restated as at January 1, 2017* $ 100 5,624,297 (1,010,767) 11,580,174 16,193,804 Profit for the period * — — — 726,561 726,561 Other comprehensive income for the period — — 61,616 — 61,616 Total comprehensive income for the period* — — 61,616 726,561 788,177 Equity restated as at June 30, 2017* $ 100 5,624,297 (949,151) 12,306,735 16,981,981

Equity as at January 1, 2018* 100 5,624,297 (1,074,887) 13,343,804 17,893,314 Loss for the period — — — (426,840) (426,840) Other comprehensive loss for the period — — (41,315) (20,321) (61,636) Total comprehensive loss for the year — — (41,315) (447,161) (488,476) Equity as at June 30, 2018 $ 100 5,624,297 (1,116,202) 12,896,643 17,404,838

* 2017 restated figures include modifications as described in Note 1 Accounting policies and related impacts in Note 13. See accompanying notes to condensed interim financial statements.

10 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Cash Flow Statement For the Six-month Period Ended June 30,2018 and 2017 (Dollars in thousands) (Unaudited)

2018 2017*

Cash flows from operating activities: Net (loss) profit $ (426,840) 726,561 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant, and equipment 305,038 339,738 Loss on sales of property, plant and equipment 46,402 7,841 Impairment of property, plant and equipment 25,623 30,833 Amortization of intangible assets 40,937 52,032 Impairment of intangibles 4,493 — Write-down of assets 1,839,063 — Net result on disposal of businesses (847,703) — Decrease (increase) in cash surrender value of Company-owned life insurance policies 2,887 (43,353) Increase in provisions 9,186 28,450 (Decrease) increase in deferred income taxes (55,873) 48,257 Taxes on other comprehensive losses (income) 6,420 (35,931) Change in working capital (excluding effects from acquisitions and divestitures): Trade and other receivables, net 139,337 (43,107) Inventories, net (397,175) (544,776) Prepayments and other current assets (78,336) (54,268) Trade and other payables and liabilities 377,034 317,822 Decrease (increase) in working capital 40,860 (324,329) Share from investments in associates and joint ventures 1,796 (4,822) Dividends from associates and joint ventures 39 135 Non-monetary movements on financial assets and liabilities (116,704) (57,459) Movements of trading derivatives (6,191) 7,814 Movements of operating derivatives (26,326) (15,136) Other employee benefits, net (138,665) (25,056) Total adjustments 1,131,282 9,014 Operating cash flow 704,442 735,575 Cash flows from investing activities: Capital expenditures (234,389) (220,806) Proceeds from sale of property, plant and equipment 15,601 4,410 Acquisition of businesses 1,381 (200) Proceeds from business divestitures 1,323,801 — Expenditure on intangible assets (90,305) (94,538) Investments (net of divestments) in associates and joint ventures — (40,000) (Outflows) from treasury investments (112,222) (100,278) Other investing activities (181,534) 201 Investing cash flow 722,333 (451,211) Cash flows from financing activities: Net borrowings of commercial paper 3,118,072 834,129 Net repayment of line of credit facilities (11,110) (12,951) Bonds issued 595,798 944,885 Bonds repaid (907,553) (900,000) Loans to/(from) affiliates issued, net (1,394,834) 72,009 Loans to parents issued, net (2,392,394) (1,394,140) Cash movement on derivatives hedging bond principal, net 20,498 — Net other financial debt (119,378) (73,289) Financing cash flow (1,090,901) (529,357) Increase (decrease) in cash and cash equivalents 335,874 (244,993) Cash and cash equivalents at beginning of the year 185,719 430,712 Effect of exchange rate changes on opening balances (358) —

Cash and cash equivalents at end of the period $ 521,235 185,719 Supplemental information: Cash paid for: Interest $ 70,088 64,432 Taxes 157,274 120,150

* 2017 restated figures include modifications as described in Note 1 Accounting policies and related impacts in Note 13. See accompanying notes to condensed interim financial statements.

11 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

(1) Accounting Policies Basis of Preparation These Condensed Interim Financial Statements are the unaudited Condensed Interim Consolidated Financial Statements (hereafter “the Condensed Interim Financial Statements”) of Nestlé Holdings Inc. (“NHI”) (hereinafter, together with its subsidiaries, referred to as the “Company”) for the six-month period ended June 30, 2018. They have been prepared in accordance with International Accounting Standard (IAS) 34 – Interim Financial Reporting, and should be read in conjunction with NHI’s Consolidated Financial Statements for the year ended December 31, 2017.

The accounting conventions and accounting policies are the same as those applied in NHI’s Consolidated Financial Statements for the year ended December 31, 2017 (as described in Note 1 and within the relevant notes), except for the changes in presentation, in accounting policies, and in accounting standards mentioned below.

The preparation of NHI’s Condensed Interim Financial Statements requires management to exercise judgment and to make estimates and assumptions that affect the application of policies, reported amounts of revenues, expenses, assets, liabilities, and disclosures. The key sources of estimation uncertainty within these Condensed Interim Financial Statements remain the same as those applied to NHI’s Consolidated Financial Statements for the year ended December 31, 2017 to which are added the ones on right of use assets following the first application of IFRS 16 Leases.

Changes in presentation – income statement

The costs of maintenance and other costs of trade assets (such as coffee machines and freezers) previously reported under marketing, general, and administrative expenses have been reclassified to cost of goods sold.

2017 comparatives have been restated (see Note 13 – presented in column “Other”)

Changes in accounting policies

The following main change has been applied:

- some costs that were previously included in the carrying value of inventory are now expensed as incurred.

- some taxes and levies on revenue or receipts, reported previously as Taxes are considered now respectively as an increase of Sales and Marketing administration expenses. The 2017 comparatives have been restated for this element (see Note 13).

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Changes in accounting standards

The Company has applied as from January 1, 2018, the following new accounting standards.

IFRS 15 – Revenue from Contracts with Customers

This standard combines, enhances, and replaces specific guidance on recognizing revenue with a single standard.

It defines a new five-step model to recognize revenue from customer contracts. The Company undertook a review of the main types of commercial arrangements used with customers under this model and has concluded that the application of IFRS 15 had the main following effects: i) as a consequence of the change in revenue recognition from transfer of risks and rewards to transfer of control, a small proportion of sales (less than 0.5% of annual sales) is recognized on average 1 day later under the new standard; ii) payments to customers currently treated as distribution costs have been reclassified as deductions from sales under the new standard; iii) the timing of accruals for certain amounts payable to customers was reviewed and as a result the current liability for these amounts at the beginning of 2017 was increased.

This standard was mandatory for the accounting period beginning on January 1, 2018 and has been applied with retrospective impact, utilizing the practical expedient to not restate contracts that begin and end within the same annual accounting period.

2017 comparatives have been restated (see Note 13).

IFRS 16 – Leases

This standard replaces IAS 17 and sets out the principles for the recognition, measurement, presentation, and disclosure of leases.

The main effect on the Company is that IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for almost all leases and therefore resulted in an increase of Property, plant, and equipment and total Financial liabilities at January 1, 2017.

This standard is mandatory for the accounting period beginning on January 1, 2019 but the Company early adopted it on January 1, 2018 under the full retrospective approach, utilizing the practical expedient to not reassess whether a contract contains a lease.

2017 comparatives have been restated (see Note 13).

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

IFRS 9 – Financial Instruments

This standard addresses the accounting principles for the financial reporting of financial assets and financial liabilities, including classification, measurement, impairment, derecognition, and hedge accounting.

The Company has performed a review of the business model corresponding to the different portfolios of financial assets and of the characteristics of these financial assets.

Consequently, debt instruments whose cash flows are solely payments of principal and interest (SPPI) were designated either at amortized cost or at fair value through Other comprehensive income depending on the objectives of the business model. The existing investments in equity instruments at the date of the initial application were generally designated at fair value through Other comprehensive income by election. This election had no net significant impact on the total Company’s equity.

There was no impact on the Company’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss, and the Company does not have any such liabilities.

The impact of the new impairment model has been reviewed. The analysis required the identification of the credit risk associated with the counter parties and - considering that the majority of the Company’s financial assets are trade receivables - also integrates statistical data reflecting the actual past experience of incurred loss due to default. No additional impairment has been recognized on January 1, 2018.

Furthermore, the Company has updated the definitions of its hedging relationships in line with its risk management activities and policies, with specific attention to the identification of the components in the pricing of commodities.

The standard was mandatory for the accounting period beginning on January 1, 2018 and was applied retrospectively as at January 1, 2018, but with no restatement of comparative information for prior years. Consequently, the Company recognized any difference between the carrying amount of financial instruments under IAS 39 and the carrying amount under IFRS 9 in the opening retained earnings (or other equity components) as at January 1, 2018.

The Company has applied the 12-month credit loss model on debt securities considering the low credit risk or the absence of significant increases of the credit risk of the counterparties since the initial recognition of the investments.

Changes to hedge accounting policies have been applied prospectively. All hedging relationships designated under IAS 39 at December 31, 2017 met the criteria for hedge accounting under IFRS 9 at January 1, 2018 and are therefore regarded as continuing hedging relationships.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

The total adjustment (net of tax) to the opening equity as at January 1, 2018 was not material. The changes on the fair value hierarchy of financial instruments as at January 1, 2018 are presented in Note 4.

IFRC 23 – Uncertainty over Income Tax Treatments

IFRIC 23 specifies how to reflect uncertainty in accounting for income taxes. IFRIC 23 is mandatory for the accounting period beginning January 1, 2019 but the Company early adopted it with effect from January 1, 2018. There was no impact on the measurement of taxes as a consequence of this adoption. The uncertain tax liabilities formerly included under Provisions have been reclassified to Current income tax liabilities.

In addition, a number of other existing standards have been modified on miscellaneous points with effect from January 1, 2018. Such changes include Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2), Annual Improvements to IFRS 2014-2016 Cycle (Amendments to IFRS 1 and IAS 28), and IFRIC 22 Foreign Currency Transactions and Advance Consideration.

None of these other amendments had a material effect on the Company’s Condensed Interim Financial Statements.

New accounting policies with effect from January 1, 2018

Revenue Sales represent amounts received and receivable from third parties for goods supplied to the customers and for services rendered. Revenue from the sales of goods is recognized in the income statement at the moment when control of the goods have been transferred to the customer, which is mainly upon arrival at the customer.

Trade assets (mainly coffee machines and freezers) may be sold or leased separately to customers. Arrangements where the Company transfers substantially all the risks and rewards incidental to ownership to the customer, are treated as finance lease arrangements. Operating lease revenue for trade asset rentals is recognized on a straight-line basis over the lease term.

Revenue is measured as the amount of consideration which the Company expects to receive, based on the list price applicable to a given distribution channel after deduction of returns, sales taxes, pricing allowances, other trade discounts, couponing, and price promotions to consumers. The level of discounts, allowances, and promotional rebates is recognized as a deduction from revenue at the time that the related sales are recognized or when the rebate is offered to the customer (or consumer if applicable). They are estimated based on historical experience and the specific terms of the agreements with the customers. Payments made to customers for commercial services received are expensed.

Sales returns provisions are recognized as revenue deductions when there is a historical practice of taking products back from customers (mainly in the Infant Nutrition business). The amount recorded is based on estimated rates of return, considering historical return rates and other relevant factors (including current 15

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

levels of inventory in the trade and sales throughput rates). No asset is recognized for products to be recoverable from these returns, as they are not anticipated to be resold.

Other revenue is primarily sales-based royalties and license fees from third parties which have been earned during the period.

Financial Instruments Financial Assets - Initial Recognition and Measurement Financial assets are initially recognized at fair value plus directly attributable transaction costs. However when a financial asset at fair value to income statement is recognized, the transaction costs are expensed immediately. Subsequent remeasurement of financial assets is determined by their categorization, which is revisited at each reporting date.

The settlement date is used for both initial recognition and subsequent derecognition of financial assets as these transactions are generally under contracts whose terms require delivery within the time frame established by regulation or convention in the market place (regular-way purchase or sale).

Financial Assets - Classes and Categories The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. On initial recognition, a financial asset is classified either: - as measured at amortized cost; - as a fair value to Other comprehensive income (FVOCI)—bond investment; - as a FVOCI – equity investment; or - at fair value to income statement (abbreviated as FVTPL, short for fair value through profit or loss, which has the same meaning).

All financial assets not classified as measured at amortized cost or FVOCI are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to classify it as a FVOCI – equity investment, with subsequent changes in the investments fair value in Other comprehensive income (OCI). This election is made on an investment-by-investment basis.

Bonds are held in a separate portfolio governed and executed as a prudently managed broad base of quality securities. The two principal objectives of the portfolio are to maximize investment income and provide financial stability, subject to a limited risk tolerance, and to obtain relatively favorable risk adjusted investment returns to achieve long-term growth of surplus. The Company considers that these securities are held within a business model whose objective is achieved both by collecting contractual cash flows and by selling securities. The contractual terms of these financial assets give rise on specified dates to cash flows 16

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

that are solely payments of principal and interest on the principal amount outstanding. These assets have therefore been classified as financial assets at FVOCI.

Equity securities represent investments that the Company intends to hold for the long term for strategic purposes. The Company would generally designate these investments at the date of initial application as measured at FVOCI. The accumulated fair value reserve related to these investments will never be reclassified to profit or loss.

Trade and other receivables are classified at amortized cost.

Debt funds and equity funds are managed in a separate portfolio used to offset exposures to financial liabilities. As a consequence, these investments fund are classified at FVTPL.

Financial Assets – Impairment and Derecognition At each reporting date, the Company assesses whether its financial assets are impaired. Impairment losses are recognized in the income statement where there is objective evidence of impairment, such as where the issuer is in bankruptcy, default, or other significant financial difficulty. This analysis requires the identification of the credit risk associated with the counterparties and, considering that the majority of the Company’s financial assets are trade receivables, integrates statistical data reflecting the past experience of losses incurred due to default.

The Company measures loss allowances at an amount equal to lifetime expected credit losses (ECL), except for the following, which are measured as 12-month ECLs: - debt securities that are determined to have low credit risk at the reporting date; and - other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

The Company has elected to measure loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs.

The Company presumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due and the overdue is caused by the lack of treasury resources of the counterparty. This presumption can be rebutted when the overdue situation results form a dispute or negotiation on the amount of variable consideration due from a customer, and not from a credit issue.

The Company considers a financial asset to be in default when: - the borrower is unlikely to have the funding resources to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held); or - the financial instrument is more than 90 days past due and the overdue is caused by the lack of treasury resources of the counterparty.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’. The Company considers this to be Baa3 or higher per Moody’s or BBB- or higher per Standard & Poor’s.

ECLs are a probability-weighed estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls due to a credit default event of the counterparty (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive). Loss allowances for financial assets measured at amortized costs are deducted from the gross carrying amount of the assets.

For debt securities at FVOCI, the loss allowance is recognized in OCI, instead of reducing the carrying amount of the asset.

Impairment losses related to trade and other receivables, including contract assets, are not presented separately in the condensed consolidated income statement but are reported under the heading Marketing and administration expenses.

The model and some of the assumptions used in calculating these ECLs are key sources of estimation uncertainty. The ECLs on Trade receivables are calculated at reporting unit level, based on actual credit loss experience over the preceding three to five years.

Impairment losses on other financial assets related to treasury activities are presented under Financial expense, similar to the presentation under IAS 39, and not presented separately in the statement of profit or loss due to materiality considerations.

Financial assets are derecognized (in full or partly) when substantively all the Company’s rights to cash flows from the respective assets have expired or have been transferred and the Company has neither exposure to substantially all the risks inherent in those assets nor entitlement to rewards from them.

Financial Liabilities at Amortized Cost Financial liabilities are initially recognized at the fair value of consideration received less directly attributable transaction costs.

Subsequent to initial measurement, financial liabilities are recognized at amortized cost. The difference between the initial carrying amount of the financial liabilities and their redemption value is recognized in the income statement over the contractual terms using the effective interest rate method. This category includes the following classes of financial liabilities: trade and other payables; commercial paper; bonds and other financial liabilities.

Financial liabilities at amortized cost are further classified as current and non-current depending whether these will fall due within 12 months after the reporting date or beyond.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Financial liabilities are derecognized (in full or partly) when either the Company is discharged from its obligation, they expire, are cancelled, or replaced by a new liability with substantially modified terms.

Hedge Accounting The Company designates and documents the use of certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair values of recognized assets and liabilities (fair value hedges) and highly probable forecast transactions (cash flow hedges). The effectiveness of such hedges is assessed at inception and verified at regular intervals and at least on a quarterly basis.

The Company excludes from the designation of the hedging relationship the hedging cost element. Consequently, cross currency basis spread and time value of the options are recognized in OCI and accumulated in a cost of the hedging reserve as a separate component within equity.

For the designation of hedging relationships on commodities, the Company applies the component hedging model when the hedged items is separately identifiable and measureable.

Leases

At inception, the Company assesses whether a contract is or contains a lease. This assessment involves the exercise of judgement about whether it depends on a specified asset, whether the Company obtains substantially all the economic benefits from the use of that asset, and whether the Company has the right to direct the use of the asset.

The Company has elected not to separate lease and non-lease components for leases of vehicles.

The Company recognizes a right of use (ROU) asset and a lease liability at the commencement of the lease. The ROU is initially measured based on the present value of lease payments, plus initial direct costs and the cost of obligations to refurbish the asset, less any incentives received. The ROU is depreciated over the shorter of the lease term or the useful life of the underlying asset. The ROU is subject to testing for impairment if there is an indicator for impairment.

Lease payments generally include fixed payments and variable payments that depend on an index (such as an inflation index). When the lease contains an extension or purchase option that the Company considers reasonably certain to be exercised, the cost of the option is included in the lease payments.

ROU assets are included in the heading Property, plant, and equipment, and the lease liability is included in the headings current and non-current Financial liabilities.

The Company has elected not to recognize ROU assets and liabilities for leases where the total lease term is less than or equal to 12 months, or for leases of low value IT equipment. The payments for such leases are recognized in the income statement on a straight-line basis over the lease term.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Changes in IFRS that may affect the Company after June 30, 2018

The following new standards and amendments to existing standards have been published and are mandatory for accounting periods beginning on or after January 1, 2019. The Company has not early adopted them.

Improvements and other amendments to IFRS/IAS A number of standards have been modified on miscellaneous points.

These include Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28), Plan Amendments, Curtailment or Settlement (Amendments to IAS 19), Annual Improvements to IFRS 2015- 2017 Cycle (Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23).

None of these amendments are expected to have a material effect on the Company’s Financial statements.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

(2) Analyses by Segment Revenue and Results

Brands (a) PetCare Nutrition (a) Other (a) (f) Total 2018 Sales $ 4,184,298 3,799,778 522,878 1,697,185 10,204,139 Underlying Trading operating profit (b) 371,332 676,029 10,190 219,921 1,277,472 Trading operating profit (loss) (c) 327,741 647,778 (28,099) 205,165 1,152,585 Net other trading expenses (d) (43,591) (28,251) (38,289) (14,756) (124,887) Of which impairment of property, plant and equipment (30,116) - - - (30,116) Of which restructuring costs (33,699) (6,354) (19,363) (9,258) (68,674) Depreciation and amortization (130,214) (117,069) (26,916) (71,776) (345,975)

2017 (e) Sales $ 4,321,250 3,700,775 545,839 1,613,688 10,181,552 Underlying Trading operating profit (b) 374,457 666,056 16,505 199,896 1,256,914 Trading operating profit (c) 285,684 673,229 13,184 197,309 1,169,406 Net other trading (expenses) income (d) (88,773) 7,173 (3,321) (2,587) (87,508) Of which impairment of property, plant and equipment (31,711) - - 878 (30,833) Of which restructuring costs (60,300) - (1,001) (597) (61,898) Depreciation and amortization (161,470) (115,952) (27,624) (93,609) (398,655)

(a) Nestlé USA Brands primarily consists of beverage, prepared foods, ice cream, snacks, and other food products. Nutrition primarily consists of infant and baby food products. Other primarily consists of Nestlé Professional, Nespresso, Gerber Life Insurance, and Nestlé Health Science, which do not meet the criteria for separate disclosure. (b) Trading operating profit before Net other trading income (expenses). (c) The Company determines trading operating profit by allocating corporate expenses to its operating segments based on activity‑based cost drivers. (d) Included in Trading operating profit. (e) 2017 restated figures include modifications as described in Note 1 Accounting policies and related impacts in Note 13. (f) 2017 adjusted following change of business structure, effective as from January 1, 2018, mainly the movement of Gerber Life Insurance Company to 'Other' segment. 21

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Reconciliation of total segment underlying trading operating profit to profit before taxes, associates and joint ventures is as follows:

2018 2017 Total segment Underlying trading operating profit* $ 1,277,472 1,256,914 Net other trading expenses (124,887) (87,508) Trading operating profit 1,152,585 1,169,406 Net other operating expenses (993,504) (483) Operating profit 159,081 1,168,923 Net financial expenses (70,389) (92,546) Profit before taxes, associates, and joint ventures $ 88,692 1,076,377

* 2017 restated figures include modifications as described in Note 1 accounting policies and related impacts in Note 13.

(3) Seasonality

The Company’s businesses are subject to the effects of slight seasonality. This is primarily concentrated in the Nestlé USA Brands segment, with more demand in the second half of the year during the holiday season. Trading operating profit margins have historically improved in the second half of the year due to increased absorption of fixed costs directly related to the increase in second half sales. Consequently, the operating results for the six months ended June 30, 2018 are not necessarily indicative of results to be expected for the full year.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

(4) Fair Value Hierarchy of Financial Instruments

June 30, December 31, 2018 2017 Derivative assets $ 25,375 41,390 Bonds and debt funds 200,000 182,025 Equity and equity funds 12,097 9,349 Other financial assets 3,028 2,300 Derivative liabilities (34,376) (16,847) Prices quoted in active markets (Level 1) 206,124 218,217 Time deposits (a) — 1,042 Derivative assets 61,284 81,868 Bonds and debt funds (b) 235,081 3,321,339 Equity and equity funds 257,981 281,441 Investments in life insurance company general accounts 568,919 555,625 Other financial assets 10,222 18,303 Derivative liabilities (325,264) (332,315) Valuation techniques based on observable market data (Level 2) 808,223 3,927,303 Valuation techniques based on unobservable input (Level 3) 14,473 174,836

Total financial instruments at fair value $ 1,028,820 4,320,356

(a) Following the first application of IFRS 9, time deposits are now carried at amortized cost.

(b) As at December 31, 2017 the fair value hierarchy included financial liabilities of $3,471,772 which were reclassified as liabilities directly associated with assets held for sale during the year. This relates mainly to bonds included in level 2.

The fair values categorized in Level 2 above were determined from discounted cash flows and market-based valuation parameters (primarily interest rates, foreign exchange rates and underlying asset prices). There have been no significant transfers between the different hierarchy levels in 2018.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Derivative assets and Derivative liabilities are included within the same respective lines of the Condensed Consolidated Balance Sheet. All other classes of financial assets disclosed in the table above are included within Short-term investments and Financial assets of the Condensed Consolidated Balance Sheet.

As of June 30, 2018, the carrying amount of bonds issued is $10,073,298 (December 31, 2017: $10,489,980), compared to a fair value of $10,072,997 (December 31, 2017: $10,570,170). This fair value is categorized as Level 2, measured on the basis of quoted prices. For all other financial assets and liabilities, the carrying amount is a reasonable approximation of the fair value.

(5) Bonds

The following bonds were issued or repaid by NHI under the Debt Issuance Programme (DIP). The DIP was established by NHI and Nestlé Finance International Ltd.:

Interest Rate Ye ar of Is sue / Face Value Comments Nominal Effective Maturity Issued (Repaid)

New issues: USD 600,000 (a) 3.13% 3.23% 2018-2023$ 595,799 Total new issues $ 595,799

Repayments: CHF 250,000 (b) 2.63% 2.66% 2007-2018$ (202,780) USD 500,000 (a) 1.25% 1.32% 2012-2018$ (500,000) AUD 175,000 (b) 3.75% 3.84% 2013-2018$ (184,275) Total repayments $ (887,055)

(a) Not subject to an interest rate or currency swap. (b) Subject to an interest rate and currency swap that creates a U.S. dollar asset or liability at floating rates.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

(6) Net Other Trading and Operating Income (Expenses) Net other trading income (expenses) are as follows:

2018 2017 (d) Other trading income (a) $ 9,338 45,318

Restructuring costs (68,674) (61,898) Impairment of property, plant and equipment and intangible assets (30,116) (30,833) Litigation and onerous contracts (24,915) (8,530) Result on deferred compensation (9,251) (31,501) Miscellaneous trading expenses (1,269) (64) Other trading expenses (134,225) (132,826) Net other trading expenses $ (124,887) (87,508)

Net other operating expenses are as follows:

2018 2017 (d) Profit on disposal of businesses (b) $ 818,764 — Miscellaneous operating income 29,272 947 Other operating income 848,036 947

Write-down of assets (c) (1,839,063) — Miscellaneous operating expenses (2,477) (1,430) Other operating expenses (1,841,540) (1,430) Net other operating expenses $ (993,504) (483)

(a) Relates mainly to returns on company-owned life insurance. (b) See acquisitions and disposals of businesses (Note 11). (c) See assets held for sale (Note 12). (d) 2017 restated figures include modifications as described in Note 1 accounting policies and related impacts in Note 13.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

(7) Net Financial Expenses 2018 2017* Interest income $ 158,192 77,758 Interest expense (216,961) (156,053) Net financing cost (58,769) (78,295) Interest income on defined benefit plans 6,688 5,714 Interest expense on defined benefit plans (19,072) (21,738) Net interest expense on defined benefit plans (12,384) (16,024) Other 764 1,773 Net financial expenses $ (70,389) (92,546)

Interest expenses on amounts due to affiliated and associated companies and bonds and commercial paper guarantee fees to Nestlé S.A. amounted to $(29,099) and $(30,374) in 2018 and 2017, respectively. Interest income on amounts due from affiliated and associated companies amounted to $155,308 and $75,484 in 2018 and 2017, respectively. * 2017 restated figures include modifications as described in Note 1 accounting policies and related impacts in Note 13.

(8) Income Taxes Reconciliation of income from continuing operations before income taxes multiplied by the applicable tax rate to income tax expense is as follows:

2018 2017*

Tax at theoretical rate $ (96,915) (413,994) Tax effect of permanent, non-deductible or non-taxable items (277,616) 30,777 Prior years' taxes 23,432 33,534 Previously unrecognized deferred tax liability related to investment in subsidiaries (154,923) — Other taxes (7,714) (4,955) Income tax expense $ (513,736) (354,638)

* 2017 restated figures include modifications as described in Note 1 accounting policies and related impacts in Note 13.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

(9) Events after the Balance Sheet Date The Company was not aware of specific events or transactions occurring after June 30, 2018, and up to August 10, 2018 that would have a material impact on the presentation of the accompanying condensed interim financial statements. The following bonds matured under the Debt Issuance Programme established by NHI and Nestlé Finance International Ltd.:

Maturities Face Value Issue Date Coupon Maturity (in 000’s) 3/19/2013 AUD 200,000 3.88% 7/19/2018 1/24/2013 USD 400,000 1.38% 7/24/2018

(10) Transactions with Related Parties 2018 2017 Loans from Nestlé S.A.: At January 1 $ — 850,052 At June 30 $ — 850,052

Loans to Nestlé S.A.: At January 1 $ 198,790 198,790 Loans granted during the period 1,726,267 — Accrued interest 10,791 — Loan repayments (198,790) (30) At June 30 $ 1,737,058 198,760

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

2018 2017 Loans to NIMCO US, Inc. (Parent): At January 1 $ 8,432,307 4,592,220 Loans granted during the period 854,126 1,394,170 At June 30 $ 9,286,433 5,986,390

Loans from affiliates: At January 1 $ 25,945 11,404 Loans received during the period 5,295 5,319 Loan repayments (5,259) (526) At June 30 $ 25,981 16,197

Loans to affiliates: At January 1 $ 1,469,215 1,486,343 Loans granted during the period 1,413,540 49,259 Loan repayments (18,670) (116,475) At June 30 $ 2,864,085 1,419,127

The above loans with related parties are presented within trade and other receivables, trade and other payables, and current and non-current financial liabilities balances of the condensed consolidated balance sheet.

(11) Acquisitions and Disposals of Businesses Acquisitions after June 30, 2018 On May 7, 2018, Nestlé Group announced it is entering into an agreement for the perpetual rights to market, sell and distribute Starbucks consumer and foodservice products (excluding Ready-to-Drink products) globally, outside Starbucks’ coffee shops. Starbucks will receive from the Nestlé Group an up- front cash payment of $7.15 billion (of which a portion, still to be determined, will be paid by the Company) for a business which generates annual sales of $2 billion. The agreement is subject to customary regulatory approval and is expected to close before the end of the third quarter 2018. Disposals The profit on the disposal of businesses is mainly composed of the disposal at the end of March 2018, of the US confectionary business classified as held for sale as of December 31, 2017. The assets disposed of (primarily fixed assets and inventory) were part of the Brands operating segment. The cash inflow of the transaction included in the interim period amounted to $1,300,000 and the result, net of disposal related expenses, amounted to $763,765 (recorded in other operating income under profit on disposal of businesses).

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

(12) Assets Held for Sale As of June 30, 2018, assets held for sale and liabilities directly associated with assets held for sale are composed of the Gerber Life Insurance business, which is part of the ‘Other’ business segment. Reclassified assets and liabilities of the Gerber Life Insurance business consist primarily of financial assets, intangible assets, goodwill, and policy insurance liabilities. A write off of $1,839,063 has been recognized in other operating expenses under write-down of assets to arrive at the estimated fair value based on market survey available at the time of the establishment of the Condensed Interim Financial Statements (categorized as Level 3 in accordance with IFRS 13). The related cumulative loss currently recognized in other comprehensive income has been estimated at about $132,764 (including losses in fair value changes on debt instruments reserve) and will be recognized in the income statement at the date control is lost.

As of December 31, 2017, assets held for sale were mainly comprised of the Confectionary business.

(13) Restatements of 2017 Comparatives As described in Note 1 Accounting policies, June 2017 comparatives have been restated following the application of IFRS 15, IFRS 16, IFRIC 23 as well as some other changes in presentation and in accounting policies. Impacts on the income statement, statement of comprehensive income, cash flow statement, and balance sheet are presented thereafter.

NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Consolidated Income Statement for the Six-month Period Ended June 30, 2017

January- June as January- originally June 2017 published IFRS 15 IFRS 16 Other Restated Sales $ 10,223,521 (41,969) — — 10,181,552 Cost of goods sold (5,601,309) — 236 (26,865) (5,627,938) Distribution expenses (979,726) 41,969 3,501 — (934,256) Marketing, general and administrative expenses (1,832,089) — 3,561 24,159 (1,804,369) Royalties to affiliated company (558,075) — — — (558,075) Net other trading expenses (87,508) — — — (87,508) Trading operating profit 1,164,814 — 7,298 (2,706) 1,169,406 Net other operating expenses (483) — — — (483) Operating profit 1,164,331 — 7,298 (2,706) 1,168,923 Net financial expenses (86,545) — (6,001) — (92,546) Profit before taxes, associates, and joint ventures 1,077,786 — 1,297 (2,706) 1,076,377 Income tax expense (357,016) — (328) 2,706 (354,638) Profit from associates and joint ventures 4,822 — — — 4,822 Profit for the period $ 725,592 — 969 — 726,561

30 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Statement of Comprehensive Income for the Six-month Period Ended June 30, 2017

June 30, 2017 as June 30, originally 2017 published IFRS 15 IFRS 16 Other Restated Profit for the period recognized in the income statement $ 725,592 — 969 — 726,561 Fair value adjustments on available-for-sale financial instrument, net of taxes 32,321 — — — 32,321 Fair value adjustments on cash flow hedges, net of taxes (3,996) — — — (3,996) Items that are or may be reclassified subsequently to the income statement 28,325 — — — 28,325 Remeasurement of defined benefit plans, net of taxes 33,291 — — — 33,291 Items that will never be reclassified to the income statement 33,291 — — — 33,291 Other comprehensive income for the period 61,616 — — — 61,616 Total comprehensive income for the period $ 787,208 — 969 — 788,177

31 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Consolidated Cash Flow Statement for the Six-month Period Ended June 30, 2017

June 30, 2017 as June 30, originally 2017 published IFRS 15 IFRS 16 Other Restated Cash flows from operating activities: Net income $ 725,592 — 969 — 726,561 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant, and equipment 293,032 — 46,706 — 339,738 Loss on sales of property, plant and equipment 7,841 — — — 7,841 Impairment of property, plant and equipment 5,833 — 25,000 — 30,833 Amortization of intangible assets 52,032 — — — 52,032 Increase in cash surrender value of Company-owned life insurance policies (43,353) — — — (43,353) Increase (decrease) in provisions 53,450 — (25,000) — 28,450 Increase in deferred income taxes 47,546 — 711 — 48,257 Taxes on other comprehensive income (35,931) — — — (35,931) Change in working capital (excluding effects from acquisitions and divestitures): Trade and other receivables, net (43,107) — — — (43,107) Inventories, net (544,776) — — — (544,776) Prepayments and other current assets (54,440) — 172 — (54,268) Trade and other payables and liabilities 320,782 — (2,960) — 317,822 Decrease in working capital (321,541) — (2,788) — (324,329) Share from investments in associates and joint ventures (4,822) — — — (4,822) Dividends from associates and joint ventures 135 — — — 135 Non-monetary movements on financial assets and liabilities (57,459) — — — (57,459) Movements of trading derivatives 7,814 — — — 7,814 Movements of operating derivatives (15,136) — — — (15,136) Other employee benefits, net (25,056) — — — (25,056) Total adjustments (35,615) — 44,629 — 9,014 Operating cash flow 689,977 — 45,598 — 735,575 Cash flows from investing activities: Capital expenditures (220,806) — — — (220,806) Proceeds from sale of property, plant and equipment 4,410 — — — 4,410 Acquisition of businesses (200) — — — (200) Expenditure on intangible assets (94,538) — — — (94,538) Investments (net of divestments) in associates and joint ventures (40,000) — — — (40,000) (Outflows) from treasury investments (100,278) — — — (100,278) Other investing activities 201 — — — 201 Investing cash flow (451,211) — — — (451,211)

32 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Consolidated Cash Flow Statement for the Six-month Period Ended June 30, 2017 (Continued)

June 30, 2017 as June 30, originally 2017 published IFRS 15 IFRS 16 Other Restated Cash flows from financing activities: Net borrowings of commercial paper 834,129 — — — 834,129 Net repayment of line of credit facilities (12,951) — — — (12,951) Bonds issued 944,885 — — — 944,885 Bonds repaid (900,000) — — — (900,000) Loans to/(from) affiliates issued, net 72,009 — — — 72,009 Loans to parents issued, net (1,394,140) — — — (1,394,140) Other changes in financial liabilities (27,691) — (45,598) — (73,289) Financing cash flow (483,759) — (45,598) — (529,357)

Decrease in cash and cash equivalents (244,993) — — — (244,993) Cash and cash equivalents at beginning of the year 430,712 — — — 430,712

Cash and cash equivalents at end of the period $ 185,719 — — — 185,719 Supplemental information: Cash paid for: Interest $ 57,214 — 7,218 — 64,432 Taxes 120,150 — — — 120,150

33 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Consolidated Balance Sheet as at June 30, 2017

June 30, 2017 as originally June 30, 2017 Assets published IFRS 15 IFRS 16 Other Restated Current assets: Cash and cash equivalents $ 185,719 — — — 185,719 Short-term investments 65,082 — — — 65,082 Trade and other receivables, net 9,351,849 (93,749) — — 9,258,100 Inventories, net 2,066,091 68,118 — — 2,134,209 Derivative assets 95,809 — — — 95,809 Assets held for sale 346,256 — — — 346,256 Prepayments 131,233 (180) (2,476) — 128,577 Total current assets 12,242,039 (25,811) (2,476) — 12,213,752 Non-current assets: Property, plant and equipment, net 5,054,208 — 400,521 — 5,454,729 Employee benefits assets 248,907 — — — 248,907 Investments in joint ventures and associated companies 53,308 — — — 53,308 Deferred tax assets 922,561 — — — 922,561 Financial assets 4,467,709 — — — 4,467,709 Goodwill 17,015,844 — — — 17,015,844 Intangible assets, net 1,228,610 — — — 1,228,610 Total non-current assets 28,991,147 — 400,521 — 29,391,668 Total assets $ 41,233,186 (25,811) 398,045 — 41,605,420 Liabilities and Equity Current liabilities: Trade and other payables $ 1,719,790 — (641) 542 1,719,691 Financial liabilities 6,874,309 — 84,248 — 6,958,557 Provisions 121,287 — (1,665) — 119,622 Derivative liabilities 712,423 — — — 712,423 Current income tax liabilities 342,302 — (328) 368,135 710,109 Accruals 1,368,569 181,021 (3,533) — 1,546,057 Total current liabilities 11,138,680 181,021 78,081 368,677 11,766,459 Non-current liabilities: Financial liabilities 6,402,697 — 383,705 — 6,786,402 Employee benefits liabilities 1,774,038 — — 1,774,038 Deferred tax liabilities 2,373,377 (55,049) (7,543) (1) 2,310,784 Provisions 145,815 — (23,335) — 122,480 Other accrued liabilities 2,232,316 — (363) (368,677) 1,863,276 Total non-current liabilities 12,928,243 (55,049) 352,464 (368,678) 12,856,980 Total liabilities 24,066,923 125,972 430,545 (1) 24,623,439 Equity: Capital stock, $100 par value. Authorized, issued, and outstanding, 1,000 shares 100 — — — 100 Additional paid-in capital 5,624,297 — — — 5,624,297 Other equity reserves (949,151) — — — (949,151) Accumulated earnings 12,491,017 (151,783) (32,500) 1 12,306,735 Total equity 17,166,263 (151,783) (32,500) 1 16,981,981 Total liabilities and equity $ 41,233,186 (25,811) 398,045 — 41,605,420

34 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Consolidated Balance Sheet as at January 1, 2017

January 1, 2017 as originally January 1, Assets published IFRS 15 IFRS 16 Other 2017 Restated Current assets: Cash and cash equivalents $ 430,712 — — — 430,712 Short-term investments 42,475 — — — 42,475 Trade and other receivables, net 8,330,288 (93,749) — — 8,236,539 Inventories, net 1,591,315 68,118 — — 1,659,433 Derivative assets 92,074 — — — 92,074 Prepayments 85,843 (180) (2,124) — 83,539 Total current assets 10,572,707 (25,811) (2,124) — 10,544,772 Non-current assets: Property, plant and equipment, net 5,329,648 — 418,256 — 5,747,904 Employee benefits assets 178,183 — — — 178,183 Investments in joint ventures and associated companies 8,621 — — — 8,621 Deferred tax assets 918,928 — — — 918,928 Financial assets 4,226,938 — — — 4,226,938 Goodwill 17,097,741 — — — 17,097,741 Intangible assets, net 1,188,159 — — — 1,188,159 Total non-current assets 28,948,218 — 418,256 — 29,366,474 Total assets $ 39,520,925 (25,811) 416,132 — 39,911,246 Liabilities and Equity Current liabilities: Trade and other payables $ 1,837,626 — — 542 1,838,168 Financial liabilities 6,009,843 — 92,016 — 6,101,859 Provisions 115,012 — — — 115,012 Derivative liabilities 873,081 — — — 873,081 Current income tax liabilities 83,628 — — (542) 83,086 Accruals 1,538,798 181,021 — — 1,719,819 Total current liabilities 10,457,988 181,021 92,016 — 10,731,025 Non-current liabilities: Financial liabilities 6,254,350 — 365,128 — 6,619,478 Employee benefits liabilities 1,785,210 — — — 1,785,210 Deferred tax liabilities 2,322,198 (55,049) (7,543) (1) 2,259,605 Provisions 98,640 — — — 98,640 Other accrued liabilities 2,223,484 — — — 2,223,484 Total non-current liabilities 12,683,882 (55,049) 357,585 (1) 12,986,417 Total liabilities 23,141,870 125,972 449,601 (1) 23,717,442 Equity: Capital stock, $100 par value. Authorized, issued, and outstanding, 1,000 shares 100 — — — 100 Additional paid-in capital 5,624,297 — — — 5,624,297 Other equity reserves (1,010,767) — — — (1,010,767) Accumulated earnings 11,765,425 (151,783) (33,469) 1 11,580,174 Total equity 16,379,055 (151,783) (33,469) 1 16,193,804 Total liabilities and equity $ 39,520,925 (25,811) 416,132 — 39,911,246

35 NESTLÉ HOLDINGS, INC. AND SUBSIDIARIES Notes to the Condensed Interim Financial Statements June 30, 2018 and 2017 (Dollars in thousands) (Unaudited)

Consolidated Balance Sheet as at December 31, 2017 December 31, 2017 as originally December 31, Assets published IFRS 15 IFRS 16 Other 2017 Restated Current assets: Cash and cash equivalents $ 45,903 — — — 45,903 Short-term investments 54,601 — — — 54,601 Trade and other receivables, net 12,095,341 (93,749) — — 12,001,592 Inventories, net 1,674,582 68,118 — — 1,742,700 Derivative assets 123,258 — — — 123,258 Assets held for sale 390,016 — — — 390,016 Prepayments 79,766 (180) (2,124) — 77,462 Total current assets 14,463,467 (25,811) (2,124) — 14,435,532 Non-current assets: Property, plant and equipment, net 5,334,907 — 602,246 — 5,937,153 Employee benefits assets 238,574 — — — 238,574 Investments in joint ventures and associated companies 50,066 — — — 50,066 Deferred tax assets 570,802 — — — 570,802 Financial assets 4,698,666 — — — 4,698,666 Goodwill 16,167,268 — — — 16,167,268 Intangible assets, net 1,348,836 — — 1,348,836 Total non-current assets 28,409,119 — 602,246 — 29,011,365 Total assets $ 42,872,586 (25,811) 600,122 — 43,446,897 Liabilities and Equity Current liabilities: Trade and other payables $ 2,058,669 — — 1,061 2,059,730 Financial liabilities 6,003,430 — 99,415 — 6,102,845 Provisions 202,029 — — — 202,029 Derivative liabilities 349,162 — — — 349,162 Current income tax liabilities 25,245 — — 329,618 354,863 Accruals 1,583,260 181,021 (76) — 1,764,205 Total current liabilities 10,221,795 181,021 99,339 330,679 10,832,834 Non-current liabilities: Financial liabilities 8,756,665 — 564,246 — 9,320,911 Employee benefits liabilities 1,805,925 — — — 1,805,925 Deferred tax liabilities 1,593,303 (55,049) (7,275) — 1,530,979 Provisions 112,248 — (23,335) (2) 88,912 Other accrued liabilities 2,304,969 — (268) (330,679) 1,974,022 Total non-current liabilities 14,573,110 (55,049) 533,368 (330,681) 14,720,749 Total liabilities 24,794,905 125,972 632,707 (2) 25,553,583 Equity: Capital stock, $100 par value. Authorized, issued, and outstanding, 1,000 shares 100 — — — 100 Additional paid-in capital 5,624,297 — — — 5,624,297 Other equity reserves (1,074,887) — — — (1,074,887) Accumulated earnings 13,528,170 (151,783) (32,585) 2 13,343,804 Total equity 18,077,681 (151,783) (32,585) 2 17,893,314 Total liabilities and equity $ 42,872,586 (25,811) 600,122 — 43,446,897